What is the Economic Middle Class?
My lovely wife shared this link with me on Facebook. I got into a discussion in comments there with a right winger who suggested that $250,000 was a very reasonable estimate for median income in Boston.
As it turns out, median household income in Boston is $51,914, close to the national average, and way below the Mass. State average of $67,950. But right wingers live in a data-free world, so this is no surprise.
Another contention in comments at that site is that the middle class is undefined and undefinable. Not so. I define middle class household income as the middle quintile. A middle class family should be able to save for retirement or have a savings account for their children without having to find jobs to do from home at The Children’s ISA. This range includes the median and a band around it wide enough to hold 20 percent of the population. You might wish to concoct your own definition with a wider spread, but you’d better not be asymmetric around the median. Feel free to use the middle three quintiles, if that is your preference. But if your of concept of middle class gets very far beyond 50% of the population, you really ought to give more thought to what the word “middle” actually means.
Thinking about all this prompted a look at the various income quintiles. The data, through 2009, is available at the Census Bureau web site, table 694. This table provides historical data from 1967 through 2009 on the top income limit for the bottom 4 quintiles, and the bottom income limit for the top 5%, expressed in constant 2009 dollars.
Graph 1 presents this data. The 3rd quintile – my definition of the middle class – is between the orange line and the yellow line.
In 1967, the threshold for the middle quintile was $32, 848. By 2009, it had increased by 17% to $38,550. This is a compounded annual growth rate of 0.38%
In 1967, the top limit for the middle (and threshold to the 4th) quintile was $46, 621. By 2009, it had increased by 33% to $61,801. This is a compounded annual growth rate of 0.68%.
The threshold value for the fifth quintile increased from $66,481 in 1967 by 80% to exactly $100,000 in 2009. This is a compounded annual growth rate of 0.98%.
To reach the top 5% required an income of 106,684 in 1967. By 2009, this had increased by 69% to $180, 001. This is a compounded annual growth rate of 1.25%.
So my comment sparring partner and the current presidential challenger he seems to support are a bit off base. $250,000 in household income puts a family well above the 95th percentile. In fact, that is just enough household income to crack the top 2%.
My ongoing hobby of debunking right wing nonsense aside, the point of this post is mainly to inform.
There are two main observations:
1) While the bottom two quintiles haven’t changed much over the decades, entry to the third quintile has crept up a bit; and into higher categories it’s moved up a lot. We recognize this as stagnation in the bottom half and growing inequality in the top half, skewed powerfully to the top.
2) This data set stops in ’09, so Obama is outside the discussion. But we can see that all the way up to the 95th percentile, income growth was dead flat during the Bush administration. No wonder the 95% percentile feels so poor.
But — surely, some wealth was generated during those 8 years. GDP growth was positive at least some of the time. I wonder where it all went?
Cross posted at Retirement Blues.
Just say Middle Income. Then things are clear.
As far as class goes, there is no reason that the classes have to be the same size. For instance, the bottom class of the Natchez Indians comprised half the population. Mitt would have been at home there. Class is more like a pyramid than a tower.
Jazz
Min is right.
Middle just means “between the other two.” Middle class has always meant something other than “near the median.” It has meant something like Professionals and Business Owners. On the other hand my family used it to mean “not dirt poor.”
and if i recall correctly (chance no better than 50%) even here on AB we hear people who make “less than 250k” claim they are not rich, so don’t raise their taxes… that is let them keep their evil Bush tax cuts.
in any case, you often hear about the “rise of the middle class” and its recent decline. If you were only talking about “near the median” such usage would be nonsense. there will always be a median. there may not always be a “class” of people who are not dirt poor but not stinking rich.
(apologies to the not-stinking rich. i know you’re out there, but Republican policies have been giving “rich” a bad name. not entirely uncaused by Dem attacks on “the rich.”
Jazz:
Perhaps I am misinterpretting your statement:
“crack the top 2%” of income(?)
or this Tax Policy Center Chart?
http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=3262&topic2ID=150&topic3ID=160&DocTypeID=1
Making $250,000 or $200,000 annually does not make the upper 2% of taxpaying households for Income. One other thing which puzzles me, are you saying the distribution for Middle Class must be normal? I would have a problem with that statement.
