Data on the Middle Class Squeeze

The economic phenomenon known as the "middle-class squeeze" describes a situation where wage increases fail to keep pace with inflation, causing a decline in real wages for middle-income earners while top earners remain unaffected [1]. This trend has resulted in a shrinking demographic, with the share of adults classified as middle class dropping significantly over the last several decades [2].

Key takeaways

• The share of adults classified as middle class fell from 61% in 1971 to 51% four decades later [2].
• Middle-income households increased their annual work hours by 10% between 1979 and 2007 to cope with economic pressure [2].
• Real wages for nonsupervisory workers were down 13% from their peak in 1973 by 1995 [1].
• The economic disparity has been compared to airline travel, where coach seats shrink as luxury accommodations expand [2].

A Declining Share of Income and Stability

Analysis of income distribution reveals a contraction of the middle class alongside a growth in the upper and lower classes. According to the Pew Research Center, the middle class—defined as those with household incomes between two-thirds and twice the national median—accounted for 61% of adults in 1971 but had fallen to 51% four decades later [2]. During this same period, the upper class increased by six percentage points and the lower class by four points [2]. Historical data from a 2001 Time Magazine report corroborates this trend, noting that the proportion of American families in the middle-income bracket fell from 65.1% in 1970 to 58.2% in 1985 [1].

This stagnation is partly attributed to a divergence between productivity and wages that began in the late 1970s. While real compensation per hour tracked productivity improvements from 1950 to 1970, that relationship subsequently broke down [1]. By 1995, 60% of American workers were laboring for real wages below previous peaks, and the median income in 2000 showed only marginal improvement over 1970 levels when adjusted for inflation [1].

Working Harder for Less

To maintain their standard of living amidst rising costs, middle-income households have increased their labor. Between 1979 and 2007, average annual hours worked by these households rose by 10%, from 3,007 to 3,335, representing a larger increase than any other income group [2]. This increase reflects economic pressure that has forced both men and women to divert time from family life to work [2].

The strain on this demographic is further illustrated by rising debt and bankruptcy rates. In 2003, more than 92% of the 1.6 million Americans who filed for bankruptcy were middle class [1]. Economist Harold Meyerson illustrates the widening gap by comparing the economy to the airline industry: while first-class and business-class seating expand and become more luxurious, coach sections shrink and amenities are removed, effectively redistributing comfort upward [2].