May 2, 2025 11:57AM # Free Markets Did Not Fail the Middle Class By [Norbert J. Michel](https://www.cato.org/people/norbert-michel) and [Jerome Famularo](https://www.cato.org/people/jerome-famularo) --- SHARE Listen to this article Generated with [ ElevenLabs](https://elevenlabs.io/) AI technology. Loading the [Elevenlabs Text to Speech](https://elevenlabs.io/text-to-speech) AudioNative Player... ![middle class](/sites/cato.org/files/styles/pubs_2x/public/2025-05/middle%20class.jpg?itok=7h-UsZXi) Today’s populists peddle two narratives to support their agenda. The first one is that the middle class suffered broad income stagnation for the past 50 years. The second one is that policymakers’ blind devotion to free markets—especially through free trade—decimated the US manufacturing sector, “[hollowing out](https://www.cato.org/blog/some-reasons-optimism-regarding-hollowing-out-americas-middle-class)” the middle class by causing the alleged income stagnation. The problem is that both stories are wrong. The second populist narrative, that policymakers’ blind devotion to free markets decimated US manufacturing, is a broad topic that we won’t delve into here. But it’s covered in this [new book](https://www.cato.org/books/crushing-capitalism), *Crushing Capitalism*, and we’ll go deeper in this upcoming [Cato event](https://www.cato.org/events/crushing-capitalism-how-populist-policies-are-threatening-american-dream). Still, the relevance of the second narrative relies on the underlying assumption of income stagnation. We’ve previously written about how the evidence [contradicts](https://www.wsj.com/opinion/free-trade-didnt-kill-the-middle-class-data-manufacturing-protectionism-policy-22d20f83) the income stagnation story, and [many](https://x.com/AlanReynoldsEcn/status/1823456552273244471) [other](https://www.cato.org/blog/american-compass-dystopia-americans-stagnant-income) scholars have as well. We’ve also provided concrete examples of how populists cherry-pick data to “prove” that income growth stagnated, and devoted a full chapter to debunking the stagnation story in this [new book](https://www.cato.org/books/crushing-capitalism). Here’s just one more example of how wrong the populists’ income stagnation story is. Real median household income, for all American households, increased 73 percent from 1968 to 2024. That’s not stagnation. Interestingly, that figure is biased downward because of changing household characteristics, such as smaller families, an aging population, and [more single](https://usafacts.org/articles/state-relationships-marriages-and-living-alone-us/) folks. As Figure 1 shows, real median income for married couples with children increased by 132 percent from 1968 to 2024. That’s pretty much the polar opposite of stagnation. ![Median Income by Household Type](https://infogram-thumbs-1024.s3-eu-west-1.amazonaws.com/c1c76251-e785-47fc-b673-5306376ea3f2.jpg) Given all the negative rhetoric, it’s hard to believe that living standards have been increasing broadly for decades. But it’s true, life has become [more](https://www.cato.org/books/superabundance) affordable. ![middle class](/sites/cato.org/files/styles/pubs_2x/public/2025-05/middle%20class%20buildings.jpg?itok=2EcCO3dg) For instance, as we’ve written [numerous](https://www.cato.org/blog/questioning-housing-crisis-recap-wrap) times, it’s not true that *housing* has become radically unaffordable, though that’s one of the more [persistent](https://www.cato.org/blog/senator-warren-way-raspberries-americans-living-standards) myths. It’s difficult to see because the housing that people buy is very different than it was 50 years ago, and a more diverse set of households now pays for housing. One way to highlight these differences is to look at the median home price as a percentage of income *by household type*. As Figure 2 shows, when we consider *all* households, the unaffordability problem looks much worse than when we consider only the income of those married with children. Again, looking at all households will understate income gains, since the population is aging and more people are choosing to live alone, so it is useful to narrow the focus to married couples with children. ![Median Home Price as Percentage of Income by Household Type](https://infogram-thumbs-1024.s3-eu-west-1.amazonaws.com/c13e753c-b119-4e6e-95b9-31c589ad8492.jpg) As we showed back in December (see [Figure 5](https://www.cato.org/blog/questioning-housing-crisis-first-look-affordability-data)), adjusting for both home and household size changes shows that housing has actually become slightly *more* affordable. Not to mention that homes have vastly more amenities nowadays than they used to, such as central air and garages, which are not factored into this adjustment. For a more in-depth factual deconstruction of these populist narratives, please check out the book and join our [live discussion](https://www.cato.org/events/crushing-capitalism-how-populist-policies-are-threatening-american-dream) on May 8, with our Cato colleague Adam Michel and the *Washington Post’s* Megan McArdle. ![Crushing Capitalism 16x9](/sites/cato.org/files/styles/pubs_2x/public/2025-04/Crushing%20Capitalism_Cover_16x9.jpg?itok=hp3n6dIk) ##### Related Tags [Economics](https://www.cato.org/economics), [Regulation](https://www.cato.org/regulatory-studies) [![Creative Commons License](/build/cato_2020/images/creative-commons.svg)](http://creativecommons.org/licenses/by-nc-sa/4.0/) This work is licensed under a [Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License](https://creativecommons.org/licenses/by-nc-sa/4.0/).