patrick.net

I don't think you can just look at a graph of US income distribution to figure out what income range constitutes the 'middle' class. You really need some other metric, some measure of the lifestyle afforded by a certain income in a certain area.

michaelsch says

The idea and the definition of middle class was highjacked by corporative thinking in America.

This is an interesting point but I don't believe anyone uses this definition you're giving anymore for "middle class", certainly since WWII and maybe even post Civil War. Some language and social drift over that time period is reasonable and common usage should be observed when discussing this stuff anyways so as not to confuse everyone.

Matt.BayArea says

You really need some other metric, some measure of the lifestyle afforded by a certain income in a certain area

No you don't. Middle class is a term applie across an entire country and not a county, city, or state term. It loses all meaning once you start breaking down by localization since everyone's definition of middle class then becomes different.

edit: you can argue that certain places might afford you a better standard of living due to the local economy but that is totally different from class. Standard of living is after all somewhat wishy washy.

tts says

No you don't. Middle class is a term applie across an entire country and not a county, city, or state term. It loses all meaning once you start breaking down by localization since everyone's definition of middle class then becomes different.

edit: you can argue that certain places might afford you a better standard of living due to the local economy but that is totally different from class. Standard of living is after all somewhat wishy washy.

So again, we come back to the issue that 'middle-class' can be defined by both income level (money in), AND by lifestyle/standard-of-living (how money goes out).

I agree that the money in is best defined on a national level - we are talking about the AMERICAN middle-class, or lack thereof, after all.

But even though measuring how the money goes out is indeed slippery, I think it is important. It is hard to quantify... take for example discretionary spending. It seems like a fuzzy metric; does it really reflect more what one CHOOSES to spend on housing rather than what one CANNOT AVOID spending on housing? Ultimately some things that some folks consider essential, baseline spending constitute luxuries for others.

(Oh yeah, I see you commented on discretionary income above...)

I think many ideas are being conflated.

It is true that a family that makes $200K a year probably is closer to a family that makes $20K a year than one of the top 1000 households in the country, it doesn't make the $200K family middle class (no matter how many times politician's consider them entitled to "middle class tax cuts").

I think the quintile method is good. As of 2004 (if anything, likely lower than this now for the non-top quintiles - note this is household income, not individual income - individual income is lower than this)

Lower class: household income $0/year to $18,500/year - fully 20% of households.

Lower-middle class: household income of $18,500/year to $34,738/year - another full 20% of the population.

Middle class: household income of $34,738/year to $55,331/year - another full 20% of the population.

Upper-middle class: household income of $55,331/year to $88,030/year - another full 20% of the population.

Upper class: household income of more than $88,030/year - this represents the top 20% of the population.

I think it is legitimate to consider middle class as either just the middle 20%, or as a general term counting the lower-middle and upper-middle and getting a full 60% of the population (skipping the lowest 20% and the highest 20%).

But I don't think it is legitimate to consider folks in the top 20% as part of the middle class. It stretches the definition of middle too much.

You can further divide the upper class into the rich, the filthy rich, the super rich, the masters of the universe or whatever divisions you want (top 5% are those >$157,176; top 1.5% are those >$250,000; etc.). And there is a point that those making $95,000 aren't that similar to those making $10,000,000; but that doesn't mean either are "middle class". That labeling is disingenuous and designed to confuse.

Compare to the OP of "Using only income as the marker, which is of course imperfect for many reasons, I would say that $40,000-$70,000 is lower middle, $70,000 to $120,000 is middle, and $120,000-$250,000 is probably upper middle". Now I'm using household income and he's using family of 4 but that shouldn't effect things too much as likely in OP's family of 4 there were only at most 2 parents working. But that division has 43.08% living in poverty/the lower class (I.e., below the middle class - below event the "lower-middle"). That division has 25.64% of people in the "lower-middle" bucket. Less than 15% of the people in the middle-middle bucket. Less than 15% of people in the upper-middle bucket. And only 1.5% of people above the middle class. So 43.08% of people are below the middle but only 1.5% are above? Some middle!

