Fewer Americans Earn a Middle-Class Income—Here’s Why It Matters

The American middle class, once the largest demographic group in the U.S. for most of the country’s history, is shrinking. Based on the Pew Research Center’s analysis of government data, the middle class in the U.S. has been slowly dwindling over the past 50 years. For instance, in 1971, about 61% of Americans were considered middle-class, but today this number has fallen to about 50%.

The decline of the middle class reflects concerns over rising income inequality in America. “Many U.S. adults remain in a position of ‘financial fragility’ despite marginally improved economic security,” says Lalita Clozel for the Wallstreet Journal. A 2021 Federal Reserve survey found that almost one-third (32%) of middle-class American adults couldn’t afford a $400 surprise expense. 

From an economic perspective, the middle class is essential for keeping the economy running because they spend a significant share of their annual earnings on basic living costs, plus “luxury” items such as dinners out, vacations, and new cars. When the middle class is reluctant to spend, the housing market and small businesses suffer, fewer advanced degrees are pursued, and more people go uninsured. 

Today, roughly half of Americans earn middle-class incomes, yet in some surveys, as many as 73% say they believe they’re middle-class. In this article, find out why it’s important to understand which income tier you actually belong in, plus how rising inflation and changing economic conditions may be affecting your income status.

What Is Considered Middle-Class?

A middle-class income in the U.S. is one in which a household earns between two-thirds and double the median household income. As of 2021, a middle-class income in America is between $52,000 and $156,000 per household annually. 

According to the U.S. Census Bureau, the median household income in America is determined by the entire population of the country being split into two equal groups: half having an income above the median and half having an income below the median. A household income includes the earnings of all individuals 15 years old and over who live together in a home.

The median household income in the U.S. in 2021 was $70,784, regardless of family size. 

Having a middle-class income generally requires at least a high school diploma and often some level of college education. According to Jobs Pik, middle-class jobs commonly include positions in these professions:

• Education
• Engineering and tech
• Accounting
• Construction
• Medical technicians and nurses
• Manufacturing
• Military
• Managerial, administrative, and clerical work 

What Are the Income Classes? Find Out Where You Fall

Researchers split Americans into different income classes, including:

• “Poor” (those below the poverty line)
• Lower middle class
• Middle class
• Upper middle class 
• Upper class (or wealthy) 

Income cutoffs change from year to year, plus there are different methodologies used to classify incomes.

Here is a chart showing how middle-class incomes compare to lower and upper-class incomes:

Let’s look more closely at differences between the lower and upper middle class in the U.S., based on family size:

What Data Tells Us About Middle-Class Income

Here’s a look at how the middle class is split between different demographics:

Older Americans and Black adults have made the greatest progress in terms of earning higher incomes over the past 50 years. Still, most experts agree that America has a significant racial income gap. According to the Federal Reserve, “In the United States, the average Black and Hispanic or Latino households earn about half as much as the average White household.” The Pew report mentioned above found that 28% of Asian and 21% of White households were in the upper class in 2021, but just 12% of Black and 10% of Hispanic households were.

The latest Federal Reserve survey also indicates that Black and Hispanic adults in all income tiers are much more likely than White or Asian adults to face difficulty paying bills. Among adults with middle-class and even upper-class incomes, 24% of Black adults, 19% of Hispanic adults, and 10% of White adults reported being unable to afford their monthly bills.

Which age are middle-class earners?

The largest age group within the middle class is those between 18 and 44 years old. About 54% of this age group earns middle-class incomes. 49% of Americans between 45 and 65 fall into the middle class, while 47% of those above 65 do.

Older adults over 65 make more money than in previous decades and earn more middle-class or upper-class incomes. This age group’s share in the middle class rose from 39% to 47% since 1971, while their share in the upper-income tier increased from 7% to 16%.

Where does the middle class live? 

Most middle-class earners reside in either large towns or small to medium-sized cities. While some live in small, rural towns, the majority reside in the suburbs or medium-sized urban areas. However, middle-class salaries are not always enough to afford housing in expensive cities such as New York City or San Franciso.

Researchers at Brookings found that small- and mid-sized cities—such as Jacksonville, North Carolina, Boise, Idaho, Honolulu, Hawaii, Las Vegas, and Cape Coral, Florida—tended to be the most middle-class. In some mid-size cities, about 70% of residents are middle-class. In bigger and more expensive cities such as San Francisco, about 52% of households are middle-class, while 32% are upper-income.

Is the Middle Class Shrinking? 

The middle class is decreasing in size, plus being “squeezed” financially. While fewer people today are considered middle-class, more earn incomes that place them in either the upper-class or lower-class income tiers. From 1971 to 2021, the upper class jumped from 14% of the U.S. population to 21%. The lower-income tier grew from 25% to 29% during this same period.

