A Closer Look at Middle Class Income and Lifestyle – Why No One Agrees

A Closer Look at Middle Class Income and Lifestyle - Why No One Agrees

After my article on Friday about the official definition of middle class, I wanted to delve deeper into income and lifestyle based definitions of middle class. After all, the income-based method of defining middle class is the one you see in the media, and at large research institutions as my friend Military Dollar pointed out.  And she’s right – other than in the dictionary, which clearly defines middle class as a social group, the media is chock-full of articles and discussions about the median income. And the titles of those articles almost always mention the middle class, before going on to explain they’re really talking about median income.

And of course I found something interesting.

Spoiler alert – there is no one accepted definition of middle class income, or middle class lifestyle.

So today I’m going to talk my findings, their inconsistencies, and the issues they cause. I also want to hear which definition resonates with you, so be sure to read to the end to see what I’d like you to share.

What Is The “Middle Class Income”, Anyway?

The median US household income is about $59,000 as of 2017. I’ll talk a bit in the next section about what this means to households of different sizes, but for now, lets stick with that. The median earnings for a man working full-time year round was about $51k, and for a woman about $41k.

Different sources define “middle class income” differently. The one you’ll see used more often than the others in the media is the one from the Pew research center. However, there’s no commonly accepted definition, so if you ever have a discussion on this subject, be sure to ask what definition the other person is using. The answer may be surprising.

Pew Research Center – Between 2/3 and double the median income

Brookings Institution – $14k – $146k per year

Center for American Progress – 20th to 80th income percentile

Washington Post – 30th to 80th income percentile

CNN – Same as the Pew definition, but with a floor of $28,500

Adjusting Median Income By Location – Should You? Or No?

Now you can see that no one really agrees on a “middle class income” definition, which could be one of the reasons why the official definition of “middle class” is still social class. Many sources talk about a middle class income, but without agreement on a common definition, it would be difficult to change the meaning of the word.

There’s another thing people don’t agree on too – whether or not, and how, to adjust this “middle class income” definition by location. There’s two primary arguments here:

  1. You should not adjust by location, because it’s up to a person to decide where they live. If they decide to live in an expensive city, state, etc. rather than in a place with a lower cost of living, that’s on them.
  2. You should adjust by location, because the median income in NYC is different than the median income in Kansas. This difference in income leads to a huge difference in purchasing power, and the cost of a comparable lifestyle (a whole other problem I’ll look at soon)

There’s no question that once you start looking at location, the picture of what a “median” income changes significantly. Take a look at this chart and note the number of states circled with an O – that O means the median income in that state is not statistically different from the median income nationally.

[Source: U.S. Census Bureau]

As I’ve mentioned before here on the site, I live in Connecticut. Our median income is significantly higher than other places in the US, but so is the cost of living. Plus the lower left part of the state near NYC tends to skew our “average” with hedge fund managers and the like. Given that I’m aware of this, I figured the state “average” above could be skewed by a few densely populated, higher income locations.

And boy was I right. Check out this visualization of income by county, also from the U.S. Census Bureau.

Median Household Income by County.png

Note the dark purple zones. I can clearly see in CT the lower left of the state is purple (no, that’s not where I live). The purple zones in each state can disproportionately impact the overall median for the state.

Even between the top most highly populated areas in the US, there is a HUGE difference in median income. Check out this visual:

[Source: U.S. Census Bureau]

You can see from all this data that “median income” is actually a hyper-local phenomenon. Even within a single state, there can be a huge variation of median income depending on where you live inside that state. And of course, that variation drives variations on cost and standard of living.

Household Size – Not Often Discussed, But Important

I mentioned above that $59k was the average household income. But did you ever stop to ask yourself what is a household, anyway? In 2016 this was the breakdown in the US by household size.

percentage of households.png

Nice to see that my family is “special” – only six percent of us there in the five person household category!

Household size obviously has a huge impact on standard of living at a specific income level, even in the same location. Even if it didn’t cost $233k to raise a child, the more people you have in your household, the higher many (but not all) costs are.  If there are non-income producing people in said household, like, for example, children, the household income must stretch to accommodate them. Note – you can actually calculate the cost to raise a child in your location and income level here.

In addition to impacting the cost of living, it also impacts the median income statistics. According to the Census Bureau real median incomes in 2016 for family households was $75,062 while nonfamily households was $35,761. This means the median income for a family household is more than twice that of a non-family. Of course, many of those family households must cover costs for three or four times as many people as nonfamily households.

And What About That “Middle Class Lifestyle”? Turns Out, There’s No Such Thing

There is no commonly accepted definition of a middle class lifestyle, which is one reason why articles and discussions that attempt to define one often end in arguments and debate.

When searching the web for sources that talked about a middle class lifestyle, I was coming up short on sources. Sure, you can find articles that state that the “American Dream” costs $130k per year. The U.S. Department of Commerce has an interesting 43 page long paper discussing the subject, where it assumes the middle class “…aspire to home ownership, a car, college education for their children, health
and retirement security and occasional family vacations.” Interestingly it does state that middle class is more about values than income, and it identifies three key areas squeezing many where costs have increased faster than inflation – college, health care, and housing costs.

