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 

The Distribution of Household Income and the Middle Class

"Although not itself a subject of legislation, the shape of the income distribution enters Congress’s
decision-making process concerning such policy issues as taxes, means-tested benefits, and social
insurance programs. Congress also considers legislation specifically in the name of those in the
middle class, which is variously defined as some income level or income range within the distribution of U.S. households with income. After briefly analyzing the distribution of household money income in 2011, the report attempts to put the term “middle class” into some perspective..."
The Distribution of Household Income and the Middle Class

Budget of the United States, FY 2011
"Supporting Middle Class Families

Having steered the economy back from the brink of a depression, the Administration is committed to moving the Nation from recession to recovery by sparking job creation to get millions of Americans back to work and building a new foundation for the long-term prosperity for all American families. To do this, the 2011 Budget makes critical investments in the key areas that will help to reverse the decline in economic security that American families have experienced over the past decade with investments in education, clean energy, infrastructure, and innovation.

But even as we meet the challenge of the recession and work to build an economy that works for all American families, we must also change the way Washington does business – ending programs that don’t work, streamlining those that do, cracking down on special interest access, and bringing a new responsibility to how tax dollars are spent. The President’s Budget takes the steps to help jumpstart job creation, works to strengthen the economic security of American families, and makes the tough choices to put our Nation back on the path to fiscal responsibility..."