What is the Middle Class and is It Shrinking?

Salary-based definitions distort the conversation. And lifestyle-based definitions are a moving target.

Mark Perry of the libertarian Foundation for Economic Education argues that the middle class is shrinking—but only because a larger percentage of society is now upper class.

Over a slightly longer time period (1967 to 2016) and using a slightly different income measure of middle-class income ($35,000 to $100,000 in 2016 dollars from Census Bureau data), it’s true that the share of US middle-class households has been declining, from 53.2 percent of US households in 1967 to 42.1 percent in 2016, see left side of the graphic above. But where did the shrinking middle-class US households go?

As the right side of the graphic above shows, the shrinking middle-class moved up into the group of American households earning $100,000 or more (in 2016 dollars). In 1969, only 8.1 percent (slightly less than one out of 12) of US households earned $100,000 or more, but by 2016, 27.7 percent (more than one out of 4) of US households were in that high-income category. At the same time, the share of low-income US households earning $35,000 or less decreased from 38.7 percent in 1969 to 30.2 percent in 2016.

Stated differently, the 19.6 percentage point increase in the share of high-income US household between 1969 and 2016 (from 8.1 percent to 27.7 percent) was a result of: a) an 11.1 percentage point shrinkage in the share of middle-class households (from 53.2 percent to 42.1 percent), and b) an 8.5 percentage point shrinkage in the share of low-income households.

Follow the link to see the graph and much more of the argument. But Dave Schuler is not impressed with Perry’s logic:

What the statistics he cites in the article really tell us is that in many places in the country a six figure salary barely provides a middle class lifestyle any more.

Dave offers a competing definition:

What is middle class? I would propose that for the entire country “middle class” should mean median income ±two standard deviations, upper middle class median income +three standard deviations, and “the rich” as median income +four standard deviations. Median income minus three standard deviations are “the working poor”. For individual localities the definitions would vary based on the local median income.

According to the Census ACS median income for a family of four in Chicago is around $66,000 (other reckonings say $47,000). The “middle class” would then be households earning between $45,000 and $85,000. Incomes in Chicago have basically been flat for a dozen years. Note that if you research this yourself you should distinguish carefully among Chicago, Chicago metro, and Illinois.

Dave closes,

Using my method the middle class cannot by definition shrink but it can become poorer which is very much what has happened over the last 30 years.

I’d go further than Dave and argue that “middle class” is almost meaningless in an area with such divergent costs of living as the United States. The median household income of $57,617 would be a poverty wage in the DC area. (The US Government understands this quite well when it’s paying its employees, who fall under hugely disparate locality adjustments, but seemingly not in its economic statistics.)

Gustopher, who comments there and sometimes here as well, counters,

After the zombie apocalypse, your definition would still have a sizeable middle class after adjusting the currency to bullets or brains (the zombies would also have a healthy middle class)

Anyway, here’s my definition:

Upper class: no longer has to work.
Middle class: can afford a house, car, food, healthcare, kids, decent education for those kids, retirement.
Working poor: below that. Probably cannot retire.

Middle class has been unaffordable on a single income for decades, and has been made much more expensive by rising healthcare costs, government cuts to higher education, rising house prices, etc.

To which Dave retorts,

Another way is by classes: upper class is when most of your income is derived from the ownership of assets (rents, royalties, etc.), middle class is when most of your income is derived from a salary, and lower class is when most of your income is derived from hourly wages. That’s imperfect, too. At least my method is quantifiable and makes at least some intuitive sense.

[…]

Something of which you should be aware if you aren’t already: retirement is a recent phenomenon and may be an artifact of U. S. post-war circumstances. Other than my mom (who was a government employee, a public school teacher) no one in my ancestral line has ever retired. I’m well over “retirement age” and may never retire.

[…]

Should middle class be affordable on a single income and why? What if part of being middle class is adopting the mores of the middle class and one of those mores is being married?

Gustopher shoots back:

A middle class, separated from the economic security for oneself and ones family, isn’t a concept that makes sense.

