I’ve been part of a lot of discussions lately on what exactly constitutes the middle class nowadays. Of course there was Financial Samurai’s article on how a couple would need $300k to live a middle class lifestyle – plenty of discussion on Twitter and in the comments about how this was ridiculous. And when researching my article on poverty tourism and whether frugality is for the rich, I saw a lot of comments claiming that folks making $200k+ per year were not middle class.
If you’re reading this and consider yourself middle class, you’re not alone – apparently nine in ten Americans would classify themselves this way. If 90% of people think they fall into a group called “middle”, what are they the middle of?
All this discussion led me to ask myself – what exactly is middle class anyway? What’s rich? Does it vary by location? What if you make less than all your neighbors, but more than the average American? What if you live paycheck to paycheck-are you poor? What about if you live paycheck to paycheck on $500k per year?
I was surprised to find I wasn’t asking the right question.
Today I’ll share the surprising results of my research with you, talk a bit about what it’s like straddling the working and middle class worlds, and ask that you join the (always respectful!) discussion in the comments.
The Argument – High Incomes Kick You Out Of The Middle Class
I’ve seen so much arguing that there’s no way $200k, $300k, $500k per year can’t possibly be considered middle class. These arguments are based on how far away these incomes are from the median US income, and arguing that incomes so far exceeding that median can’t be middle class. With the median US income currently at nearly 60k, the argument goes, incomes 2x, 3x, or 10x that amount can’t be considered middle class.
Interestingly, what I found was that these folks are mixing up social class with income level. You can make $10k per year and be upper class, or make $1 million a year and be working class.
Researching The Definition Of Middle Class
First I started out with a simple google search of “middle class”. In case you don’t want to search it yourself, I’ll share what I found below, or you can let me Google it for you.
There are two things I found immediately interesting about these definitions:
1- The middle class is defined as a social group, not as a specific amount of income or net worth. So a multi millionaire can still be working class, and someone making $30k per year with nothing in the bank could be upper class.
2- This definition includes professional and business workers. Many professional and business workers earn over six figures. Some earn pretty high six figure amounts. They would still be middle class according to these definitions.
So I dove a bit deeper. We always hear about the different strata of middle class – Upper Middle, Lower Middle, etc. They’re defined as:
Upper or Professional Middle Class
Representing about 15-20% of households. Mostly consisting of highly educated, salaried professionals and managers.
Examples falling into this category would include doctors making $250-$750k per year, mid level managers at big companies making say $300k per year. But it could also include a highly educated doctor who chooses to work in another country on a tiny stipend, like for a great organization like Doctors Without Borders. Or someone with a PHd who works as a bartender. Making a smaller income would not change their social class.
Lower Middle Class
These folks would be another third of folks in the “middle class” social group. These would be semi-professionals, skilled craftsmen and lower level management.
Are Nine Out of Ten Americans Really Middle Class? No.
Interestingly most Americans are not middle class – they’re working class. The working class hold positions related to production of goods and services. It’s the nature of the work, degree of influence and responsibility, and complexity and creativity.
This makes sense if you know a bit about education and job statistics. Quick, what percentage of Americans have a college degree? Did you say only two in five? Then you’d be right. Meaning that sixty percent did not.
Those sixty percent are the majority of America.
Don’t Confuse Social Class and Income Level
Does this mean that without a college degree you can’t get a good job, or make good money? Heck no. Social class and income aren’t the same thing.
In The Millionaire Next Door, Dr. Thomas Stanley talked about the wealth of folks in what he called “dull normal” businesses. These were businesses like auto mechanics, garbage disposal, and even purveyors of dirt. Highly educated folks would often look down on these kinds of businesses as quite working class, but those folks are laughing at the guy in the suit all the way to the bank. Plumbers, electricians, and other skilled tradespeople can easily outearn a manager with an MBA. Heck aircraft maintenance workers can earn over $130k.
