Gap between median and upper middle class widening

Investment Analysis Clubs Macro Economic Trends and Risks
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https://www.wsj.com/opinion/why-the-middle-class-feels-poor-cdb17587?mod=hp_opin_pos_5

Why the Middle Class Feels Poor

With the Great Decompression, incomes rise for everyone but much faster for the affluent.

By Jordan McGillis, The Wall Street Journal, Feb. 11, 2026

…
Since about 1975, we’ve been in an era of upward escape for families with the right human and social capital, which has become ever more valuable with the rise of digital technology and globalization. As a result, the upper middle class is running away from the pack…

As per the Integrated Public Use Microdata Series, for married couples with children (the kind of family Mr. Green wrote about), the median income in 1975 was $15,000. The 80th percentile for married couples with children was $22,600. Put another way, the 80th-percentile family earned 51% more than the median family.

Since then, the distance between the median and the 80th percentile has grown. In 2000, the median married couple with children earned $59,000 while the 80th percentile family earned $99,000, meaning the 80th-percentile family was earning 68% more.

By last year, the gap had grown even more substantial, with the median married couple with children earning $130,000 and the 80th-percentile family, also a married couple with children, earning $242,000 — 85% more…

The faster wealth building of the upper middle class in recent decades has been accompanied by assortative mating [people choosing mates from similar educational backgrounds] and what Mr. Reeves describes as the upper middle class’s hoarding of the American dream. … [end quote]

I never heard of the Integrated Public Use Microdata Series before but it’s a treasure trove of data.

The article maintains apple-to-apple comparisons by comparing only married couples with children. These households represent about 17.9% of all U.S. households, a significant decline from over 40% in 1970. While 70% of all families with children are married couples, they are now outnumbered by childless households.

Even though the median household is able to maintain a materially higher standard of living today than in 1975, human psychology works by comparison with others. An ice-age cave-dwelling family may feel they are comfortable (and even have energy to create great art) as long as the next-door family lives in a similar cave. A family with two cars and a cell phone in everyone’s pocket may feel they are falling behind if the relative wealth and educational mobility has a widening gap with others they know.

Wendy

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Is that apples to apples? I imagine that the composition of the universe of households that are married couples with children has changed drastically between 1975 and today.

Do you have a link to the article? That might shed some light…

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@albaby1 I posted a link to the article as I always do.
Wendy

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Whoops! It was above the headline! I completely missed it.

Anyway, it doesn’t really provide any additional details…so I still question how much of this effect is due to income effects or demographic effects. I mean, I don’t doubt that there’s a “decompression” where an upper level quintile is moving away from the median. That’s consistent with everything we know about recent trends in income distribution. However, I don’t think a direct comparison to the 1975 analysis is going to give you any good sense of the size of that effect, because some of it will be an artifact of the demographics.

To pick an obvious one, income changes with age. People early in their careers earn less than people later in their careers (up to a point - earnings will peak towards the end of the career). The rate of increase isn’t constant among the distribution of earnings in a population - the spread between the highest and median earners increases as people’s careers go on. The gap between 50% and 80% among 25-34 year olds is much smaller than in subsequent decades.

The wage lifecycle is more complex than you think. - ADP Research

People today are having kids markedly later in their lives than in the 1970’s. So even if nothing about the income distribution had changed, we might expect that the results of a raw 50% vs. 80% comparison between households with kids would show a widening gap. Not because income had changes (we held that constant as a hypothetical), but because you’re measuring older people - and older people have a bigger gap than younger people.

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“The Dow is over 50,000 right now. The S&P at almost 7,000, and the Nasdaq smashing records. That’s what we should be talking about.”

IYKYK.

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