What Is Middle Class, Anyway?

Photo (cc) by yomanimus

One of the surprising challenges in writing my ongoing “Restless Project” series has been defining whom I’m writing about. I’ve featured a number of families who are struggling despite having what seems like solid incomes. Many of those families have subsequently faced withering criticism, with folks convinced they don’t need to make more money, just spend less.

While there’s some truth to that, I think the bigger truth is that Americans are fundamentally and chronically underpaid. That leads to a rat race that a shrinking minority can win, and with a growing majority driving themselves crazy.

As we all debate this, there’s a real problem in defining our terms. What is middle class? What is a decent income? I’ve argued that in many American urban centers, $100,000 in spending power is the base line, but, of course, plenty of folks get by on half or even one-quarter of that.

Geography matters, housing costs matter, job availability matters, phase of life matters. America is so diverse that it’s easy to think this discussion is darn near impossible.

The folks at the Pew Research Center have done me a favor and come up with a very reasonable way to define middle class, and I’m curious where you fit into it. Here goes:

pew chartMiddle-income families are families whose size-adjusted income is between two-thirds and twice the median size-adjusted income. In other words, families of four who earn between $44,000 and $132,000 would be considered “middle income.” Single households earning between $22,000 and $66,000 are middle income. You can see more in the chart to the left.

Using this technique, Pew nicely dropped families into their correct buckets. This methodology results in 46 percent of America’s families being classified as middle income in 2013. One-third of families were lower income and 21 percent were upper income, Pew says.

Dropping families into groups this way certainly tells us more than saying the median household income is $53,000.

Based on the email I’ve received, many of you think a family earning $100,000 couldn’t possibly be considered middle class, but there it is, smack in the middle of the data. Of course, income is only one element of lifestyle, and it may not even be the most important one.Housing costs rank higher in my book. And asset ownership creates an entirely different discussion. You can be rich and not have a high income. And that’s actually what Pew was after when it published its new research last week.

Running in place

After dropping people into upper-, middle- and lower-class buckets, Pew examined how those groups were doing as the economic recovery progresses. Pew’s answer: The middle class is running in place, while the upper class continues to lap the field.

In fact, the disparity between upper and middle class is the worst it’s been in decades. The 21 percent have almost seven times the wealth of the 46 percent.

Of course, it’s entirely possible for life to be good for the middle class even as the rich get richer. Theoretically, anyway. But it’s not working out that way. Total household assets of the middle group were completely flat between 2010 and 2013. And, far worse, when adjusted to 2013 dollars, middle-class assets are basically flat since 1983.

Back during President Reagan’s term, median household assets for the middle class were $94,300. They “jumped” to $96,500 last year. So 30 years, no progress. During that same span, upper-class assets swelled from $318,000 to $639,000.

Why does this mean things are worse for the middle class? For starters, think back about any bidding war over a home purchase you’ve ever heard about. Price is set by the amount of dollars chasing an item. Folks who have money have a lot more dollars to chase homes when they become available now. Just like with high-priced sports free agents, it only takes one bidder to drive up a price to astronomical levels.

Those $100,000 middle earners have to fight with the $300,000 earners over homes near good schools. When money is distributed this unevenly, price distortions are inevitable. That’s one reason housing prices remain stubbornly high while more and more people are dropping out of the homebuying market. And another reason so many of you feel restless at night.

You can be solidly middle class, you can make $100,000 a year, and feel like you are losing the rat race.

More from Bob Sullivan:

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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