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America's Middle Class Falls Further Behind the Wealthy

By Daniel B. Kline – Updated Sep 10, 2018 at 4:47PM

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But in an encouraging sign, the middle class has stopped shrinking for the first time in decades, reports the Pew Research Center.

A slight majority of U.S. adults (52%) lived in middle-class households in 2016, according to a new report from Pew Research Center. That might seem like only a bare improvement from the previous reporting period in 2011, when the figure was 51%, but in one sense, it's a noteworthy reversal: Based on Pew's previous studies, the size of America's middle class had been in a steady decline since 1971, when 61% of U.S. adults fell into that category.

But while this snapshot indicates that the middle class has stabilized after decades of getting smaller, income disparity between classes has grown. On an inflation-adjusted basis, the median middle-class household earned more in 2016 ($78,442) then it did in 2010 ($74,015) -- a 6% gain. Upper-income households saw a median increase of 9% during the same time period. Lower-income households saw only a 5% gain. 

A point worth noting: When Pew maps those class borders, it isn't using a single set of fixed dollar amounts. Its formula factors in the number of people in a household and the cost of living in each area, as well as household income. Broadly, though, "[m]iddle-income households -- those with an income that is two-thirds to double the U.S. median household income -- had incomes ranging from about $45,200 to $135,600 in 2016," according to Pew.

A sign says save the middle class.

For the first time in decades, the middle class isn't shrinking. Image source: Getty Images.

Stuck in the middle?

The number of U.S. adults living in upper-income homes climbed from 14% in 1971 to 19% in 2016, while the percentage living in lower-income households grew similarly from 25% to 29%. So over the past five decades, the middle class has shrunk, while the upper and lower have grown in about equal measure.

Now for the less-good news. Those income gains from 2010 to 2016 are largely an artifact of the Great Recession. Inflation-adjusted median household incomes in 2010 were well below where they stood in 2000 due to the economic downturn, and when comparing 2000 to 2016, middle-class incomes have barely budged. Lower-income families are actually still about 5% behind their 2000 median incomes.

The upper class, by contrast, enjoyed a median income boost of about 2% since 2000 -- another data point confirming the growing financial chasm between the upper-income tiers and the rest of the populous.

"The wealth gaps between upper-income families and lower- and middle-income families in 2016 were at the highest levels recorded," wrote Pew's Rakesh Kochhar. "Although the wealth of upper-income families has more than recovered from the losses experienced during the Great Recession, the wealth of lower- and middle-income families in 2016 was comparable to 1989 levels. Thus, even as the American middle class appears not to be shrinking (for now), it continues to fall further behind upper-income households financially, mirroring the long-running rise in income inequality in the U.S. overall."

Holding steady

While the rising gap between upper income households and everyone else is troubling, it's encouraging that the middle class has stopped shrinking, and that the fraction of America adults living in lower-income homes has stabilized too. There are, of course, still too many families for whom a stable, middle-class lifestyle remains an elusive dream, but there are signs of hope in the overall picture.

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