Here's an analysis that purports to explain the phenomenon as a demographic artifact: Solving the Mystery of the Disappearing U.S. Middle Class From the PEW report: Political Calculations confirms that the aging boomers are enjoying high incomes. Generation X is also doing well, but this was a smaller cohort, as shown in another chart. The Millennials are another large group, but they are just starting out and their incomes are still relatively low. http://3.bp.blogspot.com/-1eXQAKUT7zE/Vml0RDywRZI/AAAAAAAAMyg/pLOmJSqoTnw/s1600/us-registered-births-1909-2004.JPG So the evaporation of the middle class may be explained by many boomers doing well and getting Social Security on one end and many young people starting out their careers on the other end.The biggest winners since 1971 are people 65 and older. This age group was the only one that had a smaller share in the lower-income tier in 2015 than in 1971. Not coincidentally, the poverty rate among people 65 and older fell from 24.6% in 1970 to 10% in 2014.
I see three potential caveats with this explanation. 1) The author here uses registered births. This chart, which would include immigrants (about 42M individuals, or 13% of the population) looks less dramatic: 2) The PEW data showed that 65 and older had a 24.6% increase, but that age excludes most of the baby boomer population (those 51-64) as defined by the generational graph. The PEW data shows that 45-64 yos had a 2.1% increase and 30-44yos had a 0.1% decrease. 3) Did Social Security really push significantly more middle class baby boomers into the upper middle class ($126,000 to $188,000 year) than it kept from falling into the lower middle class in addition to pulling lower middle class baby boomers into the middle class? Because only then could it be attributed to shrinking the middle class contribution for that generation.
These are good points. 1) Of course we should count all living residents. Births is a distortion not only because it leaves out immigrants but because it leaves out deaths as well, which certainly affected the older group more. 2) Another good catch. 3) Social Security is a strange justification for high earnings. The report measures income, but the usual picture of someone collecting Social Security is a retired person living off of their savings.
I am going to give up and fall back on my initial protest that there are better things to discuss. Think about it scientifically, and ask: What question does this analysis answer? What are we trying to learn? We are not trying to answer any of these questions: Are people doing better or worse today than before? Is life getting better or worse for the poorest people? Are typical individuals in the population seeing improvement? The question we are trying to answer is more like this: How have the membership counts in arbitrary demographic blocs changed over time, relative to each other? We are discussing changes in the shape of the bell curve, while ignoring the fact that the bell itself is moving and growing. As if someone asked you about the home team's season, and you said "compared to last year, they scored more points in the first and last quarters of their games, and fewer near halftime."
As I said elsewhere in this post, IMO both the shape and the place of the bell-curve are probably worth discussing. Personally, I suspect that the shape itself isn't as important as mobility, but that the shape of the curve and mobility may be related at times to different degrees. If there is insult of disparity, then surely the possibility to move from the lower strata to the higher one reduces the sting. And, due to some evolutionary oddity of our brains, a little bit of this goes a long way. IMO the US has long benefited from a worship of economic transcendence. There's that quote (mis-attributed to Steinbeck) that pokes fun at Americans: It's a funny cultural observation, but when your soldiers have irrationally high morale, you win more battles. To be clear, I agree that disparity isn't an injustice; at least I suspect that you don't count it as one. However, I do see an increase in disparity coincident with a decrease in mobility as symptom of something that won't end well. My sense is that due to the influence of money on law, there may be a trend in the US towards systems that preserve wealth and prevent mobility at the expense of a greater economic growth. That is, the change in the shape of the bell curve is slowing its shift to the right. To me, this would be a real concern. Here's a horrible thought: What if the hope of economic mobility is not fueled by an absolute rate of mobility, but instead by the sign of the change in that rate? What if the the shape of the bell curve doesn't matter, but the eventual shape that its current change suggests that does?"Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires."