How the Middle Class Is Financially Different Now Than in the 1980s

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Run the numbers on the American middle class of today vs. the middle class of the 1980s, and one fact is likely to stand out.

“It’s certainly smaller than it used to be,” said Rakesh Kochhar, senior researcher with the Pew Research Center. “There’s more inequality in the U.S., and people are living more at the ends of the distribution, the lower end and the upper end.”

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Kochhar was a lead researcher for a Pew study in 2022 that chronicled a steep decline in the share of U.S. adults living in middle-class households, a drop from 61% in the early 1970s to 50% two years ago. Those figures have held steady, he noted earlier this month.

“I haven’t seen anything in the data that would suggest things are turning around,” Kochhar said.

He added that while the middle class has contracted and failed to match the gains of the upper tier since the 1980s, the middle class overall has still seen substantial gains.

“One thing to note is that on balance, everyone is better off,” he said. “There may be fewer people in the middle class, but their numbers (median income, adjusted for inflation) are about 50 percent higher than they were five decades ago.”

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Improvements and Declines

The middle class of today is better off in areas like air travel, a more exclusive experience back in the 1980s that is now much more common. Technological advances have taken us from prohibitively expensive early desktop computers to more powerful, more affordable smartphones in most people’s pockets. Cars are bigger, safer and more fuel-efficient.

Still, the upper class is gobbling up more of the pie and times are relatively difficult for many in the middle class as well as the lower class. The Pew 2022 study showed a bump of 14% to 21% of Americans in the upper-income tier over the same time period. The percentage of Americans in the lower-income tier increased from 25% to 29%.

Meanwhile, the 50% gains in median income for the middle class were far outpaced by the upper-income tier, which saw gains of 69%.

Belinda Román, an associate professor of economics at St. Mary’s University in San Antonio, Texas, said the reality is that experiences vary widely even within the middle class.

“The upper-middle class has seen gains,” Román said. “The middle-middle class is treading water. The lower-middle class is trying to climb back into what they thought would be a middle-class experience.”

Here are a few areas where that failure to keep up with the gains of the upper tier have many in the middle class struggling these days, compared to four decades ago.

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Homeownership

Recent spikes in interest rates, tied to the Federal Reserve’s efforts to tame inflation, have been well-chronicled. Mix that with a skyrocketing prices and an ongoing shortage of available housing, and many in the middle class are having a tough time buying a new home these days. It hasn’t helped that many baby boomers and Gen Xers aren’t selling for fear of losing their locked in, lower rates.

Not that buying a home in the 80s didn’t also have its challenges. Thirty-year fixed-rate mortgages hit a whopping 18.63% back in October of 1981. The median mortgage rate for that year was 13.9%, and the median mortgage rate for that whole decade was 12.82%. So today’s rates of around 7%, while frustrating compared to the all-time low rate of 2.65% in January 2021, are still a lot lower than they were 40 years ago.

Healthcare

While the Affordable Care Act of 2010 has made healthcare more accessible for millions, costs have soared since the 1980s.

The average amount spent on healthcare per U.S. household doubled between 1984 and 2019, based on Bureau of Labor Statistics data. During that same time period, health insurance costs soared by 740%.

Román noted that members of the middle class, including caregivers and struggling parents, have also been increasingly more vulnerable during events like the pandemic, with many losing their jobs or having to chose between working and taking care of their family.

Higher Education

The rising cost of college has many in the middle class struggling. Román noted that even public education can be prohibitively expensive. She added that the changing nature of the college experience is at least partially to blame.

“I don’t think it’s being spent in the classroom,” Román said. “Back then (in the 1980s), when you went to college, you suffered. Crappy dorm room, crappy food. Now college dorms are offering things like their own gyms, this and that.”

Whatever the reasons, Bureau of Labor Statistics data shows an increase of 1,502% for average college tuition and fees between 1977 and 2024 — a jump from $20,000 to $320,425. That’s well past the rate of inflation and a tough increase to swallow for members of the middle class.

Román said that, politics aside, the U.S. should pursue policies that promote more growth across the entire economic spectrum.

“More inclusive growth is a good thing,” she said. “It’s the old saying: A rising tide lifts all boats.”

Kochhar added that while members of the middle class are on balance better off materially than they were in the 1980s, there may be other losses worth noting.

“It’s hard to say that we’ve lost things, materially,” he said. “We may have lost communities, neighborhoods … social things like that.”

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