When middle class becomes upper middle class…and what it means for policy

by Ryan Streeter on June 27, 2016. Follow Ryan on Twitter.

Yep:

Our central goal should be getting the bottom up, which is more important than pulling the top down. It’s also tougher.

That’s Robert Samuelson’s conclusion after drawing attention to an important new study by Stephen Rose at the Urban Institute. Rose’s study found that between 1979 and 2014 there “was a gradual and broad-based shift of Americans from poorer to richer status. Productivity gains have translated into higher living standards more than is generally believed.”

So, basically, when you hear about the “disappearing middle class,” be sure to ask how many of those families went from middle class to upper middle class, or even to plain old “rich.” It turns out that poor families (below $29,999) have declined from 24.3% of the population to 19.8% in that time period, and lower middle class ($30-49,999) has dropped from 23.9% to 17.1%.

These numbers are truly staggering:

[I]ncomes from $100,000 to $349,999…grew from 12.9 percent of Americans in 1979 to 29.4 percent in 2014 — from 1 in 8 U.S. households to more than 1 in 4. The rich ($350,000 in income or more) went from 0.1 percent of households to 1.8 percent in 2014. If these two groups are combined, nearly one-third of Americans have incomes exceeding $100,000. (Note: All these thresholds apply to three-person households; income levels are adjusted for differences in household size.)

The richest 1 percent are indeed outpacing everyone else, but so are the upper middle class because formerly middle class families are moving up.

Clearly, things like increasing shares of dual-income households with dual college-degree earners is a big part of this, as are the returns to certain kinds of work requiring college and advanced degrees. Whatever the case, it is astounding that 1/3 of American households earn above $100,000 per year.

So, to Samuelson’s point, should our policy goal be to reduce that number, or should we be trying to help more lower income families make their way upwards faster? I agree it should be the latter, and I also agree that doing so is no easy task.