SACRAMENTO, Calif. — Research shows the American middle class is shrinking. Experts say a widening gap between the rich and poor can lead not only to economic problems but also stress and anxiety.
The latest data from the Pew Research Center shows the American middle class income is between $56,000 a year to just under $170,000 a year. Research shows fewer people are earning that.
“The general concern is that it’s been shrinking and shrinking for awhile,” said UC Davis economics professor Derek Stimel.
The Pew Research Center says about half of U.S. adults lived in middle-income households in 2023. More than 60% did in 1971.
Stimel says while there isn’t a strict definition of "middle class," having a strong one is a good thing.
“The more robust your middle class is, the more you have a consumer base in your economy and that will keep the economic activity and spending going,” he said.
Stimel says the cost of living, including housing, is a big factor in how comfortable people feel with their income and if they perceive themselves as ‘middle class.’
Californians could likely feel less comfortable because the cost of living is so much higher than most of the country.
“If I’m not feeling great or feeling secure in my financial position, that’s going to impact all the financial decisions I make,” said Stimel.
Experts say a widening gap between the rich and poor can lead to some troubling economic trends like more debt and less investment in education.
“What on the margin can I really do to make myself feel a little bit more secure?" Stimel said. “Does that mean cutting back a little on spending? Does that mean not borrowing as much as I would otherwise borrow, or holding back on some big ticket item I’ve been thinking about?"
To keep the middle class strong, Stimel says governments should do what they can to allow creativity, entrepreneurship and risk-taking spirit that boosts economic activity.
Individuals should have a financial plan, savings and have a variety of skills adaptable to different kinds of jobs.
How can people find out if their defined as middle class? It’s a fluid number that changes depending on where you live.
Check out the middle class calculator from Pew HERE.
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