America's Middle Class Is Shrinking Because More Households Are Moving Up

For decades, politicians across the spectrum have pointed to a shrinking middle class as evidence of a failing economy. New research from the American Enterprise Institute reframes that story with a striking reversal: the middle is not hollowing out downward. It is emptying upward.

The U.S. middle class is shrinking, but not because more Americans are poorer. Instead, more households are climbing into the echelons of the upper middle class due to income gains in recent decades, according to research from the nonpartisan American Enterprise Institute. About 31% of U.S. households now earn enough to be considered upper middle class, a roughly threefold increase since 1979, making it the nation's largest economic group.

The upper-middle class boomed from 10% of families in 1979 to 31% in 2024, and its share of income doubled. The share of families whose income left them short of the core middle class fell from 54% to 35%.

The report, co-authored by AEI senior fellows Scott Winship and Stephen J. Rose, drew on U.S. Census data spanning 45 years of family incomes. The upper middle class, which AEI defines as households earning between $153,864 and $461,592 for a family of four, now constitutes the largest income group in the U.S. In Winship's framing, the popular narrative of a hollowed-out middle class is fundamentally misdescribed. "The whole distribution of Americans, from poor to rich, has done better over time. And to the extent that fewer people are within a fixed income range that we might think of as middle class, that's just because everybody's gotten richer over time," Winship told CBS News.

But aggregate progress obscures a fractured picture. Racial breakdowns reveal significant gaps: median middle-class incomes differ substantially by race, with White and Asian households significantly outpacing Black, Latino, and Native American middle-class households. One-third of American middle-class families struggle to afford basic necessities as of 2023, per Brookings Institution research across 160 metro areas. Moving into a higher income bracket has not, for many families, translated into financial security.

The cost side of the ledger explains why. From January 2020 to December 2024, home prices climbed 52% and food prices rose 30%, while overall inflation was 25%. That means a family earning more is still paying a much bigger slice of their paycheck just to cover the basics. The cost of private preschools, extracurriculars, and saving for college can make a six-figure income feel thin. A 2024 National True Cost of Living Coalition survey found that two-thirds of middle-income Americans reported financial strain.

As more households move up the income ladder, consumer demand is tilting toward higher-end goods and services. The so-called "K-shaped" economy, in which higher-income consumers are spending more while lower-income households pull back, has become a hallmark of the post-COVID economy.

The AEI report's core methodological argument is that past analyses, including those from the Pew Research Center, use a relative definition of the middle class, one that moves with the median, making it mathematically impossible for rising incomes across the board to register as progress. By anchoring income thresholds in absolute terms adjusted for inflation, Winship and Rose find a categorically different outcome, though critics note that absolute definitions can mask whether the gains are concentrated or broadly shared across racial and geographic lines.

The policy stakes are direct. If upward mobility is genuinely widening the upper-middle class, the question shifts from whether gains exist to whether the cost of housing, childcare, and higher education are consuming those gains before families can use them to build long-term wealth. Without targeted intervention in those cost structures, the ladder up may lengthen faster than most households can climb it.