In any case, being upper middle class and making $250,000 annually does not alleviate one from paying more taxes. That argument is lame.
My first thought about the difference between middle class and middle income has already been mentioned.
I think it may be easier if you try to define upper class. I think many of us would see a distinction in how the upper class spends money. If you have a fulltime cook or gardener you are upper class.
The borders ARE fuzzy, but I can propose a few tests.
If you never have any hope of buying a house, you are not middle class.
If you clean your own house and mow your own lawn, you are middle class.
If you hire someone to come in and clean twice a month and someone to mow your lawn, you are upper middle class.
I have managed to define it such that I am middle class even though my income is solidly in the top quintile.
Not sure if past models can be applicable to the definitive uncertainty on the markets these days. Regardless on what your income is. I would ask more the questions on how is your investment portfolio doing your 401K, your savings and your livestyle
If I wanted to, I could spend enough to hire the housecleaner and yard service that would make me upper middle class by my own definition. I don’t because I want to retire early.
This leads me to an alternate defintion. I am uper middle class because I can reasonably expect to retire before I am 60. Would someone who does not retire because he likes making money be considered upper class, then?
I would suggest that having more investment income than earned income would also put you in upper class. (I do know middle income folks who invested well in housing long enough ago to have a good income from it, and I do see it differently.)
Having a choice whether to consider yourself retired is a bit of a class distinction.
min –
I specifically said ECONOMIC middle class, not to conflate with social or some other middle class concept.
Upper class in Europe is defined by birth. That is what I was trying to avoid.
Middle income does not clarify, because median and mean are different, and the limits aren’t defined.
Dale –
For Middle class = “near the median” the rise of the middle class is not meaningless. It means the narrowing of disparity between (and among) the income percentiles. Note this rise is not represented on the graph since it occurred prior to 1967.
The decline, however, is clearly evident in the growing gaps.
run –
Sorry, I am not getting your point.
arne –
I’m not interested in the upper class. They are beyond my reach.
To equate middle class with the top quintile is to conflate economic and social criteria.
Coming from such vastly different premises, we can’t even have an argument.
I was in the top income quintile before I retired, and I recognized how well off – and lucky – I was to live a not-particularly-lavish life style that still is far beyond the dreams of half the people in this country.
JzB
jazz
if there were 3 million people in ancient egypt who lived on the equivalent of one dollar a day, and 300 people who lived on over one thousand dollars a day, the median income would be one dollar a day.
arne
i retired when i was fifty two. does that make me upper class?
on the other hand it means a lot to me that Social Security allows, for the first time in history, ordinary people to retire at the age of 65 with “enough” to live on. Based on other conversations we have had, you are willing to deny them this luxury if it means you can divert an extra one percent of your upper class income into “private” savings that will allow you to retire in style before the age of 60.
i am not being mean here. just inviting you to think about the justice and humanity of such a calculation.
Dale,
I would ask whether choosing to retire at 52 makes you upper middle class. If you bothered to read what I said you would see I think there is a distiction there.
Social Security does not, by itself, provide enough to live on at age 65. You clearly have another source of income if you retired at age 52. At some point, if the safety net is strong enough, I do believe it is better for workers to put that extra 1 percent into their own retirement savings. It certainly applies to me, and I think it applies to anyone of middle income.
If you are saying that how well SS works does not depend on how people save outside of SS, then you are the one who does not understand SS.
Dale –
Your Egyptian example illustrates that it is meaningless to talk about the characteristics of the middle class when none, in fact, exists.
Consider the England of which Dickens writes. There was a middle class, of sorts, represented by Scrooge and Marley, but not by Bob Cratchet.
Without some sort of wealth and income continuum, there is no middle class.
We had a large and robust middle class in the last half of the 20th century. Now, we are losing it to income capture by the top few percent.
JzB
“To equate middle class with the top quintile is to conflate economic and social criteria.”
