The Shrinking Middle Class: Causes and Consequences – Kavan Choksi UAE

For much of the 20th century, the American middle class was viewed as the backbone of the U.S. economy. It represented upward mobility, stability, and the promise of a better life. But over the past few decades, that middle class has been steadily shrinking. This shift has significant implications not only for individuals and families but for the broader economy and social fabric of the country. Let’s now see what pros like Kavan Choksi UAE think:

The U.S. Census Bureau defines the middle class broadly, typically including households with incomes between two-thirds and twice the national median. While that definition leaves room for interpretation, the trend is clear: fewer households now fall into this range. According to Pew Research, the percentage of Americans considered middle class has dropped from around 61 percent in 1971 to roughly 50 percent today.

Several key factors have contributed to this decline. One of the most significant is wage stagnation. While the cost of living has increased—especially in housing, healthcare, and education—wages for most workers have not kept pace. This has made it harder for families to maintain the standard of living that once defined the middle class.

At the same time, income inequality has widened. High-income households have seen strong gains from investment returns, stock market performance, and executive compensation. In contrast, many working-class and middle-income families rely mostly on wages, which have grown slowly. As a result, more wealth is concentrated at the top, while the economic foundation of the middle class erodes.

Another contributing factor is job polarization. The U.S. labor market has increasingly favored high-skill, high-wage jobs and low-skill, low-wage jobs, while reducing the number of stable, middle-wage positions. Manufacturing jobs that once supported middle-class families have declined due to automation and globalization. Meanwhile, many service-sector jobs that have grown in their place offer lower pay, fewer benefits, and less stability.

The housing market has also played a role. In many parts of the country, the cost of owning a home has far outpaced income growth. Homeownership, once a cornerstone of middle-class life, is now out of reach for many families. Rent prices have climbed as well, leaving less room for saving, investing, or spending on education and health.

The consequences of a shrinking middle class are far-reaching. Economically, it weakens consumer demand, which drives much of the U.S. economy. Politically, it fuels polarization and erodes trust in institutions. Socially, it creates barriers to opportunity, making it harder for people to improve their lives through hard work and education.

Addressing this issue will require a combination of policies that support wage growth, affordable housing, quality education, and accessible healthcare. It also means rethinking how to prepare the workforce for an evolving economy—one where traditional middle-class jobs may no longer exist in the same way.

In many ways, the strength of the U.S. economy has always depended on the health of its middle class. Rebuilding that strength is not just a matter of economic statistics—it’s about restoring balance, opportunity, and a sense of shared prosperity.