Politicians across the spectrum love to talk about America’s “hollowed out” middle class. President Joe Biden blamed it on trickle-down economics. Vice President JD Vance has pointed fingers at powerful elites and foreign wars.
But this doom-and-gloom narrative misses what’s actually happening, according to a recent report from the American Enterprise Institute: Americans aren’t falling out of the middle class. Rather, they’re climbing into higher income brackets.
The confusion comes down to how we measure the middle class, according to the report. Many analyses use what’s called a “relative definition.” Under this approach, the middle class is defined based on the median income at any given time.
The problem? Even if everyone’s income doubles, the middle class doesn’t grow using this method. It’s like measuring success on a curve where improvement for all counts as improvement for none.
When researchers use an “absolute definition” instead — one that holds purchasing power constant over time — a different picture emerges. Yes, the core middle class has shrunk from 36% of families in 1979 to 31% in 2024. But that’s not because families are struggling, but because they’re doing better.
The upper-middle class has tripled in size, accounting for just 10% of families in 1979 and 31% today. That means nearly one-third of American families now enjoy upper-middle-class incomes, a group as large as the core middle class itself.
Meanwhile, the share of families earning too little to reach middle-class status dropped dramatically during the period, from 54% to just 35%.
A major milestone for prosperity
For the first time in American history, more families in 2024 sat above the core middle class (35%) than below it (34%). When you combine the lower-middle, core middle and upper-middle classes together, they’ve grown from 70% to 78% of all families since 1979.
The upper-middle class now commands half of all family income. Together with the wealthy, these groups saw their income share jump from 28% in 1979 to 68% in 2024. The core middle class’s income share did fall, but largely because fewer families remain in that category. In short, they’ve moved up.
Family incomes rose significantly across the entire income distribution when adjusted for inflation and family size. Even families in the lower-income group saw their real incomes climb 55% from 1971 to 2023, nearly matching the middle class’s 60% gain. After adjusting for declining family size, median family income rose 52% from 1979 to 2024.
The narrative of a disappearing middle class stems from flawed measurement, not economic reality, according to the AEI report. Claims of a hollowed-out middle class wrongly reinterpret widespread gains across the income distribution as rising insecurity and declining living standards.
When you measure success by purchasing power rather than relative position, you find that widespread prosperity has lifted millions of American families into higher income brackets.
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