How do you define middle class?
Many times I heard or read that middle class economic situation is the true gauge in which you can check if the economy is improving, but how do you really define middle class?
Excuse me being cynical but the middle class can be defined by those who pay taxes and contribute to the economy.
The lower class tend to be the takers, the benefit claimants, the economic immigrants and slackers.
The upper class, with some exceptions, are the "old money" and the unscrupulous who pay no tax and contribute very little.
It is an over simplification but pretty close to the truth.
kind regards Peter
You are in the middle class if you paid a significant amount of FICA, and filed a 1040 without many deductions.
Most people try to define class by income. That is somewhat futile. A middle class income in NY may mean upper class income in more rural area's of the country. Some define it by how much one group pays in taxes. The problem with that is the vast majority of taxes in this country are paid a small # of income earners on the top end. Currently 1/10 of 1% now pays more in taxes collected than the bottom 80% of earners. So that is not a realistic way to classify people by groups. In reality it would be far more productive for people to stop trying to put individuals into classifications. Some people are very happy with 50k income and punching a clock 9-5. Some have a strong risk taking entreprenurial spirit, and could never be happy with that life. Where people end up is most often the result of personal choices. I don't look at anyone who makes more than me and assume they're in a higher class. And I don't presume that someone who makes less is lower in class status. Who cares what somebody else has or makes. If they don't work for me and they're not breaking the law, it's simply none of my business. Therefore I see no reason to classify them into groups. Too many people have allowed power seeking politicians to pit americans against eachother based on income and assets. When in fact one persons success has no bearing on another persons lack of success. What one person see's as failure another may be very happy with. The economic pie is is not finite. We do not divide it up into portions based on class. The pie is infinite. Each person has to grow their own portion of it.
Thanks for commenting. What other factors aside from income should you included or is it to your opinion that it can't be quantified at all?
Beyond income, you would look at liquid net worth. Many reitrees live off of dividends from tax free muni's. That is also misleading though, because most people entitled to a defined benefit in ret, have more commuted value and less liquidity.
I will start with the definitions I have always used, and then make a note about the current US situation. The basic unit is the household, not the individual.
Poor - Earning considerably less than they need to spend to maintain a living.
Working class / lower middle class - working and making enough money to get by. But living paycheck to paycheck, can't build up savings, may fall into poverty, will probably have difficult in retirement.
Middle class - Able to earn enough money to live on and to save for retirement and pay for children's education.
Upper middle class - still need to work, but, by working, have more than enough money for life's necessities, including retirement and children's education. Have significant discretionary income.
Wealthy / rich - Do not have to work for a living.
Before 1970, the unit was a nuclear family with 2 adults, and only one of them having to work. More and more, single parent families or two-parent, two-income families were needed to remain in the middle class. For over 50 years, the rich have gotten richer, and the poor have gotten poorer. Now, 90% of American households will run out of money and go bankrupt before they die. Most of the remaining 10% are wealthy or upper middle class. So, truly, there is hardly any middle-middle class left. That would be a family who works, and the total income can pay for children's education, plus put about $1.5 million in secure investments by age 70, as that is the amount needed to pay for living the rest of one's life, if one lives to retire at 70.
I am writing more about this in a hub called Retirement Savings 101. Keep an eye out for it - I'm still researching, and it is not published yet.
I would challenage the notion that 90% of Americans will run out of money. In the financial planning field there is something called the mass affluent. They make up much more than 10% of the Population and are far from running out of money.
Thanks for commenting and for your definition of middle class. How about income or poverty threshold, is there a specific income say for a family of four as a basis to be included when one household is deemed a middle class.
Hi LandmarkWealth. I am aware of the "mass affluent." I appreciate your thinking. My concern is that that level of affluence, if looked at in the New Economy (2008 going forward) is actually, on a lifelong basis, below the poverty line.
Poverty really differs based on regional COLA. I would not count on lifelong poverty. Even among the wealthiest, many recent studies show that people rotate up and down the income scale substantially based on their stage in life often tied to age
Middle-class is a rather broad cross-section of American society which encompasses the majority of educated professional and semi-professional types who earn a comfortable living, control assets, and engage in work which is more initiative oriented than task-driven. While both successful and comfortable, they stop short of being wealthy except possibly when referenced to those who have attained less in life thus they are seen as having "relative wealth". The middle class distinction sets the USA apart from most of the world in which the majority of countries have a given level of wealth and a majority of poor with a a great void in between the two. Current political directions and policies do not bode well for the future of the middle-class American who stands to lose the most as our federal government hurdles toward bankruptcy and financial collapse. ~WB
According to FactCheck.org, there is no generally agreed upon definition of "middle class":
http://www.factcheck.org/2008/01/defini … dle-class/
However, I believe that the Federal Reserve does a lot of surveys on the financial situation of American families. So, for example, you could look at the net worth / income of the middle 50% of Americans over long periods of times and see how it changes. This might allow you to make correct statements about how the "middle class" has changed over time. One such survey is available here:
http://www.federalreserve.gov/pubs/bull … /scf12.pdf
The census department might also have similar studies.
Also note that Wikipedia has a number of articles on the "middle class". Here is their article on the "American Middle Class":
When I was a kid, my Dad worked a low-skill, non-management, labor job. He had benefits and made enough to support a family of four with just enough left over to take small vacations and have nice Christmases. That was Middle Class. And that no longer exists.
I define "middle class" as the people who have nice homes in good repair, who are able to fix or replace anything that needs it.
They have an income large enough to cover all of their bills with money left over.
They drive newer vehicles, also kept in good condition.
They replace or enhance their wardrobe each season, without needing to shop on a clearance rack.
They like to eat out at restaurants on a regular basis & have no worry about whether or not it is in the "budget", because they have enough.
They can afford holiday gifts, vacations, and special events without worrying.
They have a savings account.
They have a retirement fund & plan.
Yip, I think that about covers it without over-doing it. But that's just MY definition of middle class....
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