Are you still in the middle class?

It’s hard to turn on the news without seeing a report about how inflation is battering the American middle class. Census Bureau data show about a quarter of middle-class American families were struggling to pay medical bills in 2020.

Since then, inflation has surged, peaking at 9% in June 2022. Some families that were middle class in 2020 may no longer be in that category.

Oliver Rust, head of Product at independent inflation data aggregator Truflation, says that the number of middle-class families has remained fairly stable over the last decade, but lately, they have struggled with financial insecurity and have taken on increasing amounts of debt.

“Historically, the middle class has been the engine of American economic growth and prosperity,” Rust told ConsumerAffairs. “Yet we’re now seeing the middle class capturing a lower share of income than in the 60s, 70s and 80s. In the two decades since the mid-2000s, it has shrunk from roughly 60%, in part due to demographic changes as the population has seen a particularly steep increase at the extreme bottom and top of the economic spectrum.”

He says inflation may be a contributor but it is not the only factor contributing to a shrinking middle-class. But that raises the question – where do you stand?

The Pew Research Center has a calculator determining the minimum annual income in each state to be considered middle-class. ConsumerAffairs used that calculator, based on 2018 data, then put those numbers into an inflation calculator provided by the U.S. Bureau of Labor Statistics.

Minimum required income by state

The result is the minimum annual income required in 2023 for a family of four to be middle class in each state.

Other reasons the middle class is shrinking

Rust says the shrinking of the middle class is less an indicator of how well the population is doing as a whole, but rather the result of the polarization of where growth is coming from. He notes that while some people are falling out of the middle class into the lower class, some are also moving into the upper class.

“Another important factor to consider is the aging population of the U.S.,” he said. “Normally, retirees live off savings and generate little income. This dynamic, combined with a higher number of immigrants, tends to bring down median incomes.”

Rust says there could soon be more changes affecting the growth of the middle class, with some states gaining middle-class households while other states lose them. Households where wage-earners can work remotely may relocate from expensive states to locations where their money goes further, providing a comfortable middle-class lifestyle.