Bloomberg: The American Middle Class Is Shrinking, and That’s OK

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The American Middle Class Is Shrinking, and That’s OK
By Allison Schrager
November 20, 2025

The good news is that Americans have never been richer. The bad news is that most of them don’t feel like it.

There has been tremendous growth in income and wealth in the US in the last half century, even for poorer and middle-class households. But because of the nature of that growth, as well as the changing structure of the national economy, a lot of the people who have benefited also believe that the economy isn’t working for them.

It is true the middle class is shrinking. In the 1960s the income distribution of US households looked like a bell curve with a very thick middle. Today there are fewer Americans in the middle — largely because many have joined the ranks of the upper-middle class. In 1967, a little more than 5% of Americans earned or received more than $150,000 (in 2024 dollars). Now more than 30% do. And it’s not just the middle class that moved up: In 1967, more than 38% earned or received less than $50,000. Now that figure is 21%.
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There are legitimate reasons that many households feel poorer, even if their income is greater. It is a struggle to keep up with the price increases of many critical services in regulated sectors such as health care, education and housing. There is also some justified anxiety that the earnings growth and prosperity won’t continue. The last 60 years was the Era of the Baby Boomers, when income gains were large for anyone who went to college. The college premium still exists, but it has stopped growing and it comes at a higher cost.
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This poses a challenge not just for economic planners but for the very meaning of prosperity. Growth and rising incomes are usually the goal of economic policy, including neoliberal economic policy. But the last two decades show that rising incomes aren’t always enough engender good feelings about the economy.

This intra-top-quartile resentment may also help explain why more politicians want higher taxes on super-high earners but don’t ask the upper middle class to pay any more. The taxes are not just a way to pay for more middle-class welfare benefits. They are a form of economic retribution.

The catch is that there is a tradeoff between growth and equality. At least some of the growth at the top came from more productivity. Innovative companies, some founded or led by billionaires, help make the American economy (or at least Americans’ stock portfolios) richer. Yes, there is room to increase taxes on the rich, but punitive taxes can harm growth.

The idea that the economy is rigged and zero-sum is leading to a rise in populism in both parties. The result will probably be less trade and more price controls, which would mean a slower-growing economy — or even one that is shrinking. Then Americans will learn that the only thing worse than rising inequality is flat or declining income.

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