In practice I think a bunch of people define middle class to mean anyone who makes what I make is middle class (or maybe anyone who makes between half of what I make and twice what I make is middle class).

A different interesting definition of middle class might be the middle class (and lower class) are those people for whom they get more than $1 of benefit for each $1 of taxes they pay. The upper class are those who get less than $1 of benefit for each $1 of taxes they pay.

Bellingham Bob says

$100,000 gross
Less 15% off the top for payroll taxes
Less $16,500 IRA and $5000 IRA
Less $20,000 for income taxes
Less $20,000 for rent
Less $10,000 for car(s)
leaves $13,500 a year discretionary income.
"Upper class" my ass.

You forgot the rug rats..

A major magazine had an article saying, if I recall correctly, the upper midddle class has home in nice area, country club membership, private schools, european vacations and luxury cars. And I am assuming savings after all that spending.

John Bailo says

I think the change has been from an American Middle Class with everyone else in the world much poorer, to a global Middle Class.

So, previously, just by being an American citizen, you had access to a certain wealth and status.

But now, that has spread worldwide. Suddenly, there is a manager in India who (rightfully) feels he should command not equal...but greater status than line workers in Kentucky.

That's what's hard for people to deal with.

http://jabailo.tumblr.com

That's the party line, but somehow the American professional classes rarely shared in this global competition with overseas professionals. When they did, it was only at the margins, work that was usually performed by entry level workers. In short, certain groups were protected from international competition, because they had lobbyists, while those without a 4 year degree were told their struggle was merely 'globalization' evening things out. And to make matters worse, that modern day Indian manager with rising status often doesn't even make what that Kentucky line worker used to make 30 years ago when adjusted for inflation and benefits. The point of the exercise is to increase the wealth and power of the professional classes and the hereditarily wealthy, not global competition and market efficiency. That's the vocabulary they use to justify it to the masses as they are still a tiny segment of society, whichever continent they hail from.

Actually even that manager in India is getting screwed, same thing for the manager in China or Mexico for that matter.

Globalization was supposed to spread the wealth around a bit more evenly but all it has done is create a tiny few very very rich people in the countries that have participated in it.

It has also made it very easy for Capital to abuse workers' rights. And now when a country tries to enforce some rules or if the workers' wages in a given country start to get too high Capital merely leaves the country and the jobs are outsourced to the next cheapest place. This is why jobs are now leaving China and India and going to SE Asia and Mongolia*, and even believe it or not places like N. Korea**. After that they'll probably start outsourcing to Africa...

The labor conditions in these countries are just awful as are the wages. Sure technically they make more and have access to reliable food supplies which is better than what they did working as subsistence farmer peasants in a field, but the standard of living for the avg. worker is often worse or about the same as our avg. poor homeless person.

That is why you are starting to hear stories from time to time of Chinese workers committing suicide or rioting and hanging their managers now. There have been massive demonstrations in India about the corruption in the government too but you don't hear much about those at all in the news. They're starting to realize they're getting screwed and they are getting pissed.

*http://www.businessweek.com/magazine/content/10_21/b4179011091633.htm
**http://blog.aflcio.org/2011/09/20/corporations-backing-new-trade-deals-outsourced-18600-jobs/

tts that can be true with strikes but it can be a bit iffy. In China people rather work for foreign companies rather than their own. They have this reverse xenophobia there that is a bit hard to explain.

I toured a number of factories there and it varies quite a bit. On the streets of Shanghai you can sometimes see people welding without a mask! There is no OSHA or DOL but people do gravitate towards areas that provide better conditions.

Sophistication continues to grow. I know of a man that has worked in Shanghai for thirty years now. He said that in 1980 the average person wanted a bike, a watch and a radio. A child can get that now. Now it is probably a job, an education and a decent apartment and in another thirty years could be an annuity, a house and tenure!

It is hard to judge other countries by our standards especially when some have only been independent for decades.

