Squeezing the middle class: Income trajectories from 1967 to 2016. Stephen Rose, George Washington University, Urban Institute: “There is growing concern over both income inequality and the plight of the middle class. But most studies of these questions rely on cross-sectional data, rather than tracking the same people over time. In this paper I examine changes in income and class position over two fifteen-year periods (1967 to 1981 and from 2002 to 2016). Specifically, for individuals aged 25 to 44 at the start of these periods, I use data from the Panel Study on Income Dynamics (PSID) to examine:
- Group Income growth (average)
- Individual Income losses and gains
- Changes in the size of income classes
- Transitions between income classes
- Income class composition by race
- Income class composition by education
Comparing the two periods, the main findings areas follows:
- The median income growth experienced by prime-age Americans over a fifteen-year period has been cut by almost two thirds, from 27%to 8%.
- The proportion experiencing a large income loss has more than tripled, from 4% to 12%.
- The upper middle class has expanded significantly, while the “middle” middle class (MMC) has shrunk from 50% to 36% .
- Income growth at the top of the distribution has been almost twice as fast as in the middle (48% at the 95th percentile, compared to 26% at the median).
- Upward mobility out of poverty has declined, from 43% to 35%.
- Downward mobility from the MMC has doubled, from 5% to 11%.
- The proportion of Black Americans in the upper middle class has increased significantly, from just 1% to 14%. But large race gaps remain: 39% of whites are in the upper middle class or higher.
- More education has become more closely associated with a higher income; 59% of those with a BA+ are in the upper middle class or higher, up from 37%.