Correct. I am saying that middle class, as opposed to middle income, is about social criteria as much as it is about economic criteria. At the least, I believe that I (who am upper middle class) am much, much more like middle class than like upper class.
Nonetheless, I also think that setting the bar at $250K for those who should being paying more is way too high. My taxes should go back to Clinton levels, too.
Arne
I not only “bothered to read” what you said, I have been thinking about this for some years now, and suffer from the delusion, perhaps, that I understand what i am talking about… even if i can’t make you understand what i am talking about, even when you bother to read.
as for “other income”… let me introduce the coberly financial planning plan: at a certain age i realized my good job had gone to hell and i was too old to find another one, and had no real savings. so i saved every dime i did not need to eat for a very few years. you’d be surprised how that added up. and at age 52 felt i had enough to “make it”. but not in “middle class” style.
As it turned out the freedom was worth far more than the foregone champagne and new cars. I clean my own house and cut my own grass.
The point about the extra 1% is that yes, you can very likely earn more in “investments” than you can from SS. on the other hand you can lose it all. then that 1% is insurance so that you can still retire… even if it is to the “simple life” that so many religious leaders recommend.
does it ever occur to you that with your high income you could find that extra 1% to invest from somewhere other than your SS premium? try looking under the couch cushions.
Arne:
Can we at least do so after we get the ~$1trillion back from the 1 percenters to whom the 2001/2003 tax breaks were skewed to?
Jazz:
Making observations. Your statements are a tad too forceful as this economy is different than previous ones.
To both Arne and Jazz:
What was considered rich in income when the AMT was put in place as compared to what is rich today? Mike Kimel gauaged it to be > $1 million. Does it nake sense the middle class and/or middle income would remain stagnant. EPI/CBPP(?) pointed out that just to get by for a family of 4, it takes ~$48,000 (dependent on where you live). Would you consider just getting by Middle Class or Middle Income?
jazzbo
i wasn’t criticizing your understanding of the middle class, i was criticizing your equating it with median income.
scrooge and marley were business owners. Cratchett was an employee. that is pretty much the distinction between middle class and working class.
Arne
glad to be able to agree with you re the Clinton era tax rate.
But I find it difficult to understand why you are willing to pay an extra 1% income tax, but surly about paying an extra 1% payroll tax.
Something about getting the money back, with interest, while it provides insurance in case something goes wrong… is more offensive to you than giving the money to the Pentagon?
is there something about letting “poor people” retire while they are still young enough to enjoy it that is deeply offensive to people who “could consider themselves upper middle class… because “having the option to retire early is a bit of a class distinction”?
run
if you think of taxes as some kind of “moral” restitution, you make the problem harder.
we need the rich to pay enough taxes to avoid a deficit that becomes a problem… even if only a political one. we don’t need to punish them, or make them pay for the advantages they have gotten out of the previous low tax rates.
at least i find the “moral” approach counterproductive. (and in fairness you might point out that i don’t find ANY approach productive.)
Oy, you could write books. And dozens of people have. But the question will always be arbitrary and ultimately class based. And rarely does it boil down to quintiles.
In the town my Mom grew up in, and which by an odd quirk I spent 2 years of H.S. in the 70s class separation was easy. Like many U.S. Middle East sizable towns/County Seats/yet not Cities Noblesville Indiana was split by the railroad tracks. Which like probably thousands of such towns was fronted by Railroad Ave. Which in Noblesville was paralleled only a couple blocks away by (I kid you not) Division Street. ‘Good’ people lived ‘North of the Tracks’ and on the same side of Division Street, ‘Those’ people lived on the other side. And everyone knew the difference even before WWII and the rubber plant led to West Virginians from Covington Gap flooding in to take those defense jobs and settling S of Division St, originally the separation was not regionally based. Instead you had No Account Hoosiers working manual jobs for Good Family Church Going Hoosiers. All mostly whiter than white but quite literally separated by a line on the map separated by a street called by God ‘Division’ with schools called First Ward (good) and Second Ward (them).