In the U.S., average household incomes have risen considerably since the 1970s, especially among the upper class. However, the middle class has not seen as steep of an increase in income compared to the upper class. The numbers below help demonstrate this point:

• The median income of middle-class households grew 50% from 1970 to 2021, ($90,131 vs. $59,934), but for the upper class, the median income increased 69% during this same period (from $130,008 to $219,572).
• Those with lower-class incomes have seen even less of a rise in average incomes compared to both the middle and upper classes. From 1970 to 2021, lower-class incomes rose about 45% (from $20,604 to $29,963).
• The upper class now earns about 7.3 times more than the lower class, up from 6.3 times more in 1970. The upper class earns about 2.4 times more than the middle class, up from 2.2 times more in 1970.

Why are fewer Americans considered middle-class?

The American population is aging, which affects average incomes. Older adults typically earn more and have a higher chance of moving into the upper class until they retire and live off savings, which generates little income for the economy.

Additionally, the U.S. has more immigrants than ever before, who are more likely to earn lower-income salaries. High immigration rates also push down the median national income because immigrants typically make less money than people born in the U.S., according to research published by IZA World of Labor.

What does a shrinking middle class mean for Americans?

Larger divides in income tiers indicate that many Americans struggle to keep up with rising living costs and to “make ends meet.” Middle-class earnings have not increased as quickly as prices have. Economic issues such as high inflation rates, struggling small businesses, an aging population, and the effects of the coronavirus pandemic have impacted the wealth and health of middle-class adults. 

Affording housing, education, health care, utilities, groceries, and other expenses is challenging for a significant percentage of the middle class, even some in the upper middle class. Therefore, budgeting well and potentially investing early (such as in property) is vital for middle-class earners. 

Studies suggest that the widening gap between the rich and poor in America also potentially negatively affects people’s well-being—including their health, self-image, relationships, and perceptions of stereotyping and prejudice. The Seven Pillar Institute states, “Societies with pronounced economic inequality suffer from lower long-term GDP growth rates, higher crime rates, poorer public health, increased political inequality, and lower average education levels.”

Determining Your Class: Include These Factors

A 2022 survey from Gallup found that most Americans, more than 50%, identify as being middle-class. While about half of Americans do in fact fall into this group, a significant proportion of people misunderstand their actual financial standing.

The same survey found that up to 45% of Americans believed they were in the “working class” or lower class, and only 2% thought they were upper class. These insights demonstrate how many Americans are often wrong about which income tier they belong to.

What makes matters more confusing is: Your salary is not the only thing determining your income class. Other qualifiers aside from household income that determine your class include your location, household size, and education level.

Additionally, there are different ways to determine a person’s or family’s class status in the U.S. and different terms that are used to describe economic groups. For example, income class is different from economic class, which is more complex to categorize. 

Economic class depends on factors including:

• Cost of living where someone resides
• Household size (including marital status and how many children you have)
• Annual salary
• Investments
• Educational attainment (such as college or graduate degrees)
• Potential for future earnings
• Social standing (such as having a family business or social connections)
• Current economic conditions

Financial adviser Susannah Snider explains, “Whether you’re considered middle-class depends on more than just your income or the balance of your bank account. And where you fall in the American economic class system may not stay consistent throughout your life, or even from year to year.” 

Need help figuring out which class status you fall into? You can use the Pew Research Center’s income calculator to determine if you have a middle-class income or an income that groups you into another class. 

No Matter Your Class, Keep Your Mindset in Check

Our income class can fundamentally shape the way we live our lives. Yet wealth alone is not an indicator of happiness. Some people have a “rich mindset”—constantly seeking opportunities and desiring a better life, despite their actual income. On the other hand, even some wealthy people have a scarcity mentality that causes them to feel and behave as if they’re lower class. 

Your social and economic status isn’t just about the type of house or car you know or where you earned a degree; it’s also about your mindset, how you treat others, and where you choose to spend your money. 

While being middle-class might come with some challenges, there’s reason to believe that people in this income class have a good chance of achieving happiness. Plus, the middle class is more likely to help their communities and give back. This is especially true when middle-class earners remain positive, optimistic, and appreciative, plus when they practice compassion. 

In fact, higher-class people may behave more selfishly and less ethically than lower-income peers, according to some research. A study published in the Journal of Personality and Social Psychology uncovered that people with less income and education tend to be more generous, trusting, and helpful than their wealthier, more educated counterparts.

No matter what your current financial situation is, your income doesn’t need to determine your identity. By staying humble, empathetic, opportunistic, and being a great servant leader, you can shape your life in a way that helps to reduce struggles.

Want to learn more about how to shape your identity if you’re struggling financially and otherwise? Check out this article: “Having an Identity Crisis? Key the Key to Finding Out Who You Are.”