The Historic Rise and Fall of the American Middle Class: Wealth, Poverty, and Inequality — **Illustration created by Brewminate with AI, Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International license**

By Matthew A. McIntosh
Public Historian
Brewminate

Introduction

Economic inequality has been one of the most persistent features of American life. From the founding of the colonies to the present day, the gap between rich and poor has shaped political debates, social movements, and cultural ideals. The promise of an egalitarian republic, championed in the rhetoric of the Revolution and the Constitution, has always coexisted with entrenched disparities of wealth and power. Landholding elites, slaveowners, and merchant princes dominated the early republic; industrial magnates consolidated their fortunes in the Gilded Age; financiers and global corporations shaped the modern economy. Against these concentrations of wealth, ordinary Americans have sought footholds of stability and dignity, often under the banner of what came to be known in the twentieth century as the “middle class.”

The rise of this middle class, particularly in the decades after the Second World War, was a striking episode in global history. It was built on mass production, organized labor, rising wages, affordable housing, and state-sponsored programs such as the GI Bill. The idea that ordinary families could own homes, send children to college, and secure a retirement became a central element of the American Dream. For many, this era seemed to offer a reprieve from older patterns of hierarchy, a moment when democracy and capitalism appeared aligned. Yet this prosperity was uneven. Women, racial minorities, and immigrants often faced exclusion from its benefits, and structural barriers prevented a truly universal middle class.¹

Since the 1970s, that brief period of broad-based growth has steadily unraveled. The decline of unions, the offshoring of industry, the deregulation of finance, and the tax revolutions of the late twentieth century reshaped the economy in ways that favored capital over labor. The rewards of growth increasingly flowed to a narrow elite, while wages stagnated for most workers. Scholars such as Thomas Piketty and Emmanuel Saez have demonstrated the long arc of wealth concentration, showing that America has returned to levels of inequality not seen since the Gilded Age.² The erosion of the middle class, coupled with racialized inequality and the rise of precarious gig labor, has transformed not only the economy but the texture of everyday life.

What follows traces the history of the American economic divide across four centuries. It examines the foundations of inequality in the colonial period, the vast disparities of the Gilded Age, the rise of the middle class in the mid-twentieth century, and its decline in the era of globalization and financialization. By situating these developments in their historical contexts, the essay seeks to clarify both the cyclical nature of inequality and the distinctiveness of the middle-class interlude. The story of wealth and poverty in America is not merely one of numbers and charts, but of contested ideals, shifting policies, and the lived experiences of millions who have sought security and dignity amid changing economic landscapes.

Foundations of Inequality in Colonial and Early America

Economic inequality in America did not emerge in the industrial age; it was embedded from the beginning. The colonial economy rested on highly unequal distributions of land, labor, and opportunity. Large land grants in Virginia, the Carolinas, and New York created a planter and landlord elite whose fortunes dwarfed those of small farmers and artisans. The system of indentured servitude, while promising eventual freedom, consigned thousands of Europeans to years of exploitative labor in conditions that were often deadly.³ At the same time, the transatlantic slave trade brought enslaved Africans into an economic order that defined wealth not only in terms of land but in the ownership of human beings.⁴

By the late seventeenth century, colonial elites had consolidated power through both landholding and trade. Merchants in cities like Boston, New York, and Philadelphia built fortunes from shipping, commerce, and speculation. Their dominance was reinforced by laws and customs that restricted access to property for women, Indigenous peoples, and African Americans. The “free labor” ideal celebrated by some colonial thinkers thus rested on exclusions that reproduced hierarchy. Gary Nash has emphasized how ordinary colonists (artisans, laborers, and smallholders) resented this concentration of wealth and periodically challenged it in riots and uprisings.⁵

The Revolution promised to reshape this order. The Declaration of Independence proclaimed equality, and revolutionary rhetoric suggested that concentrated power was incompatible with republican virtue. Yet property requirements for voting remained in many states, and the new Constitution was carefully crafted to protect creditors, slaveholders, and commercial elites.⁶ Far from dismantling inequality, the Revolution in many respects entrenched it. As Woody Holton argues, the framers were often more concerned with stabilizing property rights and preventing popular uprisings than with democratizing wealth.⁷

Slavery, in particular, bound inequality into the very fabric of the new nation. The plantation South became the most extreme example of concentrated wealth in early America, with vast fortunes built on enslaved labor and protected by law. Even in the North, where slavery declined after independence, merchant elites prospered from trade tied to the slave economy. The economic divide between elites and common citizens thus widened in ways that would shape the nation’s development for generations.

