The Eroding American Middle Class

November 12, 2013

By William A. Galston


In 1971, according to the Pew Research Center, 61% of all adults lived in middle-income households. By 2011, the middle-income share had fallen to 51%, while the lower- and upper-income sectors grew. Median household income in 2011 was not significantly higher than it had been in 1989. Because upper-income households fared much better during those four decades, their share of total household income increased by 17 percentage points—to 46% from 29%—while the middle-income share fell by 17 points, to 45% from 62%. No wonder Neiman-Marcus and Wal-Mart WMT +0.24% are doing well while J.C. Penney JCP +3.58% and Sears are nearing collapse.

These economic trends have social consequences. A recent study by Cornell University researcher Kendra Bischoff and Stanford's Sean Reardon finds that the share of families living in middle-income neighborhoods declined to 42% from 65% between 1970 and 2009. At the same time, the shares of families living in affluent neighborhoods and in poor neighborhoods more than doubled. Segregation along lines of income grew in each of the past decades, with the fastest growth coming between 2000 and 2009. This trend is not restricted to white Americans. In fact, segregation by income among black families grew four times as much as for whites, and Latino income segregation also increased more sharply.