This shows exactly how social class and income are very different things. It’s about education, values, and type of work – not about how much you make. A working class household can actually out-earn an upper middle class household.
Another example from Dr. Stanley was about two married bus drivers who earned more than their next door neighbor – a salesman with an MBA whose wife stayed at home with their kids. The salesman thought he deserved a certain lifestyle, home, car, etc. as a result of his education and position. The bus drivers, earning a higher household income, were much less likely to do so. Why? Because even though they made more, they don’t feel the same kinds of social pressure as the salesman. They may have other kinds of pressure, though.
So If Income Doesn’t Equal Social Class, What About Income Anyway?
As I mentioned, most of the debate I’ve seen online conflates middle class with median income. We’ve seen from the above that social class does not have anything to do with income-and in fact a majority of households would be considered working class. So let’s explore a bit more about income percentiles. For this we’re going to turn to the authoritative source – the US Census Bureau Income Data Tables.
First, lets look at the breakdown of income in the most recent year where data is available – 2016.
So there are two medians provided here – one for all worker, another for full time workers. The full time, year round workers have a significant income jump from the total workers, which means that there’s a good portion of folks working part-time or part-year. According to the Bureau of Labor and Statistics, there are currently about 28 million part time workers.
Also I wanted to be sure to note that this is where the oft-quoted statistic of women making eighty cents for every dollar a man makes comes from. If you look at that male:female ratio, it’s 0.8.
Now let’s see what percent of households fall into six different income buckets:
You can clearly see that the majority – over 50% – of households make under $70k per year.
Now remember, we’ve defined class above largely by education level, and type of work. The data isn’t broken out by job type, but it is by education level. So lets take a closer look at that data. It’s a bit different than the above, because this data only looks at folks 25 years old and older, to give them time to complete an education.
For those that doubt an education increases your income, you can really just read the statistics. It most certainly does not for everyone – you’ll see there’s 1% of people with less than a ninth grade education making over $200k per year, and 9% of folks with doctorate degrees making under $30k per year – but at an aggregate population level you can clearly see the impact.
Working Class to Middle Class -A Mental Disconnect
Going from working class to middle class – or vice versa – can cause a huge mental disconnect and make you feel alone. My husband is squarely in the working class. His parents are also working class – his father was a prison guard, and his mother was a nurse. He’s worked his whole life in a factory, loading packages, and construction work.
My family is not quite working class, but certainly not upper class – or even upper middle class. I’m the first person in my family, and still the only one, to get a professional degree. My father has a bachelors, and for my childhood he worked doing training for a large corporation, but when I was 18 he was laid off and started a painting business. My mother has an associates degree.
I’ve seen the disconnects my upbringing gives me when interacting with others in the “upper middle” or professional middle class, which is where I would technically belong right now. My coworkers talk about how much fun they had in college, while I worked full time and went to school full time for four years. When I traveled to China with my fellow MBA students, I couldn’t relate to them.
They were all experienced world travelers, who had grown up in that environment, blew money like it was water, and still talked about their parents and their financial role in their lives. They pretty much all went full time to college, and maybe held down a part time job for some extras. They didn’t have kids like I did. I’d been on my own financially since I was 20. So even though I had the same education they did, I didn’t have a similar background or worldview.
I read an interesting article on this topic the other day, all about going from poverty to middle class to out of place. My story is not about poverty – I was not in poverty – but even moving from lower to upper, or vice versa can be jarring. You don’t know the language. You don’t share the values. You look at people and don’t understand their choices, because you don’t share their background.
To answer the question posed in the title – I would be considered upper middle class by professional degree, lower middle by values, with a streak of working class from living with my husband. My husband would be working class, with a streak of upper middle class from living with me. So as a household, I’m not sure how to answer that question – is this a thing where you round up? Round down? I’m not really clear here.
Time To Hear Your Thoughts
Did you read something today that surprised you? Can you relate to the odd feeling of shifting classes? After reading through this – are you really middle class? Am I? Let me know in the comments.
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