For decades, the middle class represented economic security, social stability and upward mobility in the United States and Europe. A person with a reasonably paid job could expect to purchase or rent a suitable home, raise a family, obtain healthcare, educate their children, take an occasional holiday and retire with dignity.

That promise has become increasingly difficult to fulfil. The middle class has not disappeared, but many households classified as middle-income no longer enjoy traditional middle-class security. They may have jobs and adequate salaries on paper, yet remain only a medical emergency, rent increase, job loss or interest-rate shock away from financial difficulty.

The problem is measurable. According to the Pew Research Center, 61 percent of Americans lived in middle-income households in 1971. By 2023, that share had fallen to 51 percent. During the same period, the proportion living in lower-income households increased from 27 to 30 percent, while the upper-income share rose from 11 to 19 percent.[1]

This movement is not entirely negative because some people have moved upward. Nevertheless, it reveals a more economically divided society in which the broad middle is being replaced by larger upper- and lower-income groups.

Europe generally retains stronger public services and social protection than the United States, but its middle class is also under pressure from expensive housing, weak wage growth, high energy costs, insecure employment, population ageing and economic disruption.

What Does “Middle Class” Actually Mean?

There is no universally accepted definition of the middle class. Researchers commonly define middle-income households as those earning between two-thirds and twice the national median income, adjusted for household size.

Using this method, Pew estimated that the American middle-income range in 2022 was approximately $56,600 to $169,800 for a household of three.[2] However, income alone does not tell the complete story.

A family earning $100,000 in an expensive city may face higher financial pressure than a household earning less in an affordable town. Housing costs, student debt, childcare, medical insurance, transport and local taxes determine how far an income will go.

Middle-class status is therefore both an economic category and a standard of life. It traditionally includes:

• Stable employment and predictable income
• Affordable and secure housing
• Access to healthcare and education
• Savings for emergencies and retirement
• The ability to raise children without permanent financial anxiety
• A reasonable expectation of upward mobility

The crisis arises when households remain statistically in the middle but lose these forms of security.

The Long-Term Decline in Middle-Class Security

The post-Second World War decades created a relatively favourable environment for middle-class expansion. Manufacturing employment increased, labour unions were influential, productivity gains were shared more widely, public infrastructure expanded and housing was more affordable relative to wages.

From the late twentieth century, this model began to change. Globalisation increased competition, industries relocated production, technology replaced routine labour and financial markets became more influential. Highly skilled professionals and asset owners received a growing share of economic gains, while many ordinary workers experienced slower wage growth and less secure employment.

The OECD concluded that middle incomes in many developed countries had grown more slowly than upper incomes. It also found that housing and other essential elements of a middle-class lifestyle had become more expensive than general inflation.[3]

Housing: The Centre of the Crisis

Housing has become one of the biggest threats to the middle class in both the United States and Europe.

In many major American and European cities, home prices have risen much faster than wages. Rents have also increased because construction has failed to meet demand. Restrictive zoning, lengthy planning processes, expensive land, labour shortages and construction costs have contributed to housing shortages.

In the European Union, households spent an average of approximately 19 percent of their disposable income on housing in 2024. The figure was substantially higher in some countries, including 36 percent in Greece and 25 percent in both Germany and Sweden.[4]

Eurostat considers households to be overburdened when more than 40 percent of disposable income is spent on housing. In 2024, 8.2 percent of the EU population experienced this problem. The rate reached 28.9 percent in Greece, 14.6 percent in Denmark and 12 percent in Germany.[5]

The burden is usually more severe for low-income tenants, young adults, single-parent households and people living in major cities.

Housing also creates a widening generational divide. Older households that purchased homes when prices were lower have benefited from rising property values. Younger people must either pay high rents or obtain very large mortgages. Those whose parents own property may receive assistance, while those from non-property-owning families fall behind.

Consequently, inheritance rather than employment is becoming a more important determinant of homeownership and financial security.

The American Burden of Healthcare, Education and Childcare

The disappearance of the American middle class cannot be understood through wages alone. Families must personally finance services that are more heavily supported by governments in many European countries.

Health-insurance premiums, deductibles and unexpected medical bills can seriously damage household finances. College education can leave graduates carrying debt for years, delaying homeownership, marriage, parenthood and retirement saving. Childcare may consume much of one parent’s salary.

Although real median American household income was $83,730 in 2024, the Census Bureau found that its change from 2023 was not statistically significant after adjusting for inflation.[6] A family may therefore receive a nominal salary increase without gaining additional purchasing power.

