US middle class expanded, got richer from 1979 to 2024, report finds 

A new report from the American Enterprise Institute cuts directly against one of the most persistent claims in American politics: the middle class is collapsing.

The reason the middle is shrinking is not because Americans are falling behind, the report said, but because the middle class is getting richer.

“Using an absolute definition of the middle class, we find that the ‘core’ middle class has shrunk, but only because more families have become upper-middle class over time,” the analysis said. “The upper-middle class boomed from 10 percent of families in 1979 to 31 percent in 2024.”

The analysis found the share of upper-middle-income households doubled over the same period, while the number of upper-middle-class households more than tripled over 45 years.

That works out to about 2.5% growth per year.

In other words, the middle has not hollowed out as many have claimed but grew as the economy grew.

A ‘middle-class crisis’? 

The report is a blow to those who contend income inequality is creating a marginal middle class.

Actual economic data, by contrast, shows a broad upward shift across income distributions, the Wall Street Journal noted.

Families once clustered in the middle are now earning their way into higher brackets.

This is despite the fact that economic growth over the last 50 years has been slower than growth in the 25 years after World War II.

At the same time, the share of Americans struggling below middle-class thresholds has dropped sharply.

Families earning too little to qualify as middle class fell from roughly 54% in 1979 to about 35% today.

“But even at the 10th percentile [the lowest 10% in income], a family in 2024 was nearly 30 percent better off than its counterpart in 1979,” the report said.

The only group worse off when income was measured was the lowest 5%, which AEI said was likely because benefits such as food stamps, Medicaid, housing vouchers and the earned income tax credit are not counted as income.

AEI scholars argue much of the “middle-class crisis” narrative stems from how economists define the term.

Studies by Pew use a relative definition – measuring the middle class as a band around median income.

The problem with this method is that if everyone’s income rises, the term “middle class” shifts upward with them.

Even though some families may enjoy a bigger slice of a bigger economic pie, as a percentage of the whole pie, it looks smaller.

By that method, Pew is not measuring how well people are eating. It is measuring the neighbor’s share and saying the middle is falling behind.

Standard of living has risen  

By contrast, the AEI report uses a fixed, inflation-adjusted benchmark based on multiples of the poverty line.

That allows researchers to track real changes in living standards over time.

“The reality is that, in fact, we have a much higher standard of living than we had even 20 or 30 years ago,” Kent Smetters, a Wharton School professor and faculty director of the Penn Wharton Budget Model, told Fortune.

Smetters noted when he was growing up, his household had a budget for automobile repairs because of breakdowns multiple times per year.

He said this category has shrunk because of technological advances.

The different methods produced starkly different conclusions between Pew and AEI.

Pew says Americans are being pushed out of the middle class downward.

AEI contends they are moving upward.

“Decrying a shrinking or hollowed-out middle class is just a gloomy way of saying the upper-middle class has boomed and fewer families are in hardship,” the report said.

The upward shift is due to social mobility, combined with stability, even as society has been challenged by fundamental demographic changes.

“Economic growth, greater professional opportunities for women, and a robust safety net have more than offset the decline of marriage,” AEI said.

For years, both political parties have used the language of middle-class decline to justify sweeping economic interventions, from industrial policy to expanded entitlement programs.

But the underlying premise might be wrong.

Rather than a nation sliding backward, the AEI data suggests a country that has grown wealthier, more educated and more economically stratified at the top, yet still broadly upwardly mobile.

“The whole distribution of Americans, from poor to rich, has done better over time,” Scott Winship, a co-author of the report and a senior fellow at AEI, told CBS News. “And to the extent that fewer people are within a fixed income range that we might think of as middle class, that’s just because everybody’s gotten richer over time.”