The interesting aspect about the strikes is that as long as it is a foreign company then the government won't clamp down, they see it as fine as asking for more.

To note to trade with North Korea is very hard to do. Supposedly there are ways to take commodities that they make (gold, silver etc) and sell on the open market. We haven't had anything come into the USA from North Korea for quite some time. 2008 had some exports to them but not that much since. Sanctions often do have exemption. Cuban art work/music is actually legal to bring back.

Apparently "Middle Class" is anyone up to a few hundred million dollars...
http://www.cbsnews.com/8301-503544_162-20109658-503544.html

Well, if you count only income there are still two different models:

You get to the diamond model when you classify based on income percentile. In a diamond model it's about like this:

Bottom 10% - below the poverty line. (not a part of the economy)

11%-20% - very poor.

20%-35% - lower class.

36%-45% - lower middle class.

46%-75% - middle class. (it's wider percentile because at this level taxes level the field.)

76%-90% - upper middle class (same as previous)

90%-99% - bottom upper class.

99%-99.9% - real upper class (mostly still a part of the economy, i.e. productive)

99.9%-100% - Ultra rich (not a part of the national economy again).

But this is still in the diamond model - very much outdated in USA.

In reality we leave more in a pyramid model. You get to it, if you count total income distribution. In the way top 400 families are equal to about bottom 40% of the population.

Using the pyramid model you get the following population distribution:

Again 10% - below the poverty line.

10%-65% - lower class

65%-90% - lower middle class

90%-97% - middle class

97%-99.9% - upper middle class

99.9%-100% - upper class.

I did not check actual income distribution, but as far as I remember top 100000 families make much more than bottom 50 million families.

Actual ranges may be different and they are constantly moving, but the idea is clear.

michaelsch says

But this is still in the diamond model - very much outdated in USA.

You've just found a new way to showcase wealth disparity. As a measure of economic class the "diamond model" isn't very good since things get so lop sided at the top by so very few people.

Certainly without defining what is poor, middle class and rich it makes arguments harder to make.

Should it be based on how much money someone has, how much they make, what assets they have, none or a combination?

There are many farmers that can be said to be millionaires if you sold off all of their combines, all of their land and all of their crops. But the liquidity of these items is not efficient so the logic doesn't hold water.

If we use a metric of that "Anyone that is rich is someone who does not have to work" well would elderly people be considered rich if they retired on money they saved/invested for much of their life?

Having something of wealth does not automatically mean it can be sold immediately without some ramifications. If you own a house and sell it you still have to live somewhere and that comes at a cost.

Technically one could argue that anyone can become richer if they just move to a cheaper area (midwest comes to mind). But that is not always desirable. If you go overseas you can see how this differs even more. Europe is expensive (at least the capitals..London, Paris..even Moscow these days is high). Asia is cheap. For me a beer cost $1, bottle of brandy $4, a platter of food $1. China, South Korea, Thailand, Philippians etc. But some would probably prefer some of the social safety nets that operate in Europe.

Standards of living differ everywhere. If you have a car in the suburbs that can be required due to a lack of transport. In a city it usually is not needed..

Middle class is however you define it.

mdovell says

Should it be based on how much money someone has, how much they make, what assets they have, none or a combination?

The thing is that the cost of many goods is very similar most everywhere you go for the rich, middle class, or poor person. The major thing that changes that is easily comparable is their income. Things like wealth are huge factors too but the numbers are so skewed there as to make a comparison bizzarrely lopsided.

Standard of living changes a bit depending on your location but a person making $50K a year in CA couldn't move to say Idaho and make that same $50K and end up being effectively rich or even upper middle class. Of course in the cheaper areas wages also tend to be lower, so that person making $50K in CA might only make $40 or 35K a year instead. So unless they happened to sell a big asset or home in CA and then moved to ID and bought a cheaper home they wouldn't really benefit much financially from such a move.

Some things like housing cost more depending on where you live, but many things that the truly wealthy buy cost the same regardless of where you live. A G5 jet, a Bentley, a Patek watch, a Brioni suit, etc. These things cost the same wherever one lives, and they are purchased by rich people all around the world.