Industrial Capitalism and the Gilded Age Divide

The nineteenth century witnessed the transformation of the American economy from a largely agrarian society to an industrial powerhouse. This transition sharpened the divide between rich and poor, producing a new class of millionaires who concentrated wealth at levels unseen since the great planters of the South. The Civil War accelerated industrial growth, and by the 1870s, corporations in steel, railroads, oil, and finance dominated the landscape. Titans such as John D. Rockefeller, Andrew Carnegie, and J. P. Morgan became symbols of both progress and excess, celebrated for their innovation yet reviled as “robber barons.”⁸

Urbanization compounded the social divide. Cities like New York, Chicago, and Pittsburgh grew at breakneck speed, fueled by immigrant labor that supplied factories and sweatshops. Yet while elites built mansions on Fifth Avenue and summer palaces in Newport, millions of workers lived in overcrowded tenements, vulnerable to disease, unemployment, and industrial accidents.⁹ Contemporary observers such as Jacob Riis, whose How the Other Half Lives (1890) exposed the squalor of tenement life, highlighted the stark contrast between opulence and deprivation.¹⁰

The state largely upheld the interests of the wealthy during this period. Courts frequently struck down labor protections, while the federal government deployed troops against striking workers, as in the Great Railroad Strike of 1877 and the Pullman Strike of 1894.¹¹ The prevailing ideology of laissez-faire capitalism, reinforced by interpretations of Social Darwinism, justified inequality as the natural outcome of competition. At the same time, the Progressive movement began to challenge the legitimacy of this order, calling for regulation, antitrust laws, and greater protections for workers.¹²

Richard White has noted that the Gilded Age was not merely a time of concentrated fortunes but of contested political economy. Farmers in the Populist movement, industrial workers in labor unions, and reformers in urban centers all pressed for greater equity.¹³ Although their victories were limited, they laid the groundwork for reforms in the Progressive Era and, later, the New Deal. The Gilded Age thus set the template for cycles of American inequality: sharp concentration of wealth followed by waves of resistance and reform.

The Creation of the Modern Middle Class

The decades between the 1930s and the 1970s saw the emergence of a broad and relatively stable middle class in the United States. This transformation did not occur naturally; it was the product of deliberate policies, mass economic mobilization, and social movements that reshaped the terms of opportunity. The Great Depression revealed the vulnerabilities of unregulated capitalism and forced a rethinking of the social contract. Franklin D. Roosevelt’s New Deal created programs such as Social Security, unemployment insurance, and labor protections that strengthened the bargaining power of workers and provided new safety nets.¹⁴ These reforms helped narrow the wealth gap, stabilizing society in ways that contrasted sharply with the turmoil of the Gilded Age.

World War II accelerated this process by mobilizing the economy at an unprecedented scale. Wartime production pulled the country out of the Depression, and after the war, the United States stood as the world’s dominant industrial power. The GI Bill of Rights (1944) expanded access to higher education and homeownership for millions of veterans, fueling suburbanization and the growth of consumer culture.¹⁵ The combination of strong unions, rising wages, and government-backed mortgages created an era in which prosperity was more widely shared than at any other time in American history.

Lizabeth Cohen has shown how the ideology of the “Consumers’ Republic” linked citizenship to mass consumption, promising that prosperity could be broadly distributed through access to goods and services.¹⁶ Middle-class identity became tied to homeownership, car ownership, and family stability in suburban communities. At the same time, David Kennedy emphasizes that the state’s role in supporting this prosperity, through programs like the Federal Housing Administration and infrastructure investment, was central, contradicting the notion that middle-class growth was solely the product of free markets.¹⁷

Yet the mid-century middle class was never fully inclusive. African Americans were systematically excluded from many benefits of the GI Bill and from mortgage markets through redlining. Women were often confined to lower-paying jobs or pushed out of the workforce during periods of economic adjustment.¹⁸ As Jefferson Cowie argues, the appearance of universal prosperity masked deep fractures, particularly along lines of race, gender, and region.¹⁹ The middle class of the mid-twentieth century, though celebrated as a triumph of American capitalism, was thus both remarkable in its breadth and limited in its reach.

