Squeezing the middle class: Income trajectories from 1967 to 2016

[Brookings Institution]
"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 are as 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% ..."
Middle class income