Are You Middle-Class?
Emily YoffePosted Tuesday, Oct. 24, 2000, at 4:13 PM ETAl Gore and George W. Bush are each promising to make life much, much better for the middle class. What is the middle class?
While the government has a definition for being poor (in 1999 it was income of less than $17,029 for a family of four), it does not have a definition for being middle-class. However, the U.S. Census Bureau does keep statistics on household income distribution--right now the median is $40,816, an historic high--which allows economists to come up with their own definitions of middle-class. One formula is to find a range between about the 30th percentile of income and the 80th--which would make those households earning between about $30,000 and $75,000 a year middle-class. Others, with a flusher view of things, say that the formula should be about three times the poverty rate for the low end and seven times the poverty rate for the high end, putting households with between $50,000 and $120,000 of yearly income (at $120,000 many tax credits start to phase out) into the middle class.
From the end of the 1970s until the mid-1990s, the middle class seemed to be shrinking--income inequality grew as more people become poor and more became rich. But for the past few years, the inequality gap has been closing as the poverty rate declines and real median income increases. In 1999 about 12 percent of Americans were below the poverty threshold, the third consecutive decrease. On the other end, the booming economy has pushed more people out of the middle class into the top levels of income. In 1999 about 12 percent of households had income of more than $100,000 a year, the sixth consecutive increase. But being middle-class is more a state of mind than money. When surveyed, about 90 percent of Americans say that's what they are.
Next question?
Explainer thanks Henry Aaron and Gary Burtless of the Brookings Institution, Sheldon Danziger of the University of Michigan, and Wendell Primus of the Center on Budget and Policy Priorities.
Reader Comments from The Fray:
[Notes from the Fray Editor: Is it middle-class to give details of your personal financial situation in The Fray? A surprising (to us) number of posters were willing to do so, including Brian Baum, below, and Kurt B here, in support of their arguments. Otherwise, some good-natured romping through the class system (we thought it didn't exist in America?):]
Class doesn't just depend on income but also has to do with other factors such as education, family background, occupational status etc. No matter how wealthy somebody may be they aren't "upper-class" unless they were born to the "right" set of parents, educated at the "right" schools, and work in the "right" profession. Conversely, a blue-blood, Ivy-educated priest is not considered "working-class" even though he has taken a vow of poverty. That's why academics refer to it as "socio-economic" status.
--Claire
(To reply, click
here.)
[Though as Jane pointed out, social status doesn't matter if it's tax relief you're talking about.]
Of course it is a state of mind; however, there are a number of variables that should be considered when determining the classification of "middle class". Income and family size are definitely the primary factors; moreover, a debt to income ratio would be helpful as well. A family of four earning $100,000/year is (subjectively speaking) lower-upper class where a family earning $50,000/year is (again subjectively speaking) lower-middle class.
Classification based on income alone is inconceivable when you consider the debt to income ratio. A reasonable debt to income ratio which includes a $100,000 mortgage and two automobile payments would be 1/.35 - in simplest terms, this means for every dollar earned (gross) the family pays 35-cents towards debt. This debt does not include household expenses. As an example, my wife and I are childless, "double income no children", have a mortgage of $92,000 (85% of the total value of our home) and two car payments. The total mortgage and automobile payments equal approximately $1,350.00/month with a monthly gross income of $3852.86/month. That provides a debt to income ratio of $3853/$1350 or $1/35-cents. Now consider the same scenario with the exception that it is a family with revolving debt (credit cards). There is a significant increase in debt, household expenses, etc. This pseudo family debt to income ratio might be almost even (1/.89 or 1/1). They would consider themselves poor where I consider myself to be comfortable.
I subjectively believe that although there are standards and variables structured to calculate the social monetary position of a family and/or couple, it is definitely a state of mind based on the overall monetary position of the same.
--Brian Baum
(To reply, click
here.)
Whatever definition is chosen, I don't believe there should ever be a change in percentage of lower class, middle class, or upper class. If we give up our chinning bars and call everyone successful, then our society will stagnate and die.
--Rhett Livingston
(To reply, click
here.)
(10/31)
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Reader Comments from The Fray:
[Notes from the Fray Editor: Is it middle-class to give details of your personal financial situation in The Fray? A surprising (to us) number of posters were willing to do so, including Brian Baum, below, and Kurt B here, in support of their arguments. Otherwise, some good-natured romping through the class system (we thought it didn't exist in America?):]
Class doesn't just depend on income but also has to do with other factors such as education, family background, occupational status etc. No matter how wealthy somebody may be they aren't "upper-class" unless they were born to the "right" set of parents, educated at the "right" schools, and work in the "right" profession. Conversely, a blue-blood, Ivy-educated priest is not considered "working-class" even though he has taken a vow of poverty. That's why academics refer to it as "socio-economic" status.
--Claire
(To reply, click here.)
[Though as Jane pointed out, social status doesn't matter if it's tax relief you're talking about.]
Of course it is a state of mind; however, there are a number of variables that should be considered when determining the classification of "middle class". Income and family size are definitely the primary factors; moreover, a debt to income ratio would be helpful as well. A family of four earning $100,000/year is (subjectively speaking) lower-upper class where a family earning $50,000/year is (again subjectively speaking) lower-middle class.
Classification based on income alone is inconceivable when you consider the debt to income ratio. A reasonable debt to income ratio which includes a $100,000 mortgage and two automobile payments would be 1/.35 - in simplest terms, this means for every dollar earned (gross) the family pays 35-cents towards debt. This debt does not include household expenses. As an example, my wife and I are childless, "double income no children", have a mortgage of $92,000 (85% of the total value of our home) and two car payments. The total mortgage and automobile payments equal approximately $1,350.00/month with a monthly gross income of $3852.86/month. That provides a debt to income ratio of $3853/$1350 or $1/35-cents. Now consider the same scenario with the exception that it is a family with revolving debt (credit cards). There is a significant increase in debt, household expenses, etc. This pseudo family debt to income ratio might be almost even (1/.89 or 1/1). They would consider themselves poor where I consider myself to be comfortable.
I subjectively believe that although there are standards and variables structured to calculate the social monetary position of a family and/or couple, it is definitely a state of mind based on the overall monetary position of the same.
--Brian Baum
(To reply, click here.)
Whatever definition is chosen, I don't believe there should ever be a change in percentage of lower class, middle class, or upper class. If we give up our chinning bars and call everyone successful, then our society will stagnate and die.
--Rhett Livingston
(To reply, click here.)
(10/31)