29 December 2015

Defining Middle Class

The New York Times has an opinion piece today claiming that $250,000 a year is not a Middle Class household income.  As evidence, the author references a recent Census report and notes that the median household income is $53,657.  A household income of $250,000 per year puts one in the top 5% of households.

However, that same Census study notes that there are a variety of variables that affect household incomes.  For example:
  • Married couples tend to earn more than singles.
  • Income tends to peak during middle age.
  • Urban households tend to earn more than rural households.
  • Western households tend to earn more than other parts of the country.
  • While not discussed deeply in this report, education is strongly correlated with income.
I'm married.  I'm 55 years old, and thus near the peak earning age.  I have a Bachelor's Degree.  I don't live in a rural area.  And I live in the West.  Somehow, I don't think that makes me Upper Class.

In my life, my income was below $250,000 while I was a college student and before I was married.  Now that my kids are near grown up and are off to college, my income has greatly increased as I sell off assets to pay for their college.  Supporting my aging father also requires that I realize income now instead of holding stock options to be cashed in later.

So did I suddenly become upper class when I reached the point in my life where my income was in the top 5% of household incomes?  My 2,000 square foot house is slightly smaller than the median U.S. house.  I pay a mortgage.  I paid off student loans.  I don't earn income from inherited wealth.  My children attend public schools.

So, how should we define Middle Class?  It seems clear that we shouldn't ignore people's life cycle and pull out a few years in the middle of their lives during which they are Upper Class, but before and after those years, they are Middle Class.

Middle Class does not mean "people and households whose income is near the median".  Class refers to a long history of social structure, and there was never any suggestion that Classes were approximately equal in size.  In modern America, it's relatively easy to distinguish at least four classes:
  • The Under Class.  This would be a relatively small portion of society that is normally unemployed.  They would have no wealth or income and typically no more than a high school educated.  Members of the under class might spend most of their lives in prison, or be homeless, or live off charity, or live in an institution.
  • The Working Class.  This would typically be people with a high school education with little inherited wealth and a modest income.
  • The Middle Class.  This would typically be people with a college education working for a salary.  
  • The Upper Class.  This would typically be college educated people with either inherited wealth or who own or are the principal managers of a business.
The important point here is that the Working and Middle classes are fairly large comprising close to 90% of the population.  The Upper Class comprises about 1% of the population.  Income is usually not nearly as important as education and type of employment in defining class boundaries.