There has always been some form of retirement, whether it is an ice flow, crushing poverty, living off family, or semi-retirement or living off savings. The simple fact is that unless people die suddenly of a heart attack, they slow down and can do less and less in their old age.

My single vs. double income comment is to show just how far things have gone downhill since the 1970s for the average family. A stay at home parent isn’t really an option anymore.

But that’s just not true. It’s true that, when I was growing up, it was common for women—including my mother—to stay home with the kids. Middle class families were indeed able to live on what Dad earned. Of course, we lived much more modestly. Our houses were vastly smaller. We owned one car. Eating in restaurants or even ordering take-out was rare. And we didn’t have the amenities that most of us take for granted: broadband internet service, satellite or cable television, smart phones with unlimited data plans, Netflix, etc. We got by with much smaller wardrobes. Vacations, especially those that required air travel, were rare, indeed. And that’s just off the top of my head. Obviously, many of these things were literally not options in the 1970s; but they began as luxury goods and are now considered part of a normal “middle class” lifestyle.

Further, I know lots of people on what most of us would consider “middle class” incomes—Army officers—whose wives in fact stay home with the kids. Many of them homeschool their children or even put them in private (usually church-based) schools. But, again, making that choice means living less lavishly.

It’s true that retirement has changed. Large swaths of the middle class had union jobs that came with nice pensions. Most of that is gone. But, as Dave contends, that was but a brief snapshot in time, not something that was sustained for generations. And, frankly, we’re living a lot longer now. It’s probably unreasonable to expect to ride off into the sunset at 62 or even 65 and maintain one’s lifestyle for another two decades or more. As we’re structured now, that means socking a whole lot away into retirement savings—which, again, means sacrificing in the near term.

We’re in many material ways much richer as a society than we were a quarter-century ago. Ordinary people can afford luxury goods that were only dreamed of then. And we keep defining luxury up. (Watch old James Bond movies, for example, which treated trips to the Bahamas and the likes of Gordon’s gin as provinces of playboys.)

At the same time, Gustopher is right: a sense of “economic security for oneself and one’s family” has diminished. The pace of economic change has accelerated and entire industries rapidly go out of business. Few are guaranteed a job tomorrow, let alone a gold watch after 30 years. And perhaps that matters more than the lifestyle improvements that the new economy has brought.

FILED UNDER: *FEATURED, Economics and Business
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Mike Schilling says:

    “Ice flo*w*”?

  2. Dave Schuler says:

    As I’ve since followed up, what circumstances would be required to maintain the standard of living supported by a single worker’s wages when the proportion of the population available for and/or seeking work doubles? Do we have those conditions today? What would be required to produce them?

    Another feature of the issue is the sloppy way we tend to use the phrase “middle class” in the United States, interchangeably with “middle income”. “Middle class” is not determined by an income or even a lifestyle. To be middle class you need to maintain the characteristics, the mores, of the middle class.

  3. michael reynolds says:

    Apples and Oranges. The present is not the past. I started working at age 16 for $1.60 an hour. With a lot of overtime during about 4 months working at Toys R Us, I was able to take myself (and a cashier) to Europe for three months.

    It’s much, much more expensive now. For one thing I don’t fly coach and I don’t stay at youth hostels. But if I did I would still have the sum of all recorded human knowledge available in my pocket. And I would have detailed, up-to date maps of everywhere. I would be able to call anyone, anywhere at any time. I would be able to compare reviews for Hostel A vs. Hostel B. I would have books, movies, TV shows, all right there, in my pocket. What is the cash value of all that the smart phone/internet has given us?

    Had you offered an iPhone to me back in 1970 I’d have paid my last dime. The last, say, three years of computer/phone/service have cost me less than a single month’s rent (Marin County, so. . .) and are so much more important to me than the house. Or the car. Or clothing, shoes, appliances, furniture etc… I’ll give you my couch and bed and table long before I’ll give you my phone.

