1/31/2020

The Truth About Income Inequality

"That's important to remember when considering the frequently stated worry that the middle class is disappearing. The middle class is getting smaller—but it's disappearing, for the most part, because it's moving up.

Now, it matters how we define the middle class. If the middle class is defined as the middle three income quintiles, then in 2018 it consisted of households with income between $25,600 and $130,000. In 1967, the middle three quintiles had income ranging from $19,726 to $54,596 (in 2018 dollars). The people in the middle, in other words, are considerably richer than their counterparts a half century ago.

Of course, defining the middle class that way means that exactly 60 percent of households will always qualify. That seems too broad. American Enterprise Institute economist Mark Perry, on his blog Carpe Diem, defines the middle class more narrowly to include any household with an income, in 2018 dollars, of between $35,000 and $100,000. In 1967, he notes, 54 percent of households were in that category; by 2018, that was down to 42 percent. That wasn't because they slipped; it was because they rose. In 1967, only 9.7 percent of U.S. households had income of $100,000 or more (in 2018 dollars). By 2018, that percentage had more than tripled to 30.4 percent."