How this broke down by quintiles I have no idea whether when my Granddad started teaching at Noblesville High in the 40s or when I spent some years there in the 70s. But you couldn’t go too far wrong adopting a European model of Aristocrat (Noblesville maybe didn’t have one), Upper Merchant/Professional/Upper Bourgie, Shopkeeper/Farmer/Minor Bourgie/Teacher (all living N of Division St), and Mill Worker/Hired Hand/Shop Clerk along side Laundry Woman and then Lumpenproletariot (all living S).
That is what we call ‘Miiddle’ is more a synonym for ‘Good People Living on theRight Side of the Tracks’ and ‘Working’ as ‘You know, ‘Those People’ ‘ as any attempt to quantify classes by quintile of income.
My Mom’s ‘People’ come from one side of those literal and metaphorical tracks while my Dad’s ‘People’ come from the other, and even though they were separated in space (Indiana vs Delta California) fully knew the difference.
Romney and Ryan just live in the mansion neighborhoods on their side of the tracks. Which doesn’t mean they don,t identify with the ‘Good’ 50% and disdain those ‘Other’ 47%. And to some degree issues of race and numeric bank accounts just layer on top. For Christ sakes just read any 19th century novel featuring either penniless aristocrats or equally poor parson’s daughters to see who was allowed through the front door into theReceiving Room.
Read ‘Mid West’ for ‘MiddleEast’. I guess I have lived to long on the Left Coast to remember that Indiana is in the ‘Mid West’ (even as it is closer to NYC than LA by far)
Bruce
that’s pretty much my take, but i think it’s complicated by “poor aristocrat” still being of good blood… related to the conquerors… even if out of money. i don’t know how many generations that can go on before money asserts itself as the dominant determiner of “class.”
also, the use of class division is one of the ways the real rulers keep the people fighting with each other instead of with them.
and of course the money is what makes it possible for them to assure that people like us make more than people not like us. so it feeds back on itself.
i have not encountered any class barriers that i recognized, that i didn’t create for myself, but i am the last person to have a clue about how society is stratified. i do wonder at times if we have a real ruling class, related by blood, in this country.
i doubt anyone cares except maybe Arne, but I am not picking on him personally.
He is like, I think, most people, who first of all can’t keep in mind that that last 1% increase in the payroll tax would occur fifty years from now, when he is long retired and people like him will be making twice what he is making now.
But, like most people, no matter how much they make, it is not enough, and if you have to squeeze someone who has nothing in order to get some trivial increase in your own “net worth,” well, that is simple justice.
i argue here frequently on behalf of the “rich”, not because i like them so much, but because i think it is dangerous for “the left” to simplify their thinking to the point where “tax the rich”is the obvious solution to everything.
but while I can understand thinking that the poor are poor because they are less productive (for various reasons related to their own lack of god given gifts) and the rich “deserve” their wealth because they worked for it…. i cannot understand, or forgive, the rich for creating obstacles to the poor that prevent them from using having even a fair chance to live a human quality of life.
it should be said that “the rich” here means anyone who thinks he is better than someone poorer than he is, and is easily seduced into making life that much harder for the poorer person under the illusion that it will make life that much better for himself… or just to prevent the lazy poor from teaming up and taking away everything the poor rich have made for themselves.
Jazzbumpa: “I specifically said ECONOMIC middle class, not to conflate with social or some other middle class concept.”
Well, in my introductory sociology class they talked about socio-economic class. {shrug} Frankly, I do not see the point of coming up with a different concept of class, especially when there are quite clear and simple ways of saying what you mean. It just creates confusion.
Jazzbumpa: “Without some sort of wealth and income continuum, there is no middle class.”
Precisely. That is one reason why defining middle class as those in, say, the 40th – 60th income percentile means little. When we talk about losing our middle class, we cannot mean that the number of people in that group is getting smaller.
For Bruce –
http://web.usi.edu/boneyard/div06.htm
class must be objective [e.g. relations to means of production, ownership, etc]
and subjective [combined as class in itself and, with difficulty, a class for itself – functions of consciousness, but that combination can drive real revolutionary change. ”]“Combat or Death: bloody struggle or extinction. It is thus that the question is inexorably put.”]
