Changes in the Middle: Explaining Shifts in the Middle Classes

By Karen Sternheimer

In my lifetime, there has been a major shift for middle income families, sometimes called the “middle class squeeze.” Some households have been squeezed up, as the growth in technology and globalization have created new high paying “knowledge class” occupations, especially in technology-related jobs. As I mentioned in a recent post about growing up in a middle- to upper-middle-class community during the 1970s and 1980s, I have witnessed how these changes have manifested in the past several decades.

What does this mean, how did this happen, and why does it matter?

What it means:

According to a 2022 Pew Research Center report, the percent of families classified as “middle income” dropped from 61 percent in 1971 to 50 percent in 2021. Both lower income and upper income shares increased during this time; lower income households comprised 29 percent of families in 2021, compared with 25 percent in 1971. And upper income households also increased, from 14 percent to 21 percent in 2021.

Pew defines each income level as follows:

“Middle-income” adults in 2021 are those with an annual household income that was two-thirds to double the national median income in 2020, after incomes have been adjusted for household size, or about $52,000 to $156,000 annually in 2020 dollars for a household of three. “Lower-income” adults have household incomes less than $52,000 and “upper-income” adults have household incomes greater than $156,000.

Note that these three categories should not be misunderstood as “poor,” “middle,” and “rich.” The lowest income group includes those in poverty, but earning the national median is not a marker of poverty. Nor is earning $156,000 a measure of being “rich.”

All three groups have experienced income gains during this time, even when adjusted for inflation, but the upper group has seen the most growth: 69 percent, compared with 50 percent for the middle, and 45 percent for the lower group.

Since there are fewer middle-income households, this group holds a smaller share of overall aggregate income in the U.S., down from 62 percent of all income to 42 percent of all income in 2021. Upper income households went from 29 percent of all income in 1971 to 50 percent of all income in 2021.

How it happened:

The U.S. experienced an economic boom that enhanced the quality of living for most Americans after World War II. The massive public investment in science, technology, and subsequently higher education, was largely fueled by the Cold War. Sociologist Jack Metzgar describes the period of prosperity between 1947 and 1973 as the “Glorious Thirty.” He notes:

These were years of superior economic growth, during which the GDP [gross domestic product] averaged better than 4 percent a year, while unemployment averaged under 5 percent and inflation around 2 percent until the oil shock of 1973-1974….

We have not seen anything like Glorious Thirty numbers since the early 1970s, averaging …a little less than 2 percent in the first eighteen years of the twenty-first century (pp.28-29).

Metzgar also describes a 65 percent decrease in poverty during this time frame (p. 29). From 1945-1979, the income growth by quintile was relatively even, increasing about 2.5 percent for all income groups. By contrast, between 1979-2007 income was flat for all groups except for the top quintile (p.30).

But the Glorious Thirty might be a one-off economic anomaly (p. 70). As you can see from the Bureau of Labor Statistics graph below, beginning in the early 1980s wages has not kept pace with worker productivity. Metzgar notes that:

If compensation had caught up with the gains from productivity growth, production and nonsupervisory workers would share about $2 trillion more each year than they did in 2018, or about $21,000 a year each (p. 69).

This graph helps us understand part of the changes in income distribution the Pew Research Center report describes. Metzgar explains:

During the Glorious Thirty the top 10 percent of taxpayers got about one-third of all gross…income….Today, the top 10 percent get about half of all income before taxes, with the bottom 90 percent sharing the other half (p. 68).

What it means:

My hometown as well as the community where I now reside were solidly middle income in the 1970s and 1980s, meaning that people with middle-income jobs could afford homes there. Increasingly, these communities are only accessible for people with incomes that the Pew Report defined as “high income.” While public school teachers could afford to live in the community, now they are largely priced out. Recently the manager of our local recreation center announced he was moving out of state, unable to afford a home within a reasonable commute to work.

My community’s shopping area core is another local example. When I first moved here in 1993, the town center featured a 1950s midcentury-modern row of shops that included small, independently owned boutiques, a Baskin-Robbins ice cream parlor, a locally owned bookstore, a deli and other small restaurants, and a few beauty parlors. It was not unusual to walk in and be greeted by the proprietor, or to walk along the sidewalk and see one of your neighbors out for an evening walk.

The building was purchased by a billionaire local developer, who raised the rents so high that current tenets had no hope to afford the new rent. The bookstore held fundraisers in order to try and stay in business, but they were among the first to close about ten years ago (this was especially painful for me because it was where I attended some of my first author book signings and later did my very first book signing).

Today, the old shopping center is gone and has been replaced with a lavish “lifestyle center” with high-priced shops like Chanel, Sephora, Lululemon, and other places where you can buy a $100 t-shirt. Likewise, the clientele has changed. Gone are the long-time neighbors taking their evening strolls; they have been replaced by much younger people wearing designer clothing apparently hoping to “be seen.” It is no longer a place I enjoy going, but it is definitely more crowded and I assume brings in more money than its predecessor did. It is also no longer the deli sandwich dinner and Baskin Robbins dessert crowd we might associate with more middle-income clientele.

As fewer families can be classified as middle income, and more are in the upper-income category, people are getting priced out of neighborhoods their parents and grandparents could have once afforded. Perhaps most importantly, a growing number of families find themselves in the lower-income category, at or below the nation’s median income.

These are often people that hold jobs that require skill, training, and most importantly, are necessary jobs: those in childcare, home health care and other domestic labor, retail workers, personal care workers, emergency medical technicians, veterinary and dental assistants, public safety officers, substance abuse counselors, and tax preparers. If you take a look at the Bureau of Labor Statistics’ list of median income by education, you will see that dozens of important jobs fall below the median. These are people who often have a hard time finding housing they can afford near work, creating long commutes with all of the associated personal and environmental costs.

Has your community experienced an economic shift in the past several decades? Search for images from decades ago and see if you can find any.

Comments

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You tell great stories, no doubt about it. Thanks for letting us know about your blog