The American middle class is shrinking: Is that a problem?

Inequality has grown but that's just a sign of a dynamic economy

- ALLISON SCHRAGER

The good news is that Americans have never been richer. The bad news is that most of them don't feel like it.

There has been tremendous growth in income and wealth in the US in the last half century, even for poorer and middle-class households. But because of the nature of that growth, as well as the changing structure of the US economy, a lot of the people who have benefited also believe that the economy isn’t working for them.

It is true the middle class is shrinking. In the 1960s, the income distribution of US households looked like a bell curve with a very thick middle. Today, there are fewer Americans in the middle— largely because many have joined the ranks of the upper-middle class. In 1967, a little more than 5% of Americans earned or received more than $150,000 (in 2024 dollars). Now more than 30% do. And it’s not just the middle class that moved up: In 1967, more than 38% earned or received less than $50,000. Now that figure is 21%.

Income inequality increased. The very rich—the top 5% and especially the top 1% —got much richer than everyone else. The income distribution curve has flattened as more people have moved into the upper part, with the upper tail moving even further from everyone else. The result? More Americans than ever are affluent—and more have the sense that something is wrong with the economy.