Pew Research tackled this subject, asking what people thought it mean to be middle class. The only things most folks agreed on were a secure job & ability to save for the future. Most people did not believe you need to own a home, or have a college education.

So there is no “middle class lifestyle” that everyone agrees on.

My Own Survey – What Do You Think?

You’ve read the facts. You can see the challenges. And you know there’s no agreement on this subject. So now I would like you to answer these questions, in the comments or on social media (just tag me!). Or if you prefer you can fill out this survey – and share it with others you know, so we can see how people answer these questions:

  1. What is a “middle class income”?
  2. Should it be adjusted for location?
  3. Should it be adjusted for household size?
  4. What is a “middle class lifestyle”?

Survey will be open for a week – look for a follow-up article with the results next week.

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8 thoughts on “A Closer Look at Middle Class Income and Lifestyle – Why No One Agrees”

  1. modernpersonalfinance

    Excellent post. You touch on something that I think gets glossed over in nearly EVERY article discussing income in America: The difference between household income and family income. I didn’t know the difference in these two statistics until recently and had assumed “household” meant family, when in reality a “household” just refers to all the members of a particular housing unit whereas family refers a household of related individuals. Usually. Not every survey even defines these terms identically which makes comparisons in the data particularly difficult.

    As to your questions, I think you have to account for where you live. I live in Boston. In a studio. With a rent of 2,650/month, which is cheaper than the average 1 bedroom rent in the city. Our housing costs are about 50-60% of our yearly expenses, which is insane compared to everywhere in this country outside of NYC and San Francisco. I used to live in Pittsburgh, where we had a one bedroom for 750/month. When housing costs can vary by 23,000 dollars between cities, you need dramatically different incomes to maintain the same lifestyle.

    As for defining middle class, that is a tough order. In many regards, my current lifestyle isn’t middle class as defined by the US, but does that matter when it is by choice? We’re a one car family, and only buy used cars. Most of our furniture is used or built by us. We live in a studio apartment and rarely buy new clothes and electronics. We do most of our grocery shopping at Costco and try to cook most of our food rather than going out.

    In many other ways, we live like the literal 1% in the country. We save 40-50% of our income as investments. We know work will likely become optional for us in 10-15 years. We take 1-2 weeks of international vacations every year.

    So I don’t know how to define our lifestyle, and I’m not sure how outsiders would view it looking in. In general, people in the FIRE/personal finance blogging community are probably completely unclassifiable no matter how we define classes. If you’re consistently saving 40-50% of your income, there’s a huge disconnect between the lifestyle you can afford and the lifestyle you actually live.

  2. Something most people don’t realize as well is that when these surveys look at median household income in the metropolitan city, those numbers vary wildly by zip code or even the next street over. The numbers tend to be skewed down since NYC encompasses 5 boroughs, but only Manhattan/the parts of other boroughs closest to it are the places that cost such crazy amounts.

  3. Awesome post – everyone knows how much I love maps 🙂

    My answer (and I know this is naive) – let’s stop labeling each other (not only by class but also by race and who we’re attracted to) and let’s just BE PEOPLE!!

    But alas, I know the chances of that happening are between slim and zero, and slim just left town… Tribalism is only getting worse in America so it’s natural that people want to put a sticker on everyone as to what ‘tribe’ they belong in regarding money. They’re doing it for everything else.

    Great post though. There is no real answer, and even though I love looking at the stats and numbers, I have little interest in labeling people.

  4. I live in that dark purpose spot in Washington state 😉 And let me tell you, even breaking it down to “Seattle” isn’t quite enough, because the median income in the city I live in across the lake has actually broken six figures – a good 40% higher than averaging the greater metropolitan area. Which is also why so many people have 1-2 hour commutes in order to find more affordable housing when they don’t make that median income.

  5. A couple surprises in this post:

    1. Really? There are people who think you shouldn’t adjust median income for location and family size? I understand it can’t/shouldn’t be done in every conversation, but definitely think it should be done in most. Those things make a huge difference!
    2. I don’t like the hard floors. A floor in a specific location makes sense to me, but not one applied broadly (a la CNN). $28,500 funds a very different lifestyle in Memphis as compared to Seattle.

    Thanks for including my argument about how research institutions define middle class. The irony in my passion about this topic is that I actually agree with Accidental FIRE – I think it’s silly to define ourselves by these terms. After all, I am technically “middle class” but I very much feel as if I am lower rungs of the upper class. I can easily afford all of my needs and wants, and still save/invest. To me, I’m rich! But to others, I’m not. I just hate that so many people (the 9/10 Americans you reference in your last post) are bending over backwards to define middle class in a way that includes themselves. Just own your richness. No hate from me at high incomes, or flashy lifestyles! Everybody should live the way that fits them…so long as it’s in a fiscally responsible manner 😉 It just feels false for people earning mid-six figures to say they are in the same boat as someone earning 1/10th that income, even if they do live in similar houses. The location/family size adjustments don’t make *that* much of a difference (within the US, of course).

  6. I believe location must be considered since very few people can move away from their current location to a lower cost one and expect the same paycheck. I define middle class by lifestyle in terms of intangibles. Ie amount of financial stress and options.

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