The Decline of the Middle Class (1970s–Present)

The stability of the postwar middle class began to unravel in the 1970s. A combination of economic, political, and technological changes eroded the foundations that had supported broad-based prosperity. Deindustrialization led to the closure of factories across the Midwest and Northeast, as production shifted overseas to take advantage of cheaper labor. Communities that had once thrived on manufacturing jobs, often unionized and well-paid, saw employment disappear, leaving behind shrinking towns, declining wages, and growing insecurity.²⁰

Union membership, which had been a central pillar of the middle-class order, entered steep decline. In the 1950s, roughly one-third of American workers were unionized; by the early twenty-first century, that number had fallen below 11 percent.²¹ Without collective bargaining power, wages stagnated even as productivity rose. The political climate shifted as well. Ronald Reagan’s presidency marked a turning point, with tax cuts that disproportionately favored the wealthy, deregulation of industries, and an ideological campaign against organized labor exemplified by the breaking of the Professional Air Traffic Controllers Organization (PATCO) strike in 1981.²²

The financialization of the American economy further exacerbated inequality. Increasing emphasis on shareholder value and short-term profits led corporations to prioritize dividends and stock buybacks over wages and benefits for workers. As Robert Reich has argued, this shift fundamentally altered the balance of power between capital and labor, embedding inequality into corporate governance itself.²³ While executives and investors enjoyed skyrocketing compensation, middle-class households faced rising costs for healthcare, housing, and education that outpaced stagnant incomes.

The globalized economy of the late twentieth and early twenty-first centuries created new opportunities for capital but heightened precarity for labor. The growth of service-sector jobs, many low-paid and unstable, replaced the unionized manufacturing base. The rise of the “gig economy” in the 2000s symbolized this transformation, offering flexibility but little security.²⁴ Thomas Piketty has shown that the concentration of wealth in the hands of the top 1 percent reached levels reminiscent of the Gilded Age, undermining the narrative of a broad, stable middle class.²⁵

Elizabeth Warren and Amelia Warren Tyagi have emphasized how the financial pressures on families intensified even for those who remained nominally middle class. With two-income households becoming the norm rather than the exception, families faced escalating debt burdens to maintain what had once been considered middle-class standards of living.²⁶ This erosion of security has been compounded by declining intergenerational mobility, suggesting that the middle-class dream of stability and advancement is increasingly elusive.

Contemporary Inequality: Wealth, Race, and Policy

The decline of the American middle class has not only been a matter of economic structure but also of racial and social disparities that have persisted and deepened. Wealth inequality today reflects the long legacy of slavery, segregation, and discriminatory public policy. As Mehrsa Baradaran demonstrates, African American communities were systematically excluded from the accumulation of wealth through practices such as redlining, predatory lending, and the denial of access to federally backed mortgages.²⁷ Even after the civil rights movement dismantled legal segregation, the racial wealth gap persisted, with white families on average holding nearly ten times the wealth of Black families.²⁸

Contemporary inequality is also marked by the extraordinary concentration of wealth among the top 1 percent, and even more among the top 0.1 percent. Economists Emmanuel Saez and Gabriel Zucman have shown that the richest Americans now capture a share of national income rivaling that of the Gilded Age.²⁹ This concentration is not accidental but has been reinforced by tax policies that allow the wealthy to shield income and assets. The result, as Joseph Stiglitz has argued, is an economy that systematically privileges capital over labor, entrenching inequality through both markets and policy.³⁰

The technological transformations of the past two decades have created new dimensions of inequality. Automation and artificial intelligence have displaced certain categories of work, while high-tech industries generate immense returns for investors and executives concentrated in Silicon Valley.³¹ At the same time, the rise of precarious gig labor, such as ride-sharing and delivery services, has highlighted the fragility of income for millions of workers who lack benefits, job security, and bargaining power.³² The COVID-19 pandemic magnified these divides, as low-income workers disproportionately bore the brunt of health risks while wealth at the top soared through stock market gains.³³

Heather McGhee argues that racial inequality continues to shape broader economic divides, pointing out that policies that might benefit the middle and working classes are often blocked when they are perceived as disproportionately aiding minorities.³⁴ This dynamic has undermined coalitions for reform and perpetuated a zero-sum politics of scarcity. Addressing inequality in contemporary America thus requires not only rebalancing tax policy and labor rights but also confronting the racialized structures of exclusion that distort opportunity.