‘middle class’ was understood to be the petite bourgeois, the small businessman who exploited himself [In a sense, the old ‘ma and pa corner business] and was a fuzzy strata between the two dominant classes but one which expanded with the rise of corporations and monopoly – and can be seen as professionals in developing nations.
My point? To see ‘the middle class’ in strictly economic terms of income and wealth is arbitrary and -obviously – politicized, part of the repuglithons game plan.
Juan
Coberly:
I have written this before and it is worth a rerun.
The direction of the 2001/2003 tax breaks was to deliberately skew 31% of it specifically to 1% (~1 million) household taxpayers. In 9 years, this arbitrary direction by Bush and staff was estimated then to amount to ~$1.7 trillion. Much of the so-called Clinton budget surplus was utilized to pay for this. The results of the 2001/2003 tax breaks have been documented numerous times by EPI, CEPR, Brookings, CBPP, etc. http://www.cbpp.org/research/index.cfm?fa=topic&id=133&year=2012&numReturn=100 and here: http://www.cbpp.org/cms/index.cfm?fa=view&id=3811 . No other president has skewed tax breaks in such a manner for so small of a group of Household Taxpayers, enough so that it completely canceled out the impact of the 2001 recession for this group. How many household taxpaying units are we discussing? If you look here http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=3262&topic2ID=150&topic3ID=160&DocTypeID=1 and in the column marked Tax Units, we are discussing 1.3 million people making >$500,000 and ~6.6 million (4.2% of the household taxpaying units) making > $200,000.
For those making > $1 million annually, this amounts to ~$433 billion specifically directed to them (derived from the Tax Policy Center). For those making between $500,000 and $1 million, the breaks amount to ~$171 billion. And if we toss in the $200,000 to $500,000 crowd, the amount grows another $397 billion. In 9 years, ~$1.1 trillion went to 4.2% or ~6.6 million household taxpaying units. This is not being punitive or arbitrary in my comments and is a reflection of the magnitude of what Boy-George Bush did during his presidency. Not even Hoover attempted to do so for such a small group of taxpayers equating to an ~1% (making >$500,000). What about the rest of the taxpayers??? 88% of them received < $100 (http://crooksandliars.com/jon-perr/10-epic-failures-of-the-bush-tax-cuts).
Gettting to your moral restitution comment, the direction taken by Bush and company to skew so much (31% http://www.cbpp.org/cms/?fa=view&id=1146) of the 2001/2003 tax breaks to those (1% of the household taxpayers) who did not need it is the moral question at hand here. If none of this alters your opinion on what I said, then the conversation is finished. I want the money back to help pay back the deficit. Right now, I need to sleep as the 2nd dose of the percocet is finally kicking in and making me drowsy.
Juan:
If this is the same Juan who I have read and talked to before, it is good to see you back
run…,
thanks, and yes
same Juan
although
have not
been in
the best
of health
plus moved
to FL from
NM
Juan
For me, “middle class” is a picture made up of several elements, most of which are not primarily financial.
One is education. A middle-class family would have at least a solid high school education, plus some post secondary, and would also have an interest in learning and ideas.
Another element is financial stability. A middle class family would have a long-term stable lifestyle, some savings, and a reasonable prospect of being able to plan for the future. Stability across time is a key middle-class quality — perhaps THE key quality.
A third is social stability and a willingness to help others, supported by the financial stability noted above. A family with no breathing room, no savings, no extra time to help out, is a family that is not part of the middle class, no matter what their income.
Most importantly, this social stability MUST include the raising of children. Stability across time requires offspring.
One item missing from the useful definition Jazzbumpa gives us, is the relation of the quintiles to another line — the income needed to provide a stable living situation over time.
That minimum income is around the US median wage, according to my back of the envelope figures from here: http://www.angrybearblog.com/2008/03/noni-mausa-who-should-have-children-or.html
So, in order to qualify for Noni’s middle-class, you would need a household income above the median. Perhaps well above that level, given the instability of the current economy.
