February 4, 2015

America’s ‘middle’ holds its ground after the Great Recession

In the years following the Great Recession, the share of Americans who live in middle-income households held steady at 51% in 2013, the same share as in 2010, according to a new Pew Research Center analysis.

While the muddled recovery has yet to bolster the middle, this flat trend might actually be good news because, for now, it stems a decades-long slide. Back in 1970, 61% of adults lived in middle-income households.

But who, exactly, is middle income? First, we should note that middle income is not necessarily the same thing as middle class. There are many different ways to measure America’s “middle,” including by people’s education, occupation, wealth, social values or some combination of the above. There is no universal definition.

FT_15.01.29_MiddleClass_310px copyOur analysis is based on household income data from the U.S. Census Bureau. First, we adjust incomes for family size. Incomes of households of below-average size are scaled up (because their dollars go farther), and incomes of households of above-average size are scaled down (because their dollars do not go as far). This process ultimately adjusts household incomes to reflect the standard of living of a three-person household.

Finally, we compute the median of the size-adjusted household incomes. Middle-income households, by our definition, earn as much as twice the median income or as little as two-thirds the median. This results in a range of $40,667 to $122,000 for a middle-income American household of three in 2013.

Now, let’s take a look at our major findings on the trends for America’s lower-, middle- and upper-income households.

1FT_15.01.29_MiddleClass_310pxThe share of adults who live in middle-income households has eroded over time, from 61% in 1970 to 51% in 2013. Although the share is unchanged in recent years – it was the same in 2010 – the erosion over the last four decades has been sure and steady, through economic ups and downs. If past trends continue to hold, there is little reason to believe the recovery from the Great Recession will eventually lead to a rebound in the share of adults in middle-income households.

The shrinking in the middle of the income distribution is not all bad news, however. Yes, the share of adults living in lower-income households has increased, up from 25% in 1970 to 29% in 2013. But more adults now live in upper-income households, up from 14% in 1970 to 20% in 2013.

2The narrowing in the middle happened for all major racial and ethnic groups. From 1990 to 2013, the share of adult whites and Asians living in middle-income households decreased the most, from 58% to 53% and from 56% to 50%, respectively. The decline was less pronounced among Hispanics (from 48% to 47%) and blacks (47% to 45%).

Nonetheless, sharp differences persist across racial and ethnic groups in the distribution of adults by income tiers. In 2013, 44% each of Hispanic and black adults were lower income, compared with 23% of whites and 24% of Asians.

FT_15.01.29_MiddleClass_640px copy

At the top, about one-in-four whites and Asian adults are upper income, compared with only about one-in-ten Hispanics and blacks. There is no meaningful change in these gaps in the past two decades. (Consistent data on racial and ethnic categories are only available for 1987 onward.)

3FT_15.01.29_MiddleClass_420pxIncomes of all households are higher today than they were in 1970. Upper-income households saw the most growth, as their median income increased 43% from 1970 to 2013. Middle-income households gained 32% over the same period, and the median income of lower-income households increased 28%. (All incomes are adjusted for household size.)

However, the overall gains mask a lengthy period – a lost decade, and then some – of losses from 2000 to 2013. During this time, the median incomes of lower-, middle- and upper-income households have fallen by 9%, 6% and 6%, respectively. Currently, the incomes of these households are comparable to what they were in 1997.

4Upper-income households command a higher share of the U.S. aggregate household income than ever before. That is because the median income of upper-income households has risen the most, and also because a greater share of adults now lives in upper-income households.

In 2013, upper-income households accounted for 47% of aggregate household income, more than double the share of adults (20%) living in those households. Middle-income households accounted for 44% of aggregate household income, less than the share of adults (51%) living in those households.

FT_15.01.29_MiddleClass_420px copyToday’s distribution of aggregate income stands in stark contrast to what it looked like four decades ago. In 1970, middle-income households accounted for 62% of aggregate income, similar to the share of the adult population (61%) in those households. Upper-income households held a 29% share in the aggregate income of U.S. households in 1970, and 14% of the adult population lived in those households.

These data points are further confirmation of the nation’s growing economic inequality. A previous analysis by the Pew Research Center using a different data source determined that only upper-income families have experienced significant gains in wealth since the early 1990s. Researchers who focus on consumption have also found evidence of rising inequality, albeit not necessarily to the same degree as the increase in income disparities. Americans are seeing it too. In a January 2014 Pew Research Center survey, 65% of adults said the gap between the rich and everyone else had increased in the past 10 years.

Topics: Income, Middle Class, National Economy, Race and Ethnicity

  1. Photo of Rakesh Kochhar

    is an associate director of research at Pew Research Center.

  2. Photo of Richard Fry

    is a senior researcher focusing on economics and education at Pew Research Center.

18 Comments

  1. Roger8 months ago

    This appears in the CIA’s WorldFact book

    The onrush of technology has been a driving factor in the gradual development of a “two-tier” labor market in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits”

    It continues:

    “Since 1975, practically all the gains in household income have gone to the top 20% of households”, and goes on to suggest that this is a cause for concern for the well being of the nation.