Future Prospects and Debates

The persistence of inequality in the United States has sparked vigorous debate about whether the middle class can be revived or whether the nation is headed toward a new era of entrenched oligarchy. Some scholars and policymakers argue for structural reforms aimed at redistributing wealth and expanding opportunity. Proposals such as universal healthcare, strengthened labor protections, and robust public investment in education and infrastructure are framed as ways to reduce the economic burdens on households and rebuild the foundations of middle-class life.³⁵ Progressive economists, including Joseph Stiglitz, emphasize that inequality is not merely a moral issue but also a drag on economic growth, limiting consumption and destabilizing democracy.³⁶

Others propose more radical solutions, including wealth taxes and aggressive regulation of financial markets. Thomas Piketty has argued for progressive taxation at levels unseen in American history, warning that unchecked accumulation will otherwise reproduce the hereditary elites of earlier centuries.³⁷ Emmanuel Saez and Gabriel Zucman likewise propose sweeping reforms to close loopholes and ensure that corporations and billionaires contribute proportionately to the social order.³⁸

Critics of these approaches contend that redistributive policies risk stifling innovation and economic dynamism. Conservative economists and political leaders often advocate for deregulation, reduced government spending, and reliance on market mechanisms, arguing that growth itself will eventually alleviate poverty.³⁹ Yet the historical record suggests that without deliberate interventions, such as those of the New Deal and the postwar welfare state, markets alone tend to exacerbate inequality rather than reduce it.

The future trajectory of the American economic divide will also be shaped by demographic change, technological innovation, and global competition. The rise of artificial intelligence, climate change, and geopolitical shifts will test the resilience of social safety nets and the adaptability of labor markets. Whether these challenges are met with inclusive policies or with further concentration of wealth will determine whether the middle class can reemerge as a broad social foundation or continue to shrink into a historical interlude. As Paul Krugman observes, the fate of the middle class is ultimately a political question: it depends on the choices societies make about taxation, labor rights, and public goods.40

Conclusion

The history of economic inequality in America reveals a story less of steady progress than of cycles, periods of reform and broadening opportunity followed by renewed concentration of wealth and power. From the colonial landholding elite and the brutal economics of slavery, to the towering fortunes of the Gilded Age, to the mid-twentieth-century interlude of a relatively secure middle class, the pattern has been one of persistent imbalance punctuated by moments of partial correction. The postwar decades stand out as exceptional, a time when prosperity was widely shared, but even then exclusion along racial and gender lines prevented true universality.

The unraveling of that middle-class order since the 1970s has raised profound questions about the sustainability of the American Dream. Structural changes in the economy (deindustrialization, financialization, globalization, and the weakening of organized labor) have converged with policy decisions that favor capital and the wealthy. Today, the top 1 percent command unprecedented wealth while wages stagnate for much of the population. The middle class, once celebrated as the bedrock of democracy, is increasingly precarious.⁴¹

Yet history also shows that inequality is not immutable. Popular movements, progressive reforms, and state intervention have reshaped the economic order in the past. Whether through the Populist and Progressive eras, the New Deal, or the civil rights movement, political will has repeatedly challenged entrenched hierarchies. The pressing question for the present is whether a new coalition can emerge to rebuild a broadly inclusive middle class or whether the United States will slide further into oligarchic patterns reminiscent of earlier centuries. As Jill Lepore reminds us, the nation’s history is not merely a record of inequality but also of democratic aspiration, the struggle to realize ideals of equality that have always been imperfectly fulfilled.⁴²

