How Far Does Your Middle Class Income Go Compared to Your Parents?

Kira Garmashova /

Although older generations often assume that today’s young adults have it easy, no one could blame young millennials and Gen Zers for tuning them out, considering historical wage stagnation and the astronomical costs of housing and education they face.

But the goal for most young professionals in 2023 is the same as it was for their parents in the 1970s, ’80s and ’90s: middle-class security.

But is either generation right in thinking that the modern middle class has an easier or harder time compared to decades past — and how far does a middle-class dollar go today vs. then?

Well, it depends on what that dollar was buying.

What Is a Middle-Class Income?

You can’t compare the purchasing power of today’s middle-class income to that of your parents’ time without defining the term.

“In the U.S., the middle class includes households earning between two-thirds and double the median income,” said Rob Whaley, a finance specialist at Horizon Finance Group.

According to the U.S. Census Bureau, the median household income in 2022 was $74,580, which means middle-class households earn between $49,720 and $149,160, according to widely accepted Pew Research Center parameters that Whaley cited.

In 1985, the median household income was $27,740. That’s $79,350 in 2023 dollars, which means today’s middle-class families have slightly less real purchasing power — but a $4,770 deficit in the median household income is not what truly sets modern middle-class families apart from those of 30 or 40 years ago.

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The Middle Class Shrunk as More People Became Rich or Poor

For decades following World War II, a clear majority of Americans enjoyed middle-class comfort — until they didn’t. In 1971, 61% of adults were middle-income earners. By 2021, it was 50%.

So where did the missing 11% go?

During that same 50-year period, the ranks of the rich swelled from 14% to 21% (plus 7%) and the lower-income tier grew from 25% to 29% (plus 4%) — and the ’80s defined middle-class contraction.

According to Pew, “From 1981 to 1990, the change in mean family income ranged from a loss of 0.1% annually for families in the lowest quintile (the bottom 20% of earners) to a gain of 2.1% annually for families in the highest quintile (the top 20%). The top 5% of families, who are part of the highest quintile, fared even better — their income increased at the rate of 3.2% annually from 1981 to 1990. Thus, the 1980s marked the beginning of a long and steady rise in income inequality.”

Your Parents’ Wages Kept Up With Inflation; Yours Haven’t

Not only did the middle class shed members when your parents were young, but their wages stopped rising quickly enough to keep pace with inflation.

A dollar in 1970 had the purchasing power of $6.67 today — a cumulative inflation rate of 567%. However, over the same period, the median middle-class income rose by just 50%, from $59,934 to $90,131 in 2020 dollars.

As a result, the middle class’s share of aggregate income fell from 62% to 42% during that time.

How Far a Middle-Class Dollar Went Then vs. Now

Today’s middle class is smaller and its wages haven’t kept up with rising prices, with major expenses like college and healthcare far outpacing inflation. But there also has been plenty of tradeoff with expenditures, both large and small, along the way.

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“Although we may view our parents’ generation as having a significantly easier time affording daily life, this isn’t necessarily true,” said Jake Hill, CEO of personal finance and credit site DebtHammer. “For example, the 1970s saw some of the highest inflation rates in recent U.S. history, putting grocery store prices at astronomic highs for the time. Even though 1975’s egg price of $0.77 per dozen sounds great in modern terms, that would be similar to paying over $4.40 a dozen today.”

The average cost in September was $2.09.

Here are a few other examples of how the value of a dollar changed depending on what it was buying for middle-class families in previous generations and today.

Middle-Class Dollars Used To Buy Much More Real Estate

In 1980, the median home cost $64,600, or $241,300 in 2023 money. But in 2023, the median home sells for $431,000. In the fourth quarter of 2022, it was about $480,000, which means middle-class Americans then had the real purchasing power to buy nearly two homes for the price of one today.

But Your Parents Spent Way More To Finance Their Houses

Today’s homebuyers lament sky-high mortgage rates, which currently average 7.79% — but they’re only sky high compared to the recent past.

Home loans spent nearly all of the 2000s under 6.5% and then dropped below 5% for the 20102. Then, they dipped to historic lows in the mid-to-high twos in the post-pandemic 2020s.

But your middle-class parents didn’t have it so easy.

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In the nearly two decades between the summer of 1973 and the summer of 1992, mortgage rates never once fell below 8%. They were in double digits for every single month between November 1978 and July 1986, peaking near a record-high 19% in October 1981.

It’s Far Easier for Today’s Middle Class To Travel

The ability to travel and take vacations has always been a part of middle-class financial security,  but the common notion that the cost of flying has become prohibitive in recent decades is a fallacy.

In a post on Economist Writing Every Day, Jeremy Horpedahl, associate professor of economics at the University of Central Arkansas, showed that the wage-adjusted cost of airfare has fallen by more than half over the last 40 years.

In 1980, the median wage earner had to work 40 hours to afford average round-trip domestic airfare. In 2021, it had fallen to 15 hours.

You and Your Parents Spend About the Same on Food

According to the USDA Economic Research Service, Americans spend much more eating out and much less on food at home than they used to, but the middle class spends about the same on food overall.

In the early 1980s, Americans ate about 11% of their disposable income, the same as today. By context, it was about 19% in 1960.

You Also Spend About as Much on Wants

According to the Bureau of Labor Statistics, the average household spent around 20% of its income on non-necessities in 1901. By 1950 it was more than 30%, and by 1980 it was over 40%. By the mid-1980s, non-necessities accounted for nearly half of all consumer spending, then it tapered off and stayed there for 40 years.

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According to the Organisation for Economic Cooperation and Development, the American middle class still spends about 50% of its income on non-necessities — same as in the ’80s. In fact, one of the most popular budgeting strategies — 50/30/20 — allocates exactly half of your budget to needs.

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