: ‘The massive restructuring of the economy resulting from the pandemic will likely generate further declines in the middle class’

United States

Most Americans believe themselves to be members of the middle class. But a new report has shed light on who really makes up this segment of society — and how their numbers are shrinking.

A paper released this week from the RAND Corporation, a public policy research firm, explores the question of who is middle class. Citing studies from Pew and Northwestern Mutual, the researchers noted that a large majority of people in this country — anywhere from 70% to 89% — thought they were middle class. Moreover, Black and Latinx individuals were less likely than their white peers to self-describe as being part of the middle or upper classes.

But the ways in which people define the middle class can vary significantly. “For many Americans, the term evokes specific attributes, such as thriftiness and dedication to work,” the researchers wrote. “Others define it in relation to income; in the minds of many, those in the middle class are likely to have some retirement savings, own a house, and send their children to college.”

Depending on how you actually define the middle class, its members either are seeing their income diminish or are dwindling in numbers.

Prior to 1987, the 60% of Americans who fell in the middle of the income distribution nationwide accounted for over half the country’s income. By 2019, that figure had dropped to 45%, a sign that middle-income Americans are earning less than their counterparts did decades ago.

COVID-19 and the middle class

And COVID-19 may make everything worse. Because the COVID-19 pandemic has caused more significant job losses in industries that pay lower wages, the unemployment situation could make upward movement even more difficult. Plus, the researchers argued that companies may look to invest more in robotics and automation to reduce the risks a future pandemic could pose toward productivity.

“The massive restructuring of the economy resulting from the pandemic will likely generate further declines in the middle class and a disproportionate entry into the lower class,” they wrote.

To count how many people are in the middle class — and figure out what they earn — the researchers took a different approach. They first looked at the median income for households of various sizes. The middle class was then defined as households that made no less than 75% of that median income and no more than 200% of it.

Here’s how those limits broke down for different size households:

Family size 75% of median income (lower threshold) Median income 200% of median income (upper threshold)
1 $ 26,965 $ 35,953 $ 71,907
2 $ 38,134 $ 50,846 $ 101,691
3 $ 46,705 $ 62,273 $ 124,546
4 $ 53,930 $ 71,906 $ 143,813
5 $ 60,295 $ 80,394 $ 160,788

Based on these calculations, only 51% of the U.S. is in the middle class. And that number has decreased: Between 2007 and 2017, the middle class shrank by 2.7%. Most of those people (nearly 2%) joined the upper class — while nearly 1%, or some 26 million people, fell into the lower class.

“To the majority of those leaving the middle class, moving to the upper class might seem like good news,” the researchers wrote. “However, this hollowing out of the middle class is simultaneously accompanied by increasing rigidity in social class.”

Their research found that people who in the lower class are increasingly less like to move up the income ladder, particularly given that the middle class had declined since the 1970s.