    We are in a time when prestige and social standing are not determined by the size of your house or the make of your car. Incentives are less about money, more about connection, identity. I have two grown kids, 18 and 20, and offered to buy both a car. My 18 year-old has a nice new Kia Sportage now. My older kid has a Lyft app. When teenagers reject freely-offered cars as more trouble than they’re worth, something fundamental has changed.

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  4. Gustopher says:

    And we keep defining luxury up. (Watch old James Bond movies, for example, which treated trips to the Bahamas and the likes of Gordon’s gin as provinces of playboys.)

    The first few Roger Moore movies have the “ugly American” tourist, who is a sheriff from Texas, vacationing in the same exotic locales that James Bond goes to. He, presumably, did not stay at the same hotels.

    And the Gordon’s Gin was early product placement. It was entirely meant for the middle class.

    My parents went to Jamaica, and a few years later to England, on a solidly middle class income. They abandoned the kids to their own devices, leaving the dog in charge (the grandparents were there in case of emergency, but they couldn’t keep up with four boys…)

    Travel was within the realm of the middle class. It was big and special then, but doable.

    I don’t think it’s a matter of defining luxury up so much as it is some things being cheaper now. Airfare definitely is, along with electronic gadgets.

    And a lot of that cheaper “luxury” is being purchased on credit — the average family has $5,000 in credit card debt.

  5. Modulo Myself says:

    The middle class was always an American fiction cobbled out of different realities. One of the realities was that the post-war world was devastated, except for America. When you have lost few civilians and your infrastructure is untouched, you have an enormous economic advantage. Another was a very simple hierarchy that excluded women and minorities. This hierarchy was unsustainable without violence and mindless stupidity. That’s why the sexual revolution and the counterculture began in 1946, basically. Meanwhile, returning African-American veterans were treated terribly in the industrial parts of the north. The white people who had union jobs and manageable lives did so on the backs of African-Americans.

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  6. Ben Wolf says:

    There can’t really be a middle class in the traditional use of the word. Class itself is a simple concept: who gives the orders and who obeys them. And “middle” class used to mean the wealthy merchant class who did not belong to the formal aristocracy. Income itself doesn’t give us a way to separate a person with income of $100,000 from a person with income of $25,000.

    So I’d argue we should stop using the term all together. The truth is, just as two hundred years ago, you have a class that relies upon labor to provide income, and a much smaller one that does not.

  7. Gustopher says:

    Further, I know lots of people on what most of us would consider “middle class” incomes—Army officers—whose wives in fact stay home with the kids. Many of them homeschool their children or even put them in private (usually church-based) schools. But, again, making that choice means living less lavishly

    They also get pensions(*). They don’t have to save away as much for retirement. Medical coverage is also in a vastly different, separate economy.

    I don’t really want to go for the No True Scotsman fallacy, but you’ve picked a very atypical group for your example.

    That said, I was painting with a broad brush when I said that a single income cannot support a family and remain middle class. But, I would claim that is more often the exception than the rule, and requires a pretty hefty single income, well above the local median.

    A lot of the people who claim to be Middle Class in America are really just the working poor, dazzled by their electronics and ignoring their debts and lack of security.

    (*) States keep renegging on their pension obligations, so there is some precedent for these pensions not being safe, but I suspect that the last pensions to be destroyed will be those of people with really big guns.

  8. Modulo Myself says:

    And I would really question our technological greatness. If you travelled back in time to the mid-60s and told a bunch of NASA scientists that there aren’t moon colonies and undersea cities, and there isn’t any scientific solution to climate change, but there is a little device on which you can stream television, they would think maybe that science isn’t exactly that important in the future. I agree with the Michael that the range of information that is available is rather incredible. But then you would have to explain reality television, Fox News, and Donald Trump. Given that in the early 60s, Leonard Bernstein was on television and people in the Pentagon knew who Robert Lowell was, they might have a few questions.