Appendix

Footnotes

Lizabeth Cohen, A Consumers’ Republic: The Politics of Mass Consumption in Postwar America (New York: Knopf, 2003), 111–39.
Thomas Piketty, Capital in the Twenty-First Century, trans. Arthur Goldhammer (Cambridge, MA: Harvard University Press, 2014), 294–325; Emmanuel Saez and Gabriel Zucman, The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay (New York: W.W. Norton, 2019), 45–72.
David Galenson, White Servitude in Colonial America: An Economic Analysis (Cambridge: Cambridge University Press, 1979), 54–78.
Ira Berlin, Many Thousands Gone: The First Two Centuries of Slavery in North America (Cambridge, MA: Harvard University Press, 1998), 23–49.
Gary Nash, The Unknown American Revolution: The Unruly Birth of Democracy and the Struggle to Create America (New York: Viking, 2005), 201–26.
Gordon S. Wood, The Radicalism of the American Revolution (New York: Vintage, 1991), 178–203.
Woody Holton, Unruly Americans and the Origins of the Constitution (New York: Hill and Wang, 2007), 89–112.
Matthew Josephson, The Robber Barons: The Great American Capitalists, 1861–1901 (New York: Harcourt, Brace and Company, 1934), 5–39.
Sven Beckert, The Monied Metropolis: New York City and the Consolidation of the American Bourgeoisie, 1850–1896 (Cambridge: Cambridge University Press, 2001), 187–213.
Jacob Riis, How the Other Half Lives: Studies Among the Tenements of New York (New York: Charles Scribner’s Sons, 1890), 1–23.
Philip Foner, History of the Labor Movement in the United States, vol. 2 (New York: International Publishers, 1955), 167–95.
Robert H. Wiebe, The Search for Order, 1877–1920 (New York: Hill and Wang, 1967), 44–72.
Richard White, The Republic for Which It Stands: The United States during Reconstruction and the Gilded Age, 1865–1896 (New York: Oxford University Press, 2017), 657–89.
David M. Kennedy, Freedom from Fear: The American People in Depression and War, 1929–1945 (New York: Oxford University Press, 1999), 363–89.
Suzanne Mettler, Soldiers to Citizens: The G.I. Bill and the Making of the Greatest Generation (New York: Oxford University Press, 2005), 77–104.
Lizabeth Cohen, A Consumers’ Republic: The Politics of Mass Consumption in Postwar America (New York: Knopf, 2003), 112–40.
David M. Kennedy, Freedom from Fear, 889–915.
Ira Katznelson, When Affirmative Action Was White: An Untold History of Racial Inequality in Twentieth-Century America (New York: W.W. Norton, 2005), 23–51.
Jefferson Cowie, Stayin’ Alive: The 1970s and the Last Days of the Working Class (New York: New Press, 2010), 17–42.
Jefferson Cowie, Stayin’ Alive: The 1970s and the Last Days of the Working Class (New York: New Press, 2010), 77–105.
Bureau of Labor Statistics, “Union Members Summary,” U.S. Department of Labor, 2023.
Kim Phillips-Fein, Invisible Hands: The Businessmen’s Crusade Against the New Deal (New York: W.W. Norton, 2009), 234–56.
Robert B. Reich, Saving Capitalism: For the Many, Not the Few (New York: Knopf, 2015), 65–92.
Arne L. Kalleberg, Precarious Lives: Job Insecurity and Well-Being in Rich Democracies (Cambridge: Polity, 2018), 14–38.
Thomas Piketty, Capital in the Twenty-First Century, trans. Arthur Goldhammer (Cambridge, MA: Harvard University Press, 2013), 294–325.
Elizabeth Warren and Amelia Warren Tyagi, The Two-Income Trap: Why Middle-Class Parents Are Going Broke (New York: Basic Books, 2003), 43–71.
Mehrsa Baradaran, The Color of Money: Black Banks and the Racial Wealth Gap (Cambridge, MA: Harvard University Press, 2017), 89–113.
Rakesh Kochhar and Richard Fry, “Wealth Inequality Has Widened Along Racial, Ethnic Lines Since End of Great Recession,” Pew Research Center, December 12, 2014.
Emmanuel Saez and Gabriel Zucman, The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay (New York: W.W. Norton, 2019), 14–33.
Joseph E. Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future (New York: W.W. Norton, 2012), 77–105.
Erik Brynjolfsson and Andrew McAfee, The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies (New York: W.W. Norton, 2014), 111–39.
Arne L. Kalleberg, Precarious Lives: Job Insecurity and Well-Being in Rich Democracies (Cambridge: Polity, 2018), 92–118.
Heather Boushey, Unbound: How Inequality Constricts Our Economy and What We Can Do About It (Cambridge, MA: Harvard University Press, 2019), 215–34.
Heather McGhee, The Sum of Us: What Racism Costs Everyone and How We Can Prosper Together (New York: One World, 2021), 167–93.
Jacob S. Hacker and Paul Pierson, American Amnesia: How the War on Government Led Us to Forget What Made America Prosper (New York: Simon & Schuster, 2016), 201–29.
Joseph E. Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future (New York: W.W. Norton, 2012), 291–317.
Thomas Piketty, Capital and Ideology, trans. Arthur Goldhammer (Cambridge, MA: Harvard University Press, 2019), 967–1003.
Emmanuel Saez and Gabriel Zucman, The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay (New York: W.W. Norton, 2019), 187–212.
N. Gregory Mankiw, “Defending the One Percent,” Journal of Economic Perspectives 27, no. 3 (Summer 2013): 21–34.
Paul Krugman, The Conscience of a Liberal (New York: W.W. Norton, 2007), 233–56.
Emmanuel Saez and Gabriel Zucman, The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay (New York: W.W. Norton, 2019), 45–72.
Jill Lepore, These Truths: A History of the United States (New York: W.W. Norton, 2018), 785–812.