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Pew Research Center performed an in-depth analysis of data provided by the government, and the results were telling. Since 1971, the economic status of the middle-income tier America has changed. 61% of Americans were living in the middle class in 1971. By 2021, that figure dropped to 50%. That’s a steady decline of 11% over the last 50 years.
So, where did that 11% go?
During that period, there was a gradual change within the middle class. Some individuals fell towards the lower class (+4%) while some climbed to the upper class (+7%). While changes in in earnings are bound to happen, the upper-income tier grew at a much faster pace creating a wider gap between lower and middle-income earners and their upper-income counterparts, essentially leaving the middle-class behind.
In a period of just 50 years: lower-income households grew by 45%; middle-income households grew by 50%; upper-income households grew by 69%.
As a result of these changes, the gap in incomes of upper-income compared to lower and middle-income households also increased. In 2020, the median income of upper-income households was 7.3 times that of lower-income households, up from 6.3 in 1970. The median income of upper-income households was 2.4 times that of middle-income households in 2020, up from 2.2 in 1970.
Since 1970, the middle class has seen its income share steadily fall. The widening income gap and the shrinking middle class have led to a steady decrease in the share of aggregate U.S. income held by middle-class households. In 1970, adults in middle-income households earned 62% of aggregate income; by 2020 they earned only 42% of aggregate income.
Meanwhile, the share of aggregate income accounted for by upper-income households has steadily increased from 29% in 1970 to 50% in 2020. Of these increases, a growing share of adults fall into the upper-income tier.
Pew Research Center states:
“The share of U.S. aggregate income held by lower-income households edged down from 10% to 8% over these five decades, even though the proportion of adults living in lower-income households increased over this period.”
“Older Americans and Black adults made the greatest progress up the income ladder from 1971 to 2021. Among adults overall, the share who were in the upper-income tier increased from 14% in 1971 to 21% in 2021, or by 7 percentage points. Meanwhile, the share in the lower-income tier increased from 25% to 29%, or by 4 points. On balance, this represented a net gain of 3 percentage points in income status for all adults.
Older Americans, (those aged 65+) really made an impact on their income since the seventies. Managing not only to increase their share in the upper-income level but simultaneously reducing their part in the lower-income level, resulting in a 25 point gain during the period of 1971-2021.”
It is thought that the growth in household income could be a larger consequence of education, overall participation and longevity in the labor market and the benefit of additional assistance like Social Security payments.
Despite this theory, it is also necessary to mention that in 2021 more than 1 in 3 Americans aged 65 or older fall into the low-income bracket, representing one of the largest percentages of any of the groups analyzed. Which means older Americans are still the most likely to be low-income while less the overall percentage of seniors has risen in household earnings. In 1971, 54% of seniors fell into the low-income tier. In 2021, that number dropped to 37%.
Consequently, seniors’ share of the middle class also rose eight percent (39% to 47%) and the upper-income level increased by nine percent (7% to 16%.)
While seniors still fall behind the general population economically, it’s clear a lot of progress has been made over the last 50 years.
Adults 65 and older are the only age group in which more than one-in-three adults are in lower-income households, and they are much less likely than adults ages 30 to 44 – as well as those ages 45 to 64 – to be in the upper-income tier.
Interestingly among all ages, those with partial-college education (or less) saw a significant growth in the low-income tier. However, it was clear that education was on an upward path with 38% of adults 25 years or older completing at least 4 years of college in 2021 compared to only 11% of adults finishing the same level of schooling in 1971.
39% of college educated American adults wind up in the upper-income level.
No Bachelors degree? Only 16%.
Since the seventies we have seen those with at least a bachelor’s degree edge upwards in the upper tier in comparison to those without a bachelor’s degree, edging down or staying at a constant. This shows a widening gap between the two.
About half or a little more of adults with either some college education or a high school diploma only were in the middle class in 2021. But these two groups, along with those with less than a high school education, experienced notable drops in their middle class shares from 1971 to 2021 – and notable increases in the shares in the lower-income tier. In 2021, about four-in-ten adults with only a high school diploma or its equivalent (39%) were in the lower-income tier, about double the share in 1971.
There also seems to be a link between education and marriage, with those being married generally reaching higher levels of education. Which we understand has a significant impact on income levels.
With more educated people likely to get married and married people more likely to be educated, it’s only natural to see an increase in household income levels in those that are partnered versus those that are not. In 2021, it was more likely for unmarried individuals to fall into the lower-income bracket in comparison to those that are married.
It’s not a surprise that households with a married couple, earning more than one income, are more likely to fall into the upper-income bracket.
What is very interesting to note is that during the last 50 years, while there was little change for married couples in low-income households, there was a considerable increase in married men and married women being included in the upper-income bracket, up 13% from 1971.
Unmarried women were more likely to fall into the low-income bracket in comparison to their unmarried male counterparts who were more likely to be middle-class. However, unmarried men show an increase in being included in the low-income bracket while simultaneously showing a decrease in the middle income bracket.
Pew Research Center states:
“Adults in households with more than one earner fare much better economically than adults in households with only one earner. In 2021, some 20% of adults in multi-earner households were in the lower-income tier, compared with 53% of adults in single-earner households. Also, adults in multi-earner households were more than twice as likely as adults in single-earner households to be in the upper-income tier in 2021. In the long haul, adults in single-earner households are among the groups who slid down the income ladder the most from 1971 to 2021.”
“The relative economic status of men and women has changed little from 1971 to 2021. Both experienced similar percentage point increases in the shares in the lower- and upper-income tiers, and both saw double-digit decreases in the shares who are middle class. Women remained more likely than men to live in lower-income households in 2021 (31% vs. 26%).”
Married men and women and Black adults saw similar net increases varying between 12 and 14 points over the same time period.
However, in addition to those 65 and older, Black adults were also more likely to be included in the lower-income category than many of the other groups analyzed.
Pew Research Center continue:
“Of Black and Hispanic adults, women in particular seemed to register with the lowest in income.”
“Despite progress, Black and Hispanic adults trail behind other groups in their economic status. Although Black adults made some of the biggest strides up the income tiers from 1971 to 2021, they, along with Hispanic adults, are more likely to be in the lower-income tier than are White or Asian adults. About 40% of both Black and Hispanic adults were lower income in 2021, compared with 24% of White adults and 22% of Asian adults.”
“Black adults are the only major racial and ethnic group that did not experience a decrease in its middle-class share, which stood at 47% in 2021, about the same as in 1971. White adults are the only group in which more than half (52%) lived in middle-class households in 2021, albeit after declining from 63% in 1971. At the top end, only about one-in-ten Black and Hispanic adults were upper income in 2021, compared with one-in-four or more White and Asian adults.”
“All other age groups experienced an increase in the shares who are lower income from 1971 to 2021, as well as a decrease in the shares who are middle income. But they also saw increases in the shares who are upper income. Among adults ages 30 to 44, for instance, the share in upper-income households almost doubled, from 12% in 1971 to 21% in 2021.”
The income divide is expanding, that much is clear. The quicker you make forward-thinking, diverse choices in how you manage your wealth now, the more likely you are to be on the right side of the gap in the future.