How the Middle Class Is Financially Different Now vs. the ’90s
Technically, you only have to go back 25 years to reach the 1990s, but in many ways it might as well be ancient history. Much of the decade passed during the pre-internet era, which means it was an entirely different world in terms of finance, commerce, communication, work, entertainment, education and social life. Another big change involves the middle class, which has seen its financial strength steadily erode.
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As of 2021, only half of U.S. households fell into the middle class, according to a Pew Research Center analysis of government data. That share has been dropping for at least 50 years. Not even the roaring tech economy of the mid-to-late 1990s (pre-bubble) could bolster the dwindling middle class.
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Fewer Americans Sharing in the Economic Wealth
That’s partly because fewer Americans are sharing in the nation’s overall wealth now than they did 30 years ago. Government data website USA Facts revealed the following trends:
The top 20% of Americans by income have seen their share of wealth increase the most between 1990 and 2022. In the final quarter of 2022, this group held 71% of the nation’s wealth — up from 61% in 1990.
The bottom 20% have seen their share of wealth remain at roughly 3% since the 1990s.
The 60% of income earners between the top and bottom quintiles — referred to here as the “middle class” — saw their share of wealth fall to 26% in 2022 from 37% three decades earlier.
These shifts have occurred even though middle-income households are earning a lot more money now than they did in the 1990s. The median income for households defined as middle class was $68,856 a year in 1990, according to Statista. That figure rose to $76,819 in 2000 and $90,131 in 2020 — a gain of 31% over three decades.
The problem is, prices of many consumer goods have nearly doubled over roughly the same time period. According to U.S. Labor Department data cited by the CPI Inflation Calculator website, $20 in 1995 had the equivalent purchasing power of about $38.41 in 2022 — a gain of $18.41 over 27 years. That means average prices in 2022 were 1.92 times higher than average prices in 1995.
The bottom line is that while middle class Americans are earning a lot more money these days, said money has not kept pace with inflation. From a purely financial standpoint, most middle class Americans have taken a step back since the 1990s, and there are few indications that the trend will shift in the other direction anytime soon.
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This article originally appeared on GOBankingRates.com: How the Middle Class Is Financially Different Now vs. the ’90s
