As America's middle class disappears, the upper middle class is thriving

A new report by the Urban Institute depicts a growing upper middle class. Is this growth at the expense of the middle class?

Widening wealth inequality has characterized the American economy since at least the end of the Great Recession in 2009. According to a new report out Tuesday, it's not just the one-percenters who are reaping the benefits. 

As America's middle class shrinks, its upper middle class is growing and thriving, according to an analysis from the Urban Institute. That group, which the Urban Institute defines as a family of three that earns between $100,000 and $350,000 annually, now boasts control of the majority of the nation’s income, or about 52 percent of the United States’ wealth. It accounted for a much smaller share a few decades ago – 30 percent in 1979. The upper middle class has huge population gains in the past 40 years, doubling in size between 1979 and 2014, from 12.9 percent of the US populous to 29.4 percent.

Over the same period, the middle class shrank from 38.8 percent of the population to 32 percent.The amount of wealth in the hands of the middle class also took a dive. The middle class controlled 46 percent of the nation's income in 1979. By 2014, it was down to  to 26 percent.

“Although wealthier people always have a greater share of total income, this report documents a major shift in the distribution of economic resources," says Stephen Rose, an affiliated scholar with the Urban Institute and author of the report. 

Statistics vary on who, exactly, counts as middle class depending on who's doing the counting, but there is agreement that the group is shrinking in terms of both wealth and size. The Pew Research Center’s definitions of middle-income and upper-middle income are slightly different than the Urban Institute's. A family of three earning between $42,000 and $125,000 is considered middle-income, while a family of three earning between $126,000 and $188,000 would be considered upper-middle income.

According to the Pew Research Center’s data, the number of middle-income adults has fallen from 61 percent in 1971 to 50 percent in 2015. Growth in upper-income tiers by Pew's definition, has overshadowed the growth of upper-middle income households. The number of upper-income households jumped from 4 percent in 1971 to 9 percent in 2015, while the number of upper-middle income households rose slightly from 10 percent to 12 percent within the same time frame, according to Pew.

Both reports, and others, agree that there is growing economic disparity within the United States. According to the 2013 Credit Suisse Global Wealth Databook, the United States has the most top-heavy concentration of wealth among the 20 richest developed countries, with 75.4 percent of the wealth owned by 10 percent of the population.

However, Mr. Rose at the Urban Institute argues that the growing wealth of the nation's very richest individuals is just a small part of the issue.  “Any discussion of inequality that is limited to the 1 percent misses a lot of the picture because it ignores the large inequality between the growing upper middle class and the middle and lower middle classes,” he writes in the report.