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  9. CSK says:

    If the terms “middle class,” “upper middle class,” “lower middle class,” “upper class,” and “lower class” ever had any objective, across-the-board agreed-upon meaning, they’ve long since lost it.

    “Middle income,” etc., on the other hand, may still have some objective meaning, but again, as he post points out, it depends on where you live. If you make $60,000 a year in rural Mississippi, you’re living large. If you make $60,000 a year in Manhattan, you’re probably on food stamps.

  10. Gustopher says:

    At the same time, Gustopher is right:

    Damn straight.

    a sense of “economic security for oneself and one’s family” has diminished. The pace of economic change has accelerated and entire industries rapidly go out of business. Few are guaranteed a job tomorrow, let alone a gold watch after 30 years.

    Security doesn’t have to come from a single job. A pile of emergency savings and the likelihood of getting another job with a similar income is security.

    I’m a software engineer in Seattle. I have economic security. If my job goes away or I quit in a fit of rage, I’ll find another one pretty quickly. If there’s a massive downturn locally, I can afford to move. If there’s a massive downturn nationally, I might have to suck it up and take a job that doesn’t interest me as much, but I’m not going to be really hurting.

    Most people aren’t that lucky. They don’t have six months of income readily available (enough to cover losing their job and a random crisis), and they are likely to find that next job pays less.

  11. JKB says:

    Large swaths of the middle class had union jobs that came with nice pensions.

    But a small (peaked at 27% in the ’50s) swath of the total labor force had union jobs. Those high union wages came at the expense of higher prices (lower standard of living) for those whose wages weren’t set by the union.

    Under Dave’s median income definition, it is axiomatic that it would be more difficult to maintain a “middle class” family lifestyle on a single earner salary. The median income would include all the duel-income families. Unless most families shifted to single-income thus lowering the median income, then single-income families will be living more modestly.

    It seems many, even economists, do not recognize that the early 20th century was a human history anomaly. That itself was a cumulation of advances in the prior century. The linkage of electricity and magnetism is just now 200 years old. The electric light not yet 150. This new way to manipulate, transport and use energy was just becoming overtly viable in 1900. New engines that used the new form of stored energy petroleum are barely a century old.

    Just 100 years ago, the idea for the “radio music box” was ignored. But today we see it as the seed for several new industries and creator of lots of new rich people known as music, movie and television stars.

    For that matter, as late as 1915, when David Sarnoff, assistant traffic manager of the Marconi Wireless Telegraph Company, proposed a “radio music box” and suggested the future possibilities of public broadcasting, he spoke to deaf ears. But the seeds of the radio and television industries had been sown.

    I recommend
    –‘The Big Change: America Transforms Itself 1900-1950’ (1952), Frederick Allen Lewis
    for a nice stroll through the dramatic changes up to 1950. The changes since have been profound, but not nearly as dramatic. Incremental is where we are at, even in the extension of lifespan. But from 1900 to 1950, average life span exploded in the developed world with disease control and sanitation. By the 1980s, the same impact was being seen in most of the developing world.

    What is “middle class” when basic needs are met and its material definition depends on the now “necessary” luxuries one can afford?

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  12. James Joyner says:

    @Modulo Myself:

    If you travelled back in time to the mid-60s and told a bunch of NASA scientists that there aren’t moon colonies and undersea cities, and there isn’t any scientific solution to climate change, but there is a little device on which you can stream television, they would think maybe that science isn’t exactly that important in the future.

    We don’t have colonies on the moon or underwater because we don’t need them. Indeed, they’re bizarre concepts when we have plenty of undeveloped land here on earth. And streaming TV on your phone is really cool.

    But then you would have to explain reality television, Fox News, and Donald Trump.

    Frivolity is hardly a recent advent. Granted, the elite-picked system of the 1950s and 1960s wouldn’t have yielded a Donald Trump. But he was really a fluke even this go-around, a function of bizarre times, a poor opposition candidate, and sheer dumb luck.

