Jill on Money: Muddled in the middle
Today, defining the "middle class" is a bit of a muddled mess, writes Jill Schlesinger. Credit: TNS/Dreamstime
"Jill, when I hear politicians talking about the middle class, what do they mean?"
To answer this question, it's worth tracing the roots of the term. When we think about the emergence of the middle class, we go back to President Franklin D. Roosevelt's June 1944 signing of the Servicemen's Readjustment Act (the G.I. Bill) into law.
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"Jill, when I hear politicians talking about the middle class, what do they mean?"
To answer this question, it's worth tracing the roots of the term. When we think about the emergence of the middle class, we go back to President Franklin D. Roosevelt's June 1944 signing of the Servicemen's Readjustment Act (the G.I. Bill) into law.
Even as World War II raged, the administration wanted to prepare for the millions of men and women from the armed services who would return home and have no jobs. To avoid widespread human suffering — and perhaps a second Great Depression — the bill provided aid to veterans in the form of hospital facilities, purchases of homes and education assistance.
According to the National Archives, in the seven years after the G.I. Bill came to life, "approximately 8 million veterans received educational benefits" and "veterans were responsible for buying 20% of all new homes built after the war." It is notable that Black veterans were often shut out of the many benefits that the G.I. Bill provided, keeping them economically disadvantaged for generations to come.
For those Americans who could participate, the program helped bring economic success, enabling them to get educated and land jobs, which allowed them to buy homes, cars and televisions.
The virtuous economic cycle of the postwar decades helped create a large group of households that were able to attain the "American dream" and became part of what we now think of as the middle class.
Today, defining the middle is a bit of a muddled mess.
As of 2020 (the most recent year for government figures), median household income was $67,521, a decrease of 2.9 % from the 2019 median of $69,560. (The first year of COVID-19 ushered in the first statistically significant decline in median household income since 2011.)
But that seems a little too precise. Pew Research Center uses the government's median income and adjusts it for household size, creating a range for the middle class that is "about $52,000 to $156,000 annually in 2020 dollars for a household of three."
Additionally, where you live can make a big difference: The government reports that your money will go farther in Mississippi, West Virginia and Arkansas, versus higher-cost states like Hawaii, New Jersey and California.
The more impactful trend shaping the middle class is inequality. While Americans have earned more money during the past 50 years, it hasn't been evenly distributed.
Pew finds that incomes accelerated at a faster pace for higher-income households from 1970 to 2020 than for middle-class households. Pew's analysis notes: "The median income of middle-class households in 2020 was 50% greater than in 1970 ($90,131 vs. $59,934), as measured in 2020 dollars."
The gap helped contribute to a reduction of the share of adults living in a middle-class household — from 61% in 1971 to 50% in 2021. "The widening of the income gap and the shrinking of the middle class has led to a steady decrease in the share of U.S. aggregate income held by middle-class households. In 1970, adults in middle-income households accounted for 62% of aggregate income, a share that fell to 42% in 2020."
It stands to reason that if you don't earn as much, you are not able to save as much. According to data from the Fed, as of the first quarter 2022, the middle of the population held 28.1% of all household wealth, while the top 10% held 69.1%. Thirty years prior, in the first quarter of 1992, the top 10% held 59.9% of wealth, while middle class Americans held 36%.