The Numbers Come First
Nick Maggiulli, chief operating officer of Ritholtz Wealth Management, spent the better part of a year building a case on his blog, Of Dollars and Data, before giving the phenomenon a name in an April essay: the 'upper-middle-class trap.' His definition is precise — Americans earning roughly $200,000 to $400,000 a year who are working more and relaxing less to buy products and services of declining quality.
The data he marshals is hard to dismiss. 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 figures. A home near a top-rated public elementary 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 annualized returns than homes bought without competition.
Higher education tells the same story. The number of college applicants has jumped 78% since 2015 even as acceptance rates at elite schools have collapsed, pushing tuition and private-school costs up roughly twice as fast as overall inflation.
A $5 Million Dream
Maggiulli's framework helps explain a figure that has circulated widely over the past year. The cost of achieving the American Dream surpassed $5 million in 2025, according to an Investopedia analysis drawing on government data, industry statistics, and surveys of more than 1,200 U.S. adults. The cumulative lifetime tally — retirement at $1.6 million, homeownership at $957,594, vehicles at $900,346, raising two children and funding their college at $876,092, health care at $414,208, vacations at $180,621, pet ownership at $39,381, and a wedding at $38,200 — came in nearly $600,000 higher than the prior year.
The average American with a bachelor's degree earns about $2.8 million over a career — less than half of what that checklist requires. Two college-educated incomes are now functionally a prerequisite. Among survey respondents, 58% named high home prices as their top barrier, followed by rising living costs (51%) and elevated mortgage rates (47%).
The AI Accelerant
Maggiulli identifies one force that is nearly 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 positions, are compelled to adopt it just to stay competitive — a 'Red Queen' dynamic in which everyone runs faster to remain in place. 'If AI doubled everyone's productivity overnight,' he writes, 'suddenly someone with half your skill would be able to compete with you just by using AI.'
The Counterargument
Not every economist accepts the 'hollowing out' premise. A January report from the American Enterprise Institute, authored by economists Stephen Rose and Scott Winship, argues 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. 'It is simply inaccurate to characterize the 'shrinking' middle class as reflecting diminished economic security rather than material progress,' Rose and Winship wrote.
CEO Times Read
Both analyses can be true simultaneously, and that is precisely the point. A larger share of Americans has climbed into higher income brackets — a genuine market success story. But the administrative state, zoning restrictions, credentialing cartels, and government-inflated education costs have ensured that the finish line keeps moving. The trap Maggiulli describes is not a failure of free enterprise; it is the predictable result of regulated scarcity in housing, education, and health care. When government constrains supply and subsidizes demand, prices rise and quality falls — and the people who work hardest to play by the rules pay the steepest price. The exit Maggiulli prescribes — opt out of the positional arms race, reward value over status — is, at its core, a free-market argument: let price signals, not peer pressure, guide capital allocation.