Middle Class is a divide and conquer construct of the Super Rich to distract us from the real reality, that there's only the Super RIch and the rest of us.

mdovell says

Should it be based on how much money someone has, how much they make, what assets they have, none or a combination?

There are many farmers that can be said to be millionaires if you sold off all of their combines, all of their land and all of their crops. But the liquidity of these items is not efficient so the logic doesn't hold water.

I agree that it is more reasonable to talk about wealth instead of income, except people have less intuitive sense of wealth.

Because of taxes people have some sense of income and AGI, most people wouldn't calculate their own wealth accurately in their head (have to include property, goods, insurance policies, retirement accounts, less debts of all kinds). But the wealth distribution is even more skewed than the income distribution.

But I don't give the nearly mythical farmer a pass. If they really have millions of dollars of assets that they own free and clear (combines, machinery, land, etc.) with no debt then they really are wealthy! Just because they choose not to sell (liquidate) those assets and invest them in bonds/stocks/luxury goods doesn't mean they couldn't make that choice. They don't deserve any special treatment.

A wealth tax where everyone needed to pay, say, 2% of all their wealth over a million dollars would raise a lot of money and not impact many folks. It would be one way of implementing the "expiry time on money" that others in this thread suggested. It is sort of like the estate tax, except every year. As long as you couple it with a large one time fee if you renounce your citizenship (to avoid people who might try to hide assets or move them overseas) and also impose a similar tax (I'd advise 2% starting at $0 for them) on corporations and trusts and other legal organizations (to prevent legal maneuvering hiding assets to avoid taxes) I think you could do a pretty reasonable job of rebalancing the economy distribution.

But it would only favor the 99%, so what are the chances of it passing?

mbodell says

A wealth tax where everyone needed to pay, say, 2% of all their wealth over a million dollars would raise a lot of money and not impact many folks

But is that optimal?

Wouldn't it be more optimal to 1) cut the waste in government and then 2) raise taxes on parasitical wealth and not productive wealth?

People actively deploying their capital wealth to create new wealth should be last in line for taxation!

There's plenty of leechfuck specuvestors, rent-seekers, and skimmers in the system we can target first. Tapping them would bring hundreds of billions of dollars, probably enough to close the deficit if we could find some cuts.

Once again, I find that I'm referencing the following chart.

Poor is the 0 to 20 percentile
Middle class is the 20 to 98 percentile
Upper middle class is 98 to 99 percentile
Rich is 99 to 99.5 percentile
Ultra-rich is 99.5 to 100 percentile

By the way, for those who say taxing the rich can't solve our debt problem... The area under the curve, i.e. the integral of this curve, is the income that can be taxed. Notice that most of the area under the curve is in the top 2% and a healthy portion is in the top 1%.

Actually, maybe poor is the 0 to 40 percentile nowadays with how little the dollar is worth.

Bellingham Bob says

Wouldn't it be more optimal to 1) cut the waste in government and then 2) raise taxes on parasitical wealth and not productive wealth?

Totally agree. It's not the rich who produce a lot of wealth like celebrities, athletes, and inventors. It's the rich who get their wealth by playing zero-sum games, manipulating the system, and usually causing recessions and unemployment in the process.

B.A.C.A.H. says

Middle Class is a divide and conquer construct of the Super Rich to distract us from the real reality, that there's only the Super RIch and the rest of us.

The middle class rose from the progressive reforms of the early 20th century and resulted in a much higher standard of living for the vast majority of the population along with increase domestic stability.

It is only since the 1980s that the middle class has come under attack and has started to shrink. The term middle class isn't an illusion and I think its worth fighting to protect it. The alternative is abject poverty for most people.

lb51 says

In some cities, a $100,000 six figure salary for a family of four does not go very far.

If that's so, then $100k doesn't go much farther for a single. I know kids are expensive, but they aren't that expensive.