    Given that in the early 60s, Leonard Bernstein was on television and people in the Pentagon knew who Robert Lowell was, they might have a few questions.

    I’m not sure what this means. Pretty much anyone who wants to be on television is on television at this point, with hundreds of available channels—and that’s not even including the Internet-based ones—vice the three or four of your Golden Age. But, yes, having to program such that grandma and 3-year-olds could watch the same shows led to a cultural commonality that no longer exists. There could have been no “Sopranos,” “The Wire,” “Breaking Bad,” or “Game of Thrones” in those days.

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  13. michael reynolds says:

    @Ben Wolf:
    The British definition of middle class is closer to what you’re thinking. There’s posh, middle class and working class. There I think middle class is more about other class indicators not just money. But this is the United States, where EVERYTHING is about money, unless it’s about race.

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  14. Gustopher says:

    @Ben Wolf: I think the notion of class in the United States runs against our myths of everyone being a rugged individualist. If we avoid discussions of class, we can then blame poor people for being poor, and feel no responsibility to them.

    On the other hand, if we say that middle class is basic economic security and the ability to provide your family housing, food, education, medical care, basic “luxuries” and have a bit left over for retirement or semi-retirement in the end, then you start asking intelligent questions.

    – Why do so many people fail to make it? Is it extravagant living or underlying economic strain?

    – Do our policies help people reach the middle class? The cuts in funding to public universities, for instance, and our failure to control healthcare costs would suggest not.

    – Is there a middle class in rural America?

    The author of the article Dave Schuler references uses the income disparities across the country, and the net migration into the higher income and higher cost of living cities to claim that the middle class is shrinking because people are moving out into an upper class by virtue of living in cities.

    The author of that article will never ask any intelligent questions about class in America, and that’s kind of the point of his article — avoiding difficult questions.

  15. Ben Wolf says:

    @michael reynolds:

    If we were to go with the idea of three classes in the U.S. I would argue there is the employer class which owns the production, investment and profits, the administrative class which implements their will (an intelligentsia of capital) and then everybody else. That would, I think, roughly align with what you’re describing in the U.K.

  16. Gustopher says:

    @James Joyner:

    Frivolity is hardly a recent advent. Granted, the elite-picked system of the 1950s and 1960s wouldn’t have yielded a Donald Trump. But he was really a fluke even this go-around, a function of bizarre times, a poor opposition candidate, and sheer dumb luck.

    I hope you are right, but I fear you’re wrong.

  17. Gustopher says:

    @JKB:

    But a small (peaked at 27% in the ’50s) swath of the total labor force had union jobs. Those high union wages came at the expense of higher prices (lower standard of living) for those whose wages weren’t set by the union.

    Non-union shops had higher wages too, as they needed to compete for labor with those union shops. A rising tide lifts all boats, and all that.

    Under Dave’s median income definition, it is axiomatic that it would be more difficult to maintain a “middle class” family lifestyle on a single earner salary.

    Under Dave’s median income definition, Somalia has a thriving middle class, as does a refugee camp, and a zombie apocalypse. Or Fuedal Europe.

    I don’t think he means that people starving slower than average are well off, so there are a lot of unstated assumptions in his definition, that would say when his definition even applies. I don’t think it ever applies.

  18. Just 'nutha ig'nint cracker says:

    @James Joyner:

    We don’t have colonies on the moon or underwater because we don’t need them.

    Don’t forget that another reason is because we seem to lack the technology to accomplish those aims.

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  19. Ben Wolf says:

    @JKB: Real wages across sectors regardless of unionization grew at roughly 3% per year following World War II. Standards of living rose consistently so long as you were white.

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  20. James Joyner says:

    @Just ‘nutha ig’nint cracker:

    Don’t forget that another reason is because we seem to lack the technology to accomplish those aims.

    I can’t prove the negative that, if we felt an urgency to colonize the moon or the oceans, we’d have applied our resources and figured it out. But doing either strikes me as silly given actual conditions. Why would we want to do either?

