Money is an extremely important, obviously necessary component of any economy (barter is inefficient and costly), but the debate over "the middle class" reveals why money can be such a misleading measurement. Money in and of itself isn't worth anything. It exists because goods and services exist. The only reason we HAVE money is to make it easier for such goods to be traded, as money is the placeholder value so that a buyer and seller do not need EXACTLY what each other wants in terms of such goods.

So, when you look only at people's incomes and wage rates, without looking at purchasing power and availability of real, tangible consumer items, it will be literally impossible to make a judgement about the economic security and state of those people.

Case in point: The news today is dominated by cries and shrieks that the middle class is declining, people are getting poorer, and we are all on the way to peasantry, poverty, and pittance once more.

NOT SO. The actual data that matters, which is access to goods ans services and ability to consume, is ever increasing.

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No single measure of well-being is more informative or important than life expectancy. Happily, an American born today can expect to live approximately 79 years—a full five years longer than in 1980 and more than a decade longer than in 1950. These longer life spans aren't just enjoyed by "privileged" Americans. As the New York Times reported this past June 7, "The gap in life expectancy between whites and blacks in America has narrowed, reaching the lowest point ever recorded." This necessarily means that life expectancy for blacks has risen even more impressively than it has for whites.

Americans are also much better able to enjoy their longer lives. According to the Bureau of Economic Analysis, spending by households on many of modern life's "basics"—food at home, automobiles, clothing and footwear, household furnishings and equipment, and housing and utilities—fell from 53% of disposable income in 1950 to 44% in 1970 to 32% today.

One underappreciated result of the dramatic fall in the cost (and rise in the quality) of modern "basics" is that, while income inequality might be rising when measured in dollars, it is falling when reckoned in what's most important—our ability to consume.

There has never been a time in world history when the social classes have been more equal than they are now. Rich people and poor people go the the same movie theaters, they have the same phones, the same laptops, both have access to cheap books on amazon, and even groceries.

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Even though the inflation-adjusted hourly wage hasn't changed much in 50 years, it is unlikely that an average American would trade his wages and benefits in 2013—along with access to the most affordable food, appliances, clothing and cars in history, plus today's cornucopia of modern electronic goods—for the same real wages but with much lower fringe benefits in the 1950s or 1970s, along with those era's higher prices, more limited selection, and inferior products.

TL/DR: WHEN MEASURING ECONOMIC WELL-BEING IN REAL VARIABLES (SUCH AS CONSUMER GOODS) AND NOT MONETARY VARIABLES, THE MIDDLE CLASS IS BETTER OFF THAN IT HAS EVER BEEN.