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Many are anxious because they believe the American middle class is declining. A vintage mid-20th-century photo of a snappy-looking 30-something heterosexual couple standing in front of their cottage with a new Ford in the driveway encapsulates a nostalgic view of middle-class life now lost. Two darling children, a girl in a fluffy dress and a young boy on a tricycle, adorn the scene. All this was possible in the good old days with a public high-school education and a single-earner household.
A closer look at the picture reveals that the house was small and boxy, with no garage. The new Ford did not have power windows or air-conditioning. In 1960, U.S. consumers spent an average of 17% of their disposable personal income on food. By 2019, this share had shrunk to 9.5%.
There are numerous conceptions of the middle class. Some describe the middle class as a lifestyle and a set of values, aspirations, habits and customs. Others have defined the middle class as the middle third of household income. If the middle class is those with the middle third of household income, it is logically impossible for there to be a decline in the middle class. Others think of fixed real income thresholds. Perhaps, when thinking of middle-class decline, the old admonition that “it is better to be vaguely right than precisely wrong” comes to mind.
The U.S. Census Bureau’s Current Population Survey provides insight into this issue. The Census Bureau has collected income data on U.S. households every year since 1967. It uses this data to estimate the percentage of households in various income ranges and years. It adjusts these dollar incomes for inflation to reflect real purchasing power.
Using 2022 constant dollars, in 1967, 48.2% of households earned less than $50,000 per year, 38.7% earned more than $50,000 but less than $100,000, and 13.1% earned more than $100,000. In 2022, 33.9% of households earned less than $50,000 per year, 28.5% earned more than $50,000 but less than $100,000, and 37.5% earned more than $100,000.
So from 1967 to 2022, the percentage of households earning $50,000 to $100,000 did indeed decline, as did the percentage of households earning less than $50,000. That is because the percentage of households earning more than $100,000 rose from fewer than 1 in 7 to more than 1 in 3! From this perspective, perhaps the middle-class decline is not the social crisis some imagine.•
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Bohanon and Horowitz are professors of economics at Ball State University. Send comments to ibjedit@ibj.com.
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Talk about whistling past the graveyard. The social impact of large numbers of families having to pivot to both parents working to make ends meet and barely having enough to make it for any number of reasons (student loan debt, inflation, etc) has not been a positive.