Households today are smaller, older, more educated, and more racially and ethnically diverse on average than they were 40 years ago. The main drawback for the question we are investigating is that the population in the United States looks much different in 2018 than it did in 1980. 1 Plotting these data shows that median household income has been increasing over time and is higher now than in 1980, despite a decade of stagnation in the 2000s (figure 1, orange line).ĭespite the virtue of its simplicity, using real median household income as a measure of middle-class well-being has some shortcomings. The ASEC provides a self-reported, pretax measure of household incomes in the United States, which we deflate using the personal consumption expenditure (PCE) price index. We use data on incomes from the Annual Social and Economic Supplement (ASEC) from the Current Population Survey. Examining median incomes is appealing because it is simple, resistant to outliers, and aligns with the intuition that the middle class falls in the middle of the income distribution. One straightforward way to evaluate how economic well-being has changed for the middle class is to look at the real median household income over time. It is also clear that failing to adjust for demographic shifts in the population relating to age, race, and education can indicate a more positive outlook than is truly the case. Our results show that real incomes for today’s middle class are somewhat higher than in 1980, particularly for households with two adults. Furthermore, we use a definition of the middle class that takes demographic shifts into account. Accordingly, we choose 1980 as our comparison year because it predates the rise in income inequality, wealth inequality (Saez and Zucman, 2016), and a reduced share of employment for occupations that require mid-level skills (Jaimovich and Siu, 2012). Because inequality is often viewed as being related to the decline of the middle class, we choose to compare recent data with a base year from before inequality began to accelerate. We choose to compare today’s middle class with the middle class in previous decades, the second comparison group on Reeves’s list. Reeves (2019) outlines four main benchmarks to which today’s middle class is often compared: (1) economic brackets above the middle class in each time period, (2) the middle class in previous decades, (3) each individual’s previous economic history, and (4) people’s expectations for how the middle class should be doing. In other words, the change in the well-being of the middle class depends on the group with which you compare it. Such disagreement arises in part because there are multiple benchmarks against which one might compare today’s middle class.
Pethokoukis (2018) uses patterns in middle-class consumption, rather than income, to assert that the middle class is “absolutely better off now” than it used to be, while, using a different measure, Cline (2019) finds that median incomes have risen modestly over the past 50 years. However, not everyone agrees with this view. Others cite the rising costs of education (Spencer, 2018) as a primary contributor to the relative decline of the middle class, and still others cite the increasing reliance on having two incomes per household (Krause and Sawhill, 2018).
Getlen (2018), for example, states that the middle class is being “wiped out” by increases in the price of housing, education, child care, and healthcare, sources of what he deems to be increased hardship on the middle class.
Is the middle class in the United States worse off than it was a few decades ago? Many seem to think so.
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