In spite of what believers in trickle-down economics would have you think, America’s middle class is a much bigger driver of the country’s economic success than its increasingly wealthy upper class.
Unfortunately, even though the middle class holds the key to the nation’s development, it’s been shrinking for decades.
The middle class keeps shrinking as opportunities to climb up the social ladder grow slimmer, according to studies from the Pew Research Center and the Organization for Economic Co-operation and Development.
How — and why — has the middle class changed over the last 50 years? How might these changes impact the existence of the middle class going forward? Let’s take a closer look.
The American middle class has shrunk in the last 50 years
Using information from the 2020 U.S. census, the Pew Research Center reports that in 2021, 50% of the American population was part of the middle class. That’s down from 61% in 1971, and the decline from “the clear majority” to “just half the country” is troubling.
In 1971, 25% of Americans belonged to the lower class. By 2021, that percentage had increased to nearly 30% — and an increase in poverty levels isn’t exactly a sign of a healthy economy or thriving society.
The size of the middle class has stayed fairly stable for the last 10 years
While the middle class has declined decade over decade from the 1970s until now, the percentage actually stayed pretty stable between 2011 and 2021.
In 2011, the middle class comprised 51% of Americans compared to 50% in 2021. That’s a marked departure from the four previous decades when the middle class shrank by at least 2% — but usually 3% — every 10 years. A 1% decrease is the lowest rate of change the middle class has experienced in 50 years.
Upper-class incomes increased at a higher percentage than middle- and lower-class incomes
Members of the upper, middle, and lower classes all earn more today than they did in 1971. For instance, the median income of today’s middle class is 50% higher than the median middle-class income of the 1970s. The lower class’s median income didn’t grow quite as much as the middle class’ but it still increased by 45% in 50 years.
In the upper class, though, incomes expanded 69% between now and the ’70s. While households across the economic spectrum are uniformly earning more today than they used to, the gap between the rich and the rest is wider than it’s ever been.
Older Americans, married Americans, and Black Americans are the most likely to move to a higher economic class
As the gap between the richest and the poorest widens, it becomes even harder to jump from the lower class to the middle or upper class. Still, members of some demographic groups are more likely to successfully switch into a higher income level than others.
Most notably, the number of 65-year-old Americans in the lower class decreased over the last 50 years while their presence in higher-income classes increased. The same was true of Black Americans, married men and women, and to a much lesser extent, U.S. adults generally.
Bear in mind that a given demographic’s shift up the income ladder doesn’t mean the group as a whole makes more than other demographic groups. Black Americans and older Americans are still likelier than most other demographics to be lower income.
Instead, factors like increased Social Security benefits and equal employment opportunities may help disenfranchised demographics accrue more wealth now than in the past — but that isn’t the same thing as making up the majority of the upper class.
Single men, single-earner households, and adults without college degrees are more likely to fall down the income ladder
While Black, older, and married Americans increased their presence in the upper-income tiers while decreasing their presence in the lower tiers, the opposite was true for three key demographics.
Single men, members of single-earner households, and American adults with a high school education slid down the economic scale. Compared to their counterparts in the 1970s, all three demographics now have more members in lower-income tiers than high ones.
Housing takes up a higher percentage of middle-class Americans’ income
There may be a few key reasons the middle class has been shrinking instead of growing for five decades. One could be the massive increase in housing prices in the last 50 years, which far outpaced the rate of change in median incomes during the same time period.
In 1970, the median home cost was $17,000. In 2022, that number is $428,700. Obviously, the cost of living was quite a bit lower in the ’70s than it is today — houses cost less, but households also earned 50% less than they do today.
Still, even when you account for inflation, the median house cost has gone up 121% since 1960 — nearly four times the median household income increase over the same period.
College creates a much heavier burden for middle-class incomes than it did in the 1970s
In 1970, the average yearly cost to attend a four-year public university was under $400. Thanks to the G.I. Bill and, later, the federal student loan program, more people from the middle class were able to afford college than in any prior generation.
But once inflation started to grow in the ’70s, universities also started raising tuition — again at a much higher rate than the growth of the average American salary. Then, in the 1980s, the federal budget was slashed by $44 billion, with most of that money coming out of federal support for education and income stability.
As aid options decreased and tuition increased, the costs of a college education started to eat up a higher percentage of middle-class households' income. Today, a year at a four-year public college costs an average of $9,349, and tuition increased by nearly 180% in the last 20 years alone.
Childcare costs take a huge toll on middle- and lower-income families
To maintain a middle-class lifestyle, most households have to find as many ways to make money as possible. As a result, most couples with children have two income earners.
However, on average, 13% of a household’s entire annual income goes toward childcare. That’s far beyond the 7% standard the U.S. government has set as the standard of “affordable” childcare.
The COVID-19 pandemic made life substantially more expensive for the middle and lower classes
Rising pandemic costs mean that even more Americans than before are living from paycheck to paycheck, but the middle and lower classes were still hit much harder by the COVID-19 crisis than the upper class.
In 2020, for instance, one in every five middle-class households reported applying to receive unemployment benefits after losing their jobs. At the same time, the cost of living was rising fast: The inflation rate in June 2022 was the highest since the early 1980s.
Certain other costs are increasing at a faster pace than inflation itself. Childcare, for instance, costs 40% more now than it did at the start of 2020.
The income gap is widening
Thanks to the Great Recession, the median incomes of lower- and middle-class households stayed roughly the same between 2000 and 2016. The median income of lower-class Americans was actually lower in 2016 than it was in 2000, even though costs were higher in just about every economic sector.
During that same time period, though, the median income of upper-class households leapt 9%. From 1970 to 2016, the difference between the lowest and highest median incomes grew by 27%.
While high-income families in the 1970s made 6.9 times more than lower-class families, they made 8.7 times more in 2016, and the trend of widening income inequality shows no signs of stopping.
A lot has changed from the 1970s to today, and the middle class is no exception. But even though the middle class has declined and the cost of living has soared, don’t expect middle-income households to go the way of bell bottoms and disco.
Middle America is still the largest economic sector in the country — and we don’t see that changing anytime soon.
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