An extensive report prepared by economic researchers Scott Winship and Stephen J. Rose from the American Enterprise Institute (AEI) challenges the prevailing narrative suggesting that America's middle class is dwindling due to economic stagnation. Their study indicates that the contraction in the middle-income demographic is principally attributable to a substantial increase in the number of families ascending into the upper-middle-class bracket rather than families falling behind economically.
Statistical evidence from the report traces the transformation of income groups from 1979 to 2024, revealing a fourfold leap in the proportion of U.S. families categorized as upper-middle class, soaring from 10% to 31%. Concurrently, the share of families within the core middle-class bracket experienced a decline from 36% to 31%. This represents a shifting but not necessarily shrinking middle-income cohort.
The AEI's framework for defining income classes relies on adjustments for inflation and family size to maintain consistent purchasing power over time. Within these parameters, the researchers also documented a notable reduction in the percentage of families classified as poor or near-poor, shrinking from 30% in 1979 to 19% in 2024. These findings paint a picture of widespread income enhancement across various socioeconomic levels.
Winship and Rose emphasize that the dynamics underlying this demographic shift do not signal economic deterioration for the middle-class families. Instead, their analysis shows that the decrease in the core middle-class share is the result of a buoyant growth in the upper-middle-class tier. Specifically, the relatively lower segments within the middle class have contracted to a minor extent, but this is outweighed by the substantial growth occurring at the higher end of the income spectrum. Families, then, appear to be experiencing upward mobility, improving their economic standing over the observed period.
Further dissecting income trends, the report observes that median family incomes, adjusted for inflation, have climbed by 52% on average from 1979 through 2024. Even families positioned at the 10th percentile of the income spectrum report nearly 30% income gains since 1979, reflecting broader improvements even among comparatively lower-earning households.
However, the pace of income growth has been uneven. The report notes that top earners have captured the largest share of income expansion. For instance, the top 1% of income recipients increased their proportion of national income from 5% in 1979 to 9% by 2024. Moreover, the wealthiest families currently receive 19% of all income nationally, a dramatic rise from the mere 2% recorded in 1979. While income inequality at the very top has widened, it is critical to recognize that positive income movement is observable throughout the entire income distribution, not confined only to the highest earners.
This comprehensive data rebuts common claims by political figures who cite a "shrinking middle class" as evidence of economic malaise or policy failure. Instead, the report argues, referencing a decline or hollowing out of the middle class represents a misconstrued interpretation of the rise of the upper-middle class, supplemented by a reduction in families experiencing poverty or near-poverty. The central takeaway is that fewer families facing economic hardship and more families achieving higher income brackets fundamentally recalibrate the traditional understanding of income classes in America.
Given these changes, families transitioning into higher-income brackets increasingly require tailored financial planning and advice. Institutions like Domain Money have emerged to meet these demands, offering specialized financial guidance targeted at households with annual earnings exceeding $100,000. By assisting these households in making strategic money management and long-term planning decisions, such services aim to sustain and build upon the economic gains witnessed over recent decades.
Ultimately, the income distribution landscape in the United States is undergoing a notable evolution. This shift is characterized not by widespread middle-class economic decline but rather by significant upward mobility, expanding the upper-middle-class cohort markedly and reducing the prevalence of poverty. This data provides a more nuanced and optimistic perspective on America's economic stratification patterns than popular discourse typically conveys.