The official economic definition of middle class relies on income (approx. $55k-$168k), yet most Americans define it by achieving milestones like homeownership, having an emergency fund, and feeling financially secure. By this 'feeling-based' definition, fewer than 50% of Americans consider themselves part of the middle class.
The financial squeeze on the middle class is understated by overall inflation figures. Since the 1970s, the costs of key 'middle class' necessities have skyrocketed disproportionately, with childcare rising 14x and healthcare 10x more than the overall inflation basket, significantly outpacing income growth over the same period.
Initially lagging, Millennials now possess 2.5 times more wealth than Gen X had at the same age. This reversal wasn't driven by better saving, but by circumstance; being less able to afford homes, they allocated more to equities and 401ks, benefiting immensely from stock market growth and demonstrating the power of asset market timing.
While AI is expected to create long-term disinflation via productivity gains, these price reductions will first appear in early-adopter industries like financial services and tech. Since high-income households allocate a larger share of their spending to these categories, they are positioned to benefit first, potentially widening the wealth gap.