Noni
run
i think i understand your comment, and mostly agree with it.
but it is still, in my opinion, bad politics and bad mental hygiene, to think of taxes in moral terms.
we, arguably, tried, with tax cuts directed at the rich, an experiment in trickle down economics. it did not work. so it is time to try, perhaps, some trickle up. simple, non-moral, “try what works’ (what FDR said).
the moral rhetoric invites defensiveness and backlash,
ultimately any rational tax code will “tax the rich.” but it is a mistake to exempt the poor (like you and beverly) from giving back the tax cuts they got along with the rich. it looks too self serving. and, as i keep saying, it’s bad mental hygiene.
now, am I entirely wrong politically? i could be. it may be the ONLY way to manage people is with cries of moral outrage and favored tax treatment.
but i’d like to try something a little more rational and see if it works for once.
hi juan
good to hear from you again. sorry about the health.
i think i understand what you are saying about class and you may be right.
but it has the ring of something read from a book… a book informed by anger at the oppression of one class by another. maybe that’s “truth,” it certainly looks like the history of the world to me… but it is a little too “canned” for my taste and i think a very hard sell to Americans who listen to much more sophisticated propaganda every day at noon, and on the way home, and on the evening news.
Noni
Sigrid Undset described around the turn of the last century the “new economy” putting everyone into “situations subject to short notice.”
i think even the higher income folks you are talking about are now in situations subject to short notice… so maybe that’s what you mean by the disappearance of the middle class.
i don’t agree about how much money it takes to have a reasonable living… but i do agree about the unstable situations. and while i think we should all be willing to spend a little of “our” money maintaining a country in which poverty never becomes degrading, i don’t think you can count on the “middle class” to agree with you.
We had an effort to create such a country following the depression and ww2, but i think it was those who remembered being dirt poor and shot at who made that effort. and succeeded in creating a “middle class” of workers… people with pensions and holidays and sometimes a boat in the front yard and a chance to educate their kids to become “professionals.”
gone. gone. gone.
as far as i can tell this is by agreement of the political rulers of both parties who found such a system just too much trouble and expense.
Well I am going to continue this in a main post with a slightly different approach. Perhaps some of you will weigh in there.
noni:
Some more good reading: “Understanding Mobility in America” by Rom Hertz. http://www.americanprogress.org/wp-content/uploads/kf/hertz_mobility_analysis.pdf
I believe this will flesh out your thoughts on this topic beyond the three items you mentioned.
There has been a lot of thoughtful disagreement here, which I respect and appreciate.
Noni’s middle class idea corresponds pretty closely to my life on Toledo’s East side as a teenager in the 60’s, though we would have been at the lower end of it. (There was a Division St. in another part of town, but I don’t think it ever divided anything meaningful.)
Toledo’s divider, BTW, was – and still is – the Maumee river. A West sider can easily live his whole life without ever going there. But I digress.
My parents were not H.S grads. I was the first college grad in my family. (later, a younger cousin went to Harvard.) My dad worked for the post office, and my mother at a low end retail store. I think we had the kind of stability Noni mentions.
I don’t know what they earned, nor what quintile we were in. Probably high second to low third.
In those days, that was middle class – or darned close to it.
Now, being “middle class” requires well above median income.
This, I think, is what the decline of the middle class is all about. Social middle class and economic middle class were near equivalents in my childhood and adolescence. Now, they are not.
Thanks for all your thoughts and contributions. Great discussion.
JzB
Jazz:
“Now, being “middle class” requires well above median income.”
Which is what I was trying to say and failed miserably. Middle Class is not Median Income or??? A lot of people have been disenfranchised and do not know it or will not admt to it. It was a fun thread.
Got some new stuff coming on a recent report which may interest you.
If you consider what goes on tv and movies as middle class, they are actually fairly affluent. I propose a definition of affluent middle class as that portion of the population that earns between 50-x% and 50+x%. Since 50% of total income is earned by those above $100k, something like $50-200k would rank for those.