Europe’s welfare systems provide greater protection against medical and educational costs, but European governments face pressure from ageing populations, slow economic growth, staff shortages and rising pension and healthcare expenditure. If public services deteriorate, middle-class families may increasingly pay privately for services they already support through taxation.

Automation and the Disappearance of Middle-Skill Employment

Technological change does not eliminate all employment. It destroys some jobs, transforms others and creates new occupations. The difficulty is that the new jobs may not emerge in the same communities, industries or income groups as those that disappear.

Traditional middle-class employment included manufacturing, clerical work, administration, banking, retail management and technical services. Automation has already reduced demand for many routine tasks.

Artificial intelligence could extend automation into occupations previously considered relatively secure. Administrative assistants, customer-service employees, translators, junior analysts, bookkeepers and some media workers may see parts of their jobs automated.

The OECD has estimated that one in six middle-income workers holds a job facing a high risk of automation.[3] Meanwhile, the International Labour Organization warns that technological change can affect job security and wage inequality, even where complete job replacement remains limited.[7]

The danger is not simply mass unemployment. It is the gradual weakening of job quality through reduced bargaining power, short-term contracts, unpredictable hours and slower wage growth.

Globalisation and Regional Economic Decline

International trade has provided consumers with cheaper products and helped businesses reach new markets. However, it has also exposed industrial communities to intense competition.

Parts of the American Midwest, northern England, France, Germany, Italy and other industrial regions have experienced factory closures or declining manufacturing employment. New technology and service-sector opportunities have often concentrated in major metropolitan areas.

This produces a geographical divide. Successful cities attract investment, educated workers and high-income industries, while smaller towns lose young people, tax revenue and public services.

Governments frequently assume that displaced workers can relocate or retrain. In reality, relocation may be difficult because of family responsibilities, housing costs, age, health or regional identity.

The Growing Gap Between Income and Wealth

Income pays monthly bills, but wealth provides long-term security. Savings, property, shares, retirement accounts and business ownership protect families from emergencies and allow wealth to pass between generations.

Rising asset prices favour households that already own assets. A person who purchased a house or invested in the stock market years ago may become much wealthier without a large increase in salary. A younger worker who spends most of their income on rent receives none of those gains.

An OECD examination of household wealth found that median household wealth recovered in many countries during the 2010s, but substantial gaps remained across age, income and property-ownership groups.[8]

In the United States, wealth concentration is especially important. An OECD analysis found that the share of aggregate wealth owned by American middle-income households fell from 32 percent in 1983 to 17 percent in 2016. Over the same period, the upper-income share increased from 60 to 79 percent.[9]

This helps explain why economic growth can appear strong while large numbers of citizens feel financially insecure.

How the United States Should Respond

Make Healthcare Less Financially Dangerous

The United States needs broader affordable coverage, lower prescription-drug prices, clearer medical billing and stronger limits on costs faced directly by patients.

Medical treatment should not destroy the savings of an otherwise financially responsible family. Expanding preventive and community-based healthcare could also reduce expensive emergency treatment.

Reduce the Cost of Education and Childcare

Affordable community colleges, technical institutions and apprenticeship programmes can prepare people for good jobs without requiring overwhelming debt.

Childcare support is equally important. Expensive childcare reduces household income and often forces one parent—usually the mother—to reduce working hours or leave employment. This damages both present earnings and future career progression.

Rebuild Labour Power

Wage growth depends partly on workers’ ability to negotiate. Policies should protect collective bargaining, prevent wage theft and provide basic benefits to contract and gig workers.

Benefits such as healthcare, paid leave and retirement savings should become more portable, allowing employees to change jobs without losing essential protections.

How Europe Should Respond

Protect Public Services While Improving Efficiency

Europe’s healthcare, education and social-protection systems are major supports for its middle class. Governments must preserve them while improving productivity, reducing unnecessary bureaucracy and addressing staff shortages.

Simply increasing spending without reform will be difficult because ageing populations are already placing pressure on national budgets.

Create Better Jobs for Young Workers

Many young Europeans move between internships, temporary contracts and insecure employment before obtaining stable positions. Labour rules should protect workers without discouraging employers from creating permanent jobs.

Governments can reduce the divide between highly protected permanent employees and younger people trapped in insecure contracts.

Deepen European Economic Competitiveness

Europe must increase investment in research, digital technology, renewable energy, advanced manufacturing and infrastructure. Without productivity growth, it will become increasingly difficult to finance wages, pensions and social services.

Industrial policy should not protect every declining business indefinitely. It should help workers and regions move toward productive industries with long-term potential.

