Middle Class Families Making It Work

Ask Americans whether they belong to the middle class and the answer is likely to be yes. In fact, 70% of adults identify as middle class, according to a recent online survey by Northwestern Mutual--a figure that has held steady for years.

Yet today, only 50% of adults actually live in middle-class households, according to the Pew Research Center. That percentage has been steadily shrinking since 1970, when 61% of adults were considered middle class.

Who is middle class? Definitions vary, but Pew defines middle class as families with two-thirds to twice the U.S. median household income, after adjusting incomes for household size and the cost of living in specific areas. According to Pew's most recent calculations, a middle-class family of four nationally has a household income of $53,369 to $160,107. The income ranges are often higher in cities on the coasts, such as New York; San Jose, Calif.; and Washington, D.C. Some of the lowest ranges are in the Midwest and South, such as Michigan City, Ind.; Mobile, Ala.; and Spartanburg, S.C.

Since the '70s, every decade has ended with a smaller share of people in middle-income households than at the start of the decade. The number of people who have moved up the income ladder is slightly higher than those who have slid downward, says Rakesh Kochhar, Pew's associate director of research and coauthor of the 2016 report America's Shrinking Middle Class.

The contracting middle class is tied to a number of factors. "Chief among them is the decline of middle-class jobs," says Richard Clinch, executive director of the Jacob France Institute, a research center at the University of Baltimore. Back in the 1970s, the country had a large base of unionized manufacturing jobs that provided a path to the middle class, he says. But over time, those jobs have been eliminated by automation or moved overseas. There are now plenty of high-skill, high-salary jobs, as well as low-skill, lower-paying jobs that don't require more than a high school diploma, he says.

The decline of the middle class could have adverse effects on the U.S. economy because it could reduce consumer spending and even discourage some people from investing in a college education if a diploma is no longer seen as a sure way to climb the economic ladder.

Competing Priorities

Lynn Dunston, a certified financial planner in Denver, says his middle-class clients struggle to balance competing priorities, especially choosing between saving for retirement and . "Those are the conversations we have on a weekly basis," he says. The middle-class families we interviewed say they live comfortably, but their lifestyles are often modest, without much discretionary income.