A new Pew Research Center analysis calculates the proportion of lower income, middle income and upper income households in 1971 and 2021. The headline of the analysis is the shrinking of the American middle class over the last half century. 61 of American households in 1971 were middle income. In 2021 that had declined to 50 percent.
The reason for the decline in middle income households is both a good news and bad news story. The bad news is that the proportion of lower income households grew from 25 to 29 percent. The good news is that the proportion of upper income households grew from 14 to 21 percent.
Pew defines middle income households as those with annual household income that was two-thirds to double the national median income in 2020, after incomes have been adjusted for household size, or about $52,000 to $156,000 annually in 2020 dollars for a household of three. Lower-income households have annual incomes less than $52,000 and upper-income households have incomes greater than $156,000.
The data source is the Current Population Survey’s Annual Social and Economic Supplements. Income is defined as money income received (exclusive of certain money receipts, such as capital gains) before payments for such things as personal income taxes, Social Security, union dues and Medicare deductions. Non-cash transfers, such as food stamps, health benefits, subsidized housing and energy assistance, are not included.
The decline of middle income households accompanied by a rise in both lower income and upper income households has widened greatly the distribution of income between upper income households and everyone else. In 1970 aggregate household income was 10 percent for lower income households, 62 percent for middle income households and 29 percent for upper income households. In 2020 upper income households had 50 percent of aggregate household income, middle income households 42 percent and lower income households eight percent. More evidence of an increasingly two-tier economy.
The two tiers are increasingly defined by college attainment. With the higher-income tier dominated by those with a four-year degree or more and the lower-income tier by those without. As Dr. Carnevale wrote in our last post the most reliable path to the middle class is a B.A. or more.
Pew found that 87 percent of those with a B.A.or more were in middle income or above households. It was 72 percent for those with some college, 61 percent for high school graduates and 43 percent for those with less than a high school degree.
Getting a B.A. is even more important to being an upper income household. Pew found:
In 2021, about four-in-ten adults with at least a bachelor’s degree (39%) were in the upper-income tier, compared with 16% or less among those without a bachelor’s degree. The share of adults in the upper-income tier with at least a bachelor’s degree edged up from 1971 to 2021, while the share without a bachelor’s degree either edged down or held constant.
More specifically the proportion of upper income households with a B.A. or more grew from 36 to 39 percent, while the proportion declined from 21 to 16 percent for those with some college, from 14 to 10 for high school graduates and from 6 to 5 percent for those with less than a high school degree.
Despite constant claims of the widespread availability of six figure jobs in occupations that do not require a four-year degree, the reality is that the most reliable path to annual household income of at least $156,000 is getting a B.A. or more.