The Myth of the Middle Class Squeeze: Employment and Income by Class in Six Western Countries, 1980-2020

The public debate depicts the middle class as the victim of employment polarization and income stagnation. This narrative of a squeezed middle class suggests that people above and below fared better in terms of job and income growth. However, this narrative ignores basic insights from class theory and lacks empirical evidence. Based on the Luxembourg Income Study, we trace the evolution of employment and income by class for six large Western countries – France, Germany, Poland, Spain, the UK and US –, 1980-2020. Over this period, employment of the upper-middle and middle class strongly expanded, while the skilled and low-skilled working class shrank everywhere. Working-class households also made consistently smaller income gains than middle-class households in all countries except Poland. Real labor income of the working class declined in Germany, stagnated in the US and grew by less than one percent annually in France and the UK. A cohort analysis of wage growth shows that the promise of doing better than one’s parents and grandparents held for middle- class households. However, this same promise vanished for the working class – most evident in Germany and the US. The great economic loser of the last decades was not the middle, but the working class.