The Missing Middle in U.S. Policy Responses to Creeping Inflation
Hema Thakur throws a spotlight on the ‘hidden’ middle-income households struggling to keep up with post-pandemic inflation.
Photo by Blake Wheeler on Unsplash
Economic debates often fixate on two ends of the spectrum: the ultra-wealthy and the deeply impoverished. But what about those in the middle—households that don’t qualify for policy interventions, yet aren’t financially secure enough to comfortably weather economic shocks?
This question has gained renewed urgency in the wake of post-pandemic inflation, where public narratives often celebrate economic "resilience" based on aggregate indicators like wage growth or consumer spending. Yet behind those indicators lies a quieter story—one of middle-income households stretched thin, adapting not from a place of comfort, but necessity.
This is what I explored in a recent study on post-COVID inflation in the US. The goal was simple: analyse how inflation was impacting different income groups. The findings, however, were anything but.
“Behind the indicators lies a quieter story, one of middle-income households stretched thin.”
At first glance, the data seemed oddly optimistic. Wages were rising, consumer spending appeared stable—metrics that would typically suggest resilience. But dig deeper, and a different story emerged: the middle-income group was fuelling this "resilience" through borrowing. Credit use was surging. Debt-to-income ratios were climbing. Thus, middle-income expenditure reflected financial obligations and risks rather than confidence or stability.
This was an important reminder that averages can mask more than they reveal. Aggregate data may suggest broad recovery, but it often obscures who is absorbing the cost. While public policy focused on poverty alleviation or protecting elite capital, the financial pressures faced by those in between were being quietly overlooked.
To place this in a wider context, I turned to policy documents from global institutions like the IMF, World Bank, and OECD. A pattern quickly became clear: while these institutions advocated for a range of relief measures—from direct cash transfers and food subsidies to expanded unemployment benefits and social protection floors—most of these were targeted at the lowest income brackets. This was both understandable and necessary. However, those earning slightly above the eligibility thresholds—middle-income households making "just enough" to be excluded—were often left to navigate inflationary pressures without tailored support. These families didn’t qualify for income support or subsidies, yet their financial resilience had been weakened by pandemic-era shocks and the rising cost of living. The result was a quiet strain: borrowing to maintain basic consumption, depleting savings, or compromising future stability.
To complement this policy-level analysis and better capture how these gaps were being experienced on the ground, I conducted two small-scale surveys in the U.S.—one closed-ended and one open-ended, each with 50 participants. This approach was intentional—small-scale surveys are particularly effective for capturing early signals, everyday adjustments, and the social meanings people attach to economic change—insights that often elude broader datasets.
The closed-ended survey offered nuance. While lower-income respondents favoured direct support—subsidies, benefits, safety nets etc. - middle-income respondents leaned toward market-based solutions like tax relief or better access to credit. What stood out was not just the contrast in preferred mechanisms, but the reasoning behind this. Many in the middle-income group expressed discomfort with being seen as "recipients" of aid. They viewed themselves as self-reliant, responsible contributors—taxpayers who had “done things right.” Their preference for market-based tools was shaped not just by economic need but also by a desire to maintain a sense of independence. In their view, temporary relief should enhance their ability to help themselves, not replace it. This ideological gap—between seeking support and preserving self-perception—complicates the design of inclusive policy, especially in times of crisis.
“The ideological gap — between seeking support and preserving self-perception — complicates the design of inclusive policy.”
The most powerful insights, however, came from the open-ended responses. They offered a more personal, textured view of how households are adapting to —not just coping with — financial strain. Many from middle-income groups described how they were actively shifting their behaviour: reducing discretionary spending, delaying major purchases, liquidating savings, or quietly taking on second jobs or side gigs to maintain their standard of living. Some mentioned moving to less expensive neighbourhoods, rethinking schooling plans for their children, or postponing medical procedures. A few even described rationing energy use to manage rising utility costs. While individual experiences varied, these responses pointed to broader patterns of financial adjustment and concern. Several respondents noted that their challenges were rarely acknowledged in public discussions or policy debates. While they did not necessarily seek direct aid, they expressed a need for greater recognition and support structures that reflect their efforts to remain financially self-reliant despite growing pressures.
This recalibration isn’t unique to the U.S. In Europe, for instance, stagnant wages and rising living costs are fuelling widespread “middle-class anxiety”. Globally, the middle class is retreating from discretionary spending, including luxury goods—a contraction not seen in over 15 years. In India, the middle class is described as “bleeding quietly,” squeezed by equated monthly instalments (EMIs), inflation, and lack of targeted relief. An OECD report reinforces this broader trend, documenting a shrinking and increasingly fragile middle class across high-income nations.
To be truly inclusive in a world of rising inequality, post-crisis volatility, and shifting labour markets, we need to broaden our understanding of vulnerability. Economic development isn’t just about lifting people out of poverty—it’s also about recognizing the quiet slide into lower-income brackets and insecurity through sustained financial erosion.
Future research should delve deeper into the evolving financial behaviours and psychological impacts of prolonged economic strain on middle-income groups—particularly in post-crisis contexts. Policy interventions, in turn—such as tiered tax relief, temporary inflation buffers, or access to targeted financial tools that reinforce self-reliance—must move beyond binary categories of “poor” and “rich” to acknowledge the unique vulnerabilities of those in between. If policy continues to treat the middle-income group as an afterthought, we’re not just overlooking a data point—we’re overlooking a fault line.
---
Hema Thakur is Manager of Skill Development at Cactus Communications, where she trains academic editors and supports early-career researchers in navigating scholarly publishing. She graduated with first-class honours in Banking and Finance from the University of London International Programmes and has served as an alumni ambassador for the university.