By Scott Winship of AEI. Excerpts:
"In a recent with Stephen Rose, I argued that the narrative of a “shrinking middle class” was based on a kernel of truth, but one that undermines economic pessimism. We showed that while 36 percent of families were part of what we called the “core middle class” in 1979, the share had fallen to 31 percent by 2024. However, the share of families who fell short of the middle class shrank even more. The middle class has not been hollowed out; rather, the overall decline stems from the net movement of families upward into the upper-middle class. That group, with incomes between 5 and 15 times the 2024 federal poverty guidelines, rose from 10 percent of families in 1979 to 31 percent in 2024.
Analyses that find a hollowed-out middle invariably rely on definitions of the middle class that peg thresholds to how the typical family is doing. In that case, even if everyone is better off over time in inflation-adjusted terms, if the middle’s gains are stronger than those of families lower down, more people can fall short of “the middle.” The Pew Research Center, for example, that the share of families that were “lower-income” rose between 1971 and 2023, even though the purchasing power of those lower-income families rose by 55 percent. The explanation for this seeming paradox is that “middle-income” families saw a 60 percent gain, making it harder to reach the middle-income threshold if income rose more slowly than that.
The point of my paper with Rose was that claims of a “hollowing out” of the middle class wrongly reinterpret widespread gains across the income distribution as rising insecurity and declining living standards. Unbeknownst to us, a perfect example of this misinterpretation appeared a week before we published our report in Chicago magazine. The offending article title that “Chicago’s Middle Class Is Disappearing.” My reanalysis of the data behind the piece indicates it would be difficult to articulate a more misleading conclusion. Fewer Chicagoans live in middle-class neighborhoods than in 1970—but only because more live in richer neighborhoods."
"the Voorhees Center methodology has the same shortcoming as Pew’s analyses of the shrinking middle class. Both define middle-class status relative to a benchmark that changes over time and is tied to typical contemporary income. If everyone’s income doubles, the middle class is no larger, yet everyone’s income has doubled."
"instead of “middle income” requiring 80 to 120 percent of the 2017 metro average income, it requires 80 to 120 percent of the 1970 metro average income (adjusted for inflation to keep income in terms of constant purchasing power). Using this approach, the share of people living in middle income tracts fell in half from 1970 to 2017—from 51 percent to 25 percent. The share living in tracts below the middle income was roughly constant—42 percent in 1970 and 43 percent in 2017. In contrast, the share living in tracts above middle income more than quadrupled, rising from 7 percent to 31 percent."
"If we instead use 2015-2019 as the end point (average national unemployment rate of 4.4 percent), the middle income share falls from 51 percent to 26 percent, the lower-income share falls from 42 percent to 36 percent, and the higher income share jumps from 7 percent to 38 percent."
"From 1970 to 2024, the share of Chicagoans who lived in middle income tracts fell from 51 percent to 25 percent. The share living in tracts falling short of middle income dropped from 42 percent to 28 percent. Meanwhile, the share living in upper income tracts rose sevenfold—from 7 percent to a whopping 48 percent. Looking at the top group, very high income tracts were home to just 4 percent of Chicagoans in 1970 but 38 percent in 2024."
"In reality, per capita income in the median Chicagoan’s census tract rose from $29,600 in 1970 to $39,300 in 2024 (both in 2025 dollars)—an increase of one-third. Using relative thresholds and letting class thresholds increase over time, the average Chicagoan in a lower income census tract lived in a tract with a per capita income of $22,300 in 1970 but $27,800 in 2024 (25 percent higher). For Chicagoans in middle income tracts, the increase was from $32,400 to $49,900 (54 percent)."