Policies Needed on Both Sides of the Atlantic

Build Housing at Scale

Governments must reform planning systems, permit greater residential density near transport and shorten approval procedures. They should also support social housing, affordable rental developments, starter homes and the conversion of suitable vacant buildings.

Housing subsidies alone are insufficient. If supply remains fixed, additional purchasing power may simply push prices higher.

The European Commission’s Affordable Housing Plan, introduced in December 2025, reflects growing recognition that housing has become a major social and economic concern.[10]

Connect Training to Real Employment

Retraining programmes should be based on actual employer demand. Workers need paid apprenticeships, recognised qualifications, career guidance and financial support while learning.

Priority sectors could include healthcare, construction, advanced manufacturing, renewable energy, cybersecurity, transport and technical maintenance.

Reform Taxation Fairly

Tax systems should reward employment, entrepreneurship and productive investment rather than speculation. Governments can reduce burdens on low- and middle-income work while closing avoidance opportunities used by extremely wealthy households and multinational companies.

Tax reform must be carefully designed. Punishing ordinary homeowners or small businesses would weaken the same middle class that governments are trying to protect.

Widen Ownership of Assets

Workers need opportunities to accumulate wealth, not merely survive on monthly salaries. Governments and employers can encourage matched savings accounts, portable pensions, employee share-ownership programmes and affordable retirement plans.

First-time-buyer support should be connected to increased housing construction. Otherwise, assistance may inflate existing home prices.

Strengthen Competition

Excessive corporate concentration can raise consumer prices, reduce wages and restrict business formation. Strong competition enforcement is therefore a middle-class policy.

Small and medium-sized enterprises should receive better access to finance, public contracts, digital infrastructure and export markets.

Future Consequences If the Crisis Is Ignored

Political Polarisation

A secure middle class generally supports moderate politics and stable institutions. When people believe that hard work no longer produces progress, they become more vulnerable to political anger, conspiracy theories, extreme nationalism and simplistic economic promises.

Declining Birth Rates

Young adults may postpone marriage and children because they cannot obtain stable jobs or affordable housing. This would worsen Europe’s demographic problems and place additional pressure on pension systems. Similar effects are increasingly visible in the United States.

Reduced Social Mobility

If housing, education and professional opportunities depend increasingly on parental wealth, society becomes less meritocratic. Children born into wealthy families gain advantages that talent and hard work alone cannot easily overcome.

Weaker Consumer Economies

Middle-class households are major purchasers of homes, vehicles, appliances, entertainment, travel and education. If their disposable income falls, consumer demand weakens, affecting businesses throughout the economy.

Loss of Trust in Democracy

The most serious consequence may be psychological. When citizens conclude that governments protect wealthy interests while ignoring ordinary households, trust in democracy, the media, business and public institutions declines.

Conclusion

The middle-class crisis in the United States and Europe is not caused by one policy, political party or technological development. It is the result of several connected pressures: unaffordable housing, unequal wealth accumulation, insecure employment, automation, regional decline and rising costs for essential services.

The solution is not to resist every economic change or attempt to recreate the industrial economy of the 1950s. Governments must build a new middle-class settlement suited to the twenty-first century.

That settlement should combine affordable housing, quality public services, competitive industries, lifelong training, stronger wages, fair taxation and wider asset ownership. Its purpose must be greater than keeping households within an official income bracket. It should restore the substance of middle-class life: stability, dignity, opportunity and confidence in the future.

References

1. Pew Research Center. “The State of the American Middle Class,” May 31, 2024. Read the report
2. Pew Research Center. “Are You in the U.S. Middle Class? Try Our Income Calculator,” September 16, 2024. Read the analysis
3. OECD. Under Pressure: The Squeezed Middle Class. OECD Publishing, Paris. Read the report
4. Eurostat. Housing in Europe—2025 Edition. View the data
5. Eurostat. “Living Conditions in Europe—Housing.” View the statistics
6. U.S. Census Bureau. Income in the United States: 2024, September 2025. Read the report
7. International Labour Organization. World Employment and Social Outlook: Trends 2025. Read the report
8. OECD and European Union. Mapping Trends and Gaps in Household Wealth Across OECD Countries, 2025. Read the report
9. OECD. Selected Policy Challenges for the American Middle Class. OECD Publishing. Read the report
10. European Commission. European Affordable Housing Plan, December 16, 2025. Read the official communication
11. Federal Reserve. “Distribution of Household Wealth in the United States Since 1989.” View the database
12. OECD. “Income and Wealth Distribution Databases.” Explore the databases