    I think that to suggest that the data presented supports in any way that the middle holding it’s own is barking.

  2. Alonso Quijano1 year ago

    The Question is how to define that.

  3. M C Crockett1 year ago

    Interesting, a Pew Research Center report that makes a distinction between middle income and middle class and that seems to confirm my intuitive suspicion that that middle class incomes have shifted upward.

  4. Steven1 year ago

    At the top, about one-in-four whites and Asian adults are upper income, compared with only about one-in-ten Hispanics and blacks.
    —–
    Shouldn’t that be one-in-five?

  5. Eugene Patrick Devany1 year ago

    The “median” income is an arbitrary way of pegging the middle class. It is a moving target from year to year. It also says nothing about net family wealth over the years.

    Thomas Piketty uses three population groups to compare wealth. The top 10%, the next 40% (the middle class) and the poorer half. The top group has 75% of the wealth, the middle class has 24% and the poorer half (62 million families) have just 1%. The spread or “wealth gap” is informative but the trend is much more significant. The middle class lost a modest 8% of their share of wealth while the poorer half lost 70% of their family wealth singe 1995.

    The data presented by Pew suggests a small lower class but the 23% represents those with debts that exceed assets. A family with $5,000 or even $10,000 in net wealth should not be considered middle class.

    More importantly, the upper class is distorted because most most of the real economic gains are not even counted as income. Individual wealth increased from $56 trillion in 2010 to $83 trillion today due to unrealized capital gains which are not counted as income. This further distorts the data presented.

  6. Jim Beard1 year ago

    The “middle income” group by this article’s definition has shrunk, but with those moving up into upper income roughly equal in numbers to those moving down into lower income.

    Given that the upper end of the scale is essentially unconstrained while the lower end is pretty much limited to zero (yes, bankruptcy and negative values are possible), this is not real surprising mathematically.

    Real standard of living of those in the lower and middle income groups is far more important. From the article, it looks like there has been improvement for all, over the full period, with visible decline for all during the past 6 years. That shows no signs of reversing in the next 2 years.

  7. Eleanor Fitzgerald1 year ago

    Abraham Lincoln, a Republican president, freed the slaves. Today’s Republicans seem to favor the idea of many Americans being forced to work for far less than a living wage, essentially close to slavery since employers do not feed and house them. I have nephews and nieces working long hours for low wages trying to pay for college or other advanced education and/or training, They struggle to pay for food, clothing, housing and transportation and health care costs. These times do not seem much different than “the Great Depression” for many young Americans.

    1. John Smith1 year ago

      While what you say may or may not be true, none of the negative consequences of what you are saying is supported by the data presented above. Perhaps what you are witnessing is (the minority of) people who were middle class (but didn’t have the skill sets to remain there) having their standard of living declining to the point where the skills that they do have can support them. This is the negative version of the Peter Principle.

  8. Jeff H1 year ago

    Why the focus on income?

    Should we not be focused on the standard of living that that income delivers?

    From anecdotal accounts, I would expect many of those newly-minted upper income households probably live the same way they have for years.

    Being called upper, middle or lower-income is meaningless, especially when the boundaries do not reflect meaningful differences in living standards.

    1. John Smith1 year ago

      Actually, if you use standard of living, everybody has gone up. Homes are larger, cars are safer, more people have computers, healthier diets, longer lives, and cell phones. A “poor”person today lives better than a “rich” person 50 years ago. If you use leisure time as a measure, however, then the poor and people who receive help from the taxpayers (people on Welfare, Social Security, retire at an early age from the Military, Fire or Police departments) are much better off than the rich, who on the whole work a lot more than 40 hours per week and work well past retirement (unless they inherited the money — perhaps inheritance should be illegal).

  9. RJ1 year ago

    Headline of the article does not seem to fit with the overall findings, i.e., the middle is shrinking, and does not hold ground.

  10. Nancy Roof1 year ago

    Since the cost of living has gone up has gone up in conjunction with income increases what does this research actually show?

    1. Rakesh Kochhar1 year ago

      The income data for all years are adjusted for changes in the cost of living. For example, the 32% increase in the median income of middle-income households from 1970-2013 is the gain over and above the increase in the cost of living.

  11. Packard Day1 year ago

    It would be interesting to see a similar report using household net worth as the comparison variable.

    1. Bob Goedjen1 year ago

      I agree that would be important as well. With the concern about being able to retire I think the difficulty in tracking net worth is what are pension plan’s net worth. Clearly the public sector has had their pensions grow exponentially in the past decade or so and I would like to see this included in net worth. Leaving it out would not present the full picture.

      1. John Smith1 year ago

        What is a pension plan?

      2. Ray Dimmock1 year ago

        Bob that is really a great point. Fair Pensions for All.

        1. Arny1 year ago

          How about federally funded pensions for all based on taxes paid….

          And no Socialist InSecurity does not count.