Americans earning between $200,000 and $400,000 a year are caught in an upper-middle-class trap, working harder and spending more for products and services of declining quality, according to Nick Maggiulli, chief operating officer of Ritholtz Wealth Management.
Maggiulli named the phenomenon in an April essay on his blog, Of Dollars and Data, after spending the better part of a year building the argument in pieces.
His evidence is concrete. New single-family homes shrank in average size by 12% between 2014 and 2024, even as the price per square foot surged 74%, according to LendingTree data. A home near a top-rated public primary school costs 78.6% more than a comparable property in the surrounding county. Homebuyers who win bidding wars fare worse still: one study found their purchases produced 6.9% lower annualised returns than homes bought without competition.
A financial arms race nobody can win
Maggiulli calls the underlying mechanism a ‘financial arms race’. Every individual decision is rational, he argues, but collectively the competition for the same scarce positional goods lowers everyone’s quality of life while draining their savings.
One accelerant is near-impossible to opt out of. Citing Brookings Institution data from November 2025, he notes AI usage rises from 9% among earners below $30,000 to 34% among those earning $100,000 or more. High earners, worried AI threatens their careers, are forced to adopt it simply to defend their position, a dynamic Maggiulli likens to the Red Queen effect: everyone runs faster just to stay in place.
His prescribed exit is blunt. Stop competing for positional goods that do not materially improve your life. His test for any large purchase: ‘Am I buying this to improve my quality of life, or merely because other people are buying it?’
The trap helps explain a broader number. The cumulative lifetime cost of eight pillars of middle-class aspiration surpassed $5 million in 2025, according to a comprehensive analysis by Investopedia, drawing on government data, industry statistics and survey responses from more than 1,200 US adults. The average American with a bachelor’s degree earns about $2.8 million over a career, less than half that figure. Two college-educated earners are functionally a prerequisite for ‘living the dream.’
Fed survey data set to sharpen the upper-middle-class trap debate
The argument has drawn a counter from the American Enterprise Institute (AEI). Economists Stephen Rose and Scott Winship, in a January report, found the share of American families earning between roughly $133,000 and $400,000 tripled from 10% in 1979 to 31% in 2024. Median family income, adjusted for inflation and family size, rose 52% over the same period.
Maggiulli reframes the debate around wealth rather than income. The share of US households with $1 million to $10 million in net worth more than doubled, from 7% in 1989 to 18% in 2022-23. Yet a $1 million net worth, which placed someone in the top 5% of Americans in the late 1990s, today puts them only in the top 20%.
The most recent data to settle the argument is the Federal Reserve’s 2022 Survey of Consumer Finances, with 2025 figures due in the coming months. Maggiulli told Fortune he believes that release ‘will answer a lot of these questions more definitively.’
The Federal Reserve Board has conducted the survey every three years since 1983. The 2025 edition, run by NORC at the University of Chicago, began interviewing US households about their financial circumstances in March 2025.
AEI is reportedly preparing a follow-up using wealth data, with preliminary results pointing to a similar pattern: the middle class shrinks mainly because the upper-middle class booms. Winship’s own summary of the picture: ‘broad prosperity, unequally shared.’
Maggiulli’s own read is that both arguments appear to be true, the pie grew alongside misperceptions shaped by social media. The dynamic, he said, is ‘quite psychological in nature.’