  21. Tyrell says:

    One problem is that most wages have been flat or even lower in the last several years. The recession has finally “wound down” but a lot of people lost jobs that paid well with good benefits. Once they finally went back to work, it was in such lucrative fields as selling vacuum cleaners door to door or running a popcorn machine at the theater. People talk about the US standard of living actually going down, for the first time in modern history.
    “Too much month and not enough paycheck”.

  22. James Joyner says:

    @Tyrell: I prefer the “Billy Hill” version: “Too much month at the end of the money.”

  23. Modulo Myself says:

    @James Joyner:

    And if we wanted to figure out a means to get CO2 out of the atmosphere, we would just do it, apparently.

    Scientific dreams in the 60s were about new experiences, horizons, and frontiers. This was partially a fantasy, in that we were using Nazi scientists to build rockets to the moon that would also be useful in delivering warheads to Russia. But regardless, even von Braun wanted to get to the moon because it was his dream.

    These scientists would think that the current dreams of driverless cars and streaming lots of Netflix are moronic substitutes for actually building something better or at least new using science.

  24. Mikey says:

    @Modulo Myself: You can’t legitimately equate “driverless cars” and “streaming lots of Netflix.” Driverless cars are going to improve everyone’s lives in significant ways.

    First, there won’t be nearly so many terrible traffic jams. Driverless cars can be programmed to drive in ways that avoid the creation of “traffic snakes.”

    Second–and even more important–driverless cars will save tens of thousands of lives by eliminating the human error that lies at the root of pretty much every deadly traffic accident.

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  25. Tyrell says:

    @Modulo Myself: Think about Robert Fulton and “Fulton’s Folly”.
    Wright Brothers – laughed at and ridiculed.

  26. An Interested Party says:

    If we could step past questions about the “middle class” for a moment and ask a far more important question, namely, are the practices and policies of government and business designed to help as many people as possible or are they designed to help a small, fortunate, rich few…

  27. DrDaveT says:

    Further, I know lots of people on what most of us would consider “middle class” incomes—Army officers—whose wives in fact stay home with the kids.

    Let me pile on with @Gustopher here to note that this is disingenuous. Those Army officers get an enormous portion of their income “in kind”, as Tricare and basic housing allowance and BX privileges and (if they stick it out 20 years) an incredibly generous pension plan. If you monetize the benefits, those officers are making a reasonably princely wage.

  28. DrDaveT says:

    @Gustopher:

    If we avoid discussions of class, we can then blame poor people for being poor, and feel no responsibility to them.

    On the other hand, if we say that middle class is basic economic security and the ability to provide your family housing, food, education, medical care, basic “luxuries” and have a bit left over for retirement or semi-retirement in the end, then you start asking intelligent questions.

    This.

    In the end, it’s all about security. The upper class is immune — they can be as incompetent and spendthrift as they like, and it won’t matter. The lower class is screwed — they will never have enough to be able to withstand a single economic shock (like a recession or a major illness), or to retire on, or to give their kids a better chance than they had.

    The middle class is everyone else. It’s not a positive definition — it’s the “other” category in the middle. Not secure, but not on the brink (or over it).

  29. James Joyner says:

    @DrDaveT:

    Those Army officers get an enormous portion of their income “in kind”, as Tricare and basic housing allowance and BX privileges and (if they stick it out 20 years) an incredibly generous pension plan. If you monetize the benefits, those officers are making a reasonably princely wage.

    Tricare is certainly a better deal than I get as a Federal employee but not by leaps and bounds. BX privileges aren’t what the used to be in the age of Amazon and Costco. The housing and subsistence allowances, both tax-free, are significant but hardly “princely.” The pension plan is insanely generous now that we’ve jacked up base pay and since people live much longer; but that doesn’t much help a captain pay to keep his wife home to raise the kids. (And military folks tend to have more kids, earlier than their social class peers, which contributes to the disparity. If you have three or four kids, daycare is really not a good option unless the spouse who would have stayed home with them can command six figures.)