Zoom image

Now, housing costs should really be a constant regardless of whether or not you have kids. A middle class house costs the same for a single person as a married couple with two kids. So subtract the "housing" part from the real cost since you're paying that anyway. Also subtract "education" since it's free and child care is something you choose to buy. You can raise your own kids yourself.

By counting vertical pixels, that means the real cost is 53.4% of what the above graph says. So that most expensive kid, the one on the right, should really cost only $7225.02 per year. If your kids cost more than that, tell them to get a job.

Your kid can pay for him/herself at minimum wage working only 19 hours and 10 minutes a week. I believe that Huntington Moneyworth III, Esq has a factory with openings.

Dan8267 says

Once again, I find that I'm referencing the following chart.

Poor is the 0 to 20 percentile

Middle class is the 20 to 98 percentile

Upper middle class is 98 to 99 percentile

Rich is 99 to 99.5 percentile

Ultra-rich is 99.5 to 100 percentile

By the way, for those who say taxing the rich can't solve our debt problem... The area under the curve, i.e. the integral of this curve, is the income that can be taxed. Notice that most of the area under the curve is in the top 2% and a healthy portion is in the top 1%.

Hey, you did not finish the curve. There is a hugh area under the portion of the curvebetween 99.9% and 100%. It's more than 20% of total national income.

Bellingham Bob says

2) raise taxes on parasitical wealth and not productive wealth?

No. Because that will allow parasits to decide which wealth is parasitic.

tts says

>michaelsch says

But this is still in the diamond model - very much outdated in USA.

As a measure of economic class the "diamond model" isn't very good since things get so lop sided at the top by so very few people.

That's exactly what I wrote in the second part of the message. When you deal with percentiles of income distribution rather than percentiles of population you get to a pyramid rather than a diamond.

benviews says

would be a fair definition of middle class

it depends on individual perception.

no matter how much money you have, if you feel you
still need to work to support your lifestyle, then you are
in middle class zone.

but if you don't have any money , and you do need to work to pay basic bills, then you are not middle class, you are poor.

Dan8267 says

Upper middle class is 98 to 99 percentile
Rich is 99 to 99.5 percentile
Ultra-rich is 99.5 to 100 percentile

By the way, for those who say taxing the rich can't solve our debt problem... The area under the curve, i.e. the integral of this curve, is the income that can be taxed. Notice that most of the area under the curve is in the top 2% and a healthy portion is in the top 1%.

That's a great description using the chart. Thanks!

By the way, what are the break points you are using at 98, 99, 99.5, 99.9? Where'd you get them? It seems like you have 2 other points -- what are those?

Yep, all the discussion about who's in and who's out of the middle class works well for that construct they prop up to distract the rest of Us from Them, the Super Rich. To Them, we are all the same, we're not them.

Regarding child expenses: The cost of a kid is much higher than Dan8267 indicates.

If you have a one-parent household, there must be childcare during the first five years of life, else there will be no household income. If you have a two-parent household, raising your own kid yourself means dropping or reducing one (or both) incomes--there cannot be two full-time careers in the absence of childcare. And childcare alone easily hits $11,000 (up to $25,000) per year for one child around here. The alternative to childcare would be to drop one career, not just for a few years but maybe forever--it is not always possible to get back in.

Once the kids hit elementary school, childcare costs are still significant if the parent(s) need to be employed full-time. Even given a public school, there will be a need to pay for aftercare (around $700 per month around here) as well as Thanksgiving, Winter Break, Spring Break, and Summer camps (usually $200-300 per week here).

We are not even considering food, clothing, diapers, toys, musical instruments, mandatory donations to public schools, the extra room in your house where the kid will live, or the cost of the safer neighborhood and the better school.

Let's not minimize--kids are incredibly costly.

@John B.

>I think the change has been from an American Middle Class with everyone else in the world much poorer, to a global Middle Class.

You have some good insight here.

American, the more chatter from Us "everyone else" (vs Super RIch) about "who's in, who's out" of the middle class, more chits in the gotcha! column of the Super Rich.