Where are the upper and lower boundaries of the American middle class?

Great Debates
21

First of all, I’m not talking about net worth. I’m only talking about income. They’re two very different concepts. A family could make a million in annual household income and have a negative net worth. That doesn’t mean they aren’t upper-class, it just means their outgo is too high. They’re living beyond their means. You can argue that income and net worth are both components of class, but it wasn’t mentioned in the OP so I haven’t addressed it.

There’s no legal definition for upper class, but I don’t think it’s reasonable to say the top 2% in the nation aren’t all members of it. I didn’t feel the need to restrict the search by region because 1) I didn’t know where you lived, and 2) $300k/year is a lot of money no matter where you are.

Just for my personal opinion on the matter of class, I’d say the top 5% qualify as upper. The bottom 20% are lower. That leaves 25% who are lower-middle, middle, and upper-middle respectively.

22

Top 7% in Minneapolis for my household. I still say middle class. I would feel comfortable with upper middle class designation if I could afford to buy luxury vehicles and a North Shore condo and a Parade of Homes model while still being able to save for retirement, emergencies, and son’s education while not incurring debt.

Many of our friends live exactly as I described above, with incomes similar to ours, but I suspect that they also live paycheck to paycheck and if they want to continue that lifestyle into old age, they’ll be retiring at age 80.

23

So, you’d say then that someone making, say, $200K is upper middle class, correct?

24

I plugged my number into Minneapolis and came up in the top 3%. It doesn’t seem to me that there should be really that much difference between someone in the top 7% and someone in the top 3%, but I can do all the things you listed, although I have no children, and you say you can’t, so I wonder if their calculator is accurate.

Parade of Homes still exists? I thought they went under long ago.

25

Only in very expensive areas.

26

No, I really cannot afford a $4000 mortgage and another $2000 in car payments with another $800 or so added on for upkeep of a vacation home along with what we currently pay for our son’s tuition and still set aside 25% of our net income for investments and another 5% for savings. Although we don’t talk about finances among friends, so I can’t know if some of them truly are in the ‘break into a cold sweat in the middle of the night’ kind of debt that I suspect they are. And I am also just guessing about similar incomes, but it’s not like they’re stockbrokers and bank presidents. Most are in the tech field, or in a slightly different classification of engineer than my husband. I’m also wildly guessing at mortgage and vehicle costs by doubling the value of my own home and increasing the payment amount accordingly. And back when we made vehicle payments, our very modest sedan was just over $400 at a 36 month term and the slightly more upscale Jeep was nearly $500 at same term. So assume $2k a month would be realistic for a BMW and Lexus SUV. All of which is just MY idea of what upper-middle class looks like anyway.

27

I think I may agree with this. I guess it just seems odd to me that upper-class is such a broad strata that it includes both millionaires and someone at my income level without any additional tiering.

28

So do quite a lot of Americans. Strange, isn’t it?

29

The basic metrics (as I see it):
[ul]
[li]Poverty: when you must rely on others for at least part of you income[/li][li]Lower/Lower-Middle Class: you need others to help make ends meet, in indirect ways (roommates, loaned cars, gratis labor)[/li][li]Middle Class: you are reasonably self-sufficient and can buy a lot of the stuff you want[/li][li]Upper Middle Class: your assets and equity would theoretically make it possible for you to take a year sabbatical without major hardship[/li][li]Upper Class: Salary/compensation is the lesser fraction of your income[/li][/ul]

The lower bound of UMC is net worth, though it is a little below what I specified (which is the middle of the Upper Middle Class).

Upper class is not defined by what you earn but by what you bring in. A person, by my definition, could be showing a $50K income but be upper class due to all their other revenue sources (and they would have to satisfy the net-worth metric).

30

The mathematician in me just wants to say: Median +/- 2 sigma. But income is probably not Gaussian, so find the median and then figure 70% around it, or whatever number you pick. It might even be better to use “personal wealth” as the metric instead of “income”.

But I honestly think it’s more a state of mind than anything else. If you grow up solidly middle class, but work a low paying job as a young adult, you’re still “middle class” even if you’re living with 2 roommates in not the best part of town.

31

To sort of echo what some other people on this thread have said - it seems to me that “class” is a social construct which involves stuff like your upbringing, desires, goals, and circle of friends, and by necessity has massive variation between people. Witness the contempt by “old money” sorts on the up-and-coming wealthy who may actually have more money than the old guard. Income, on the other hand, you can measure.

If you wanted to make a standard postwar middle class wish list, it would probably look something like this:

Stable job, with affordable health insurance and pension
Mortgage on single-family home in suburb with good public school district
One or two new-ish cars
Yearly vacation (by car, somewhere in US)
Eat out twice a week
One or two hobbies
Able to save for retirement and college education for two children, who will do the same thing

The problem, insofar as there is a problem, is that it’s increasingly difficult to check off the entire middle class wishlist on a median income. So someone who is in the top 10% of earners may consider themselves “middle class”, but that sure doesn’t make them average.

32

Economically, there are only two classes worth worrying about in the US: the robber barons (aka the top 1 tenth of the one percent) and their minions, and everybody else. The robber barons are increasingly making their money through complex financial schemes (think CDOs) that tend on the whole to defraud and degrade the wealth of everyone else, and the result has been that everyone else’s wealth is decreasing while theirs increases.

For example, suppose you are a furniture maker in North Carolina. You make money by buying raw materials, adding value to them through labor and processing via machinery (lathes, etc.) and turning out a finished product that people can buy and sit on. A dollar that you earn via that work represent real value.

Now suppose you are an arbitrager. You make money by having a computer program make bets against the value of currencies vs. other computer programs. If your program is better than others, and/or your insights into the values of currencies are better than others. Liberal fundraising icon George Soros literally made billions in that way in the Black Wednesday debacle by short selling the British Pound.

Big high profile arbitrage incidents like that are outliers, however. The vast majority of arbitrage is computer programs making trades that involve fluctuations that might amount to the equivalent of fractions of a penny in US currency, at speeds faster than humans can manage, operating against other programs that make trades at the same speeds.

Basically, the arbitragers are harvesting the wealth that comes from tiny fluctuations in world currencies. Every day they turn their computers on, watch the charts and graphs, and harvest the millions that they make as a result of those fluctuations.

But at the end of the day, what do they have that is of real value? They are bettors who have won bets, just like high rollers in Las Vegas. Sometimes the lose, sometimes they win, but mostly they win because often they are betting against the economies of nations.

What do they produce that anyone else in the world can use? Nothing. Yet their dollar can buy as much as the furniture makers’ dollar can, even though the furniture maker has created a real product that people can use.

Basically, we have one class of people (the financial industry) that plays with Monopoly money all day and then is able to use their Monopoly money like real dollars, while the rest of us have to work to create real products and services that others can use for our dollars.

Which is why there is so much wealth inequality in the US of late, and why the fortunes of the middle class have fallen so much as they are relentlessly pushed back into the lower class by the economic consequences of the real wealth we all create having to compete with the financial industry’s monopoly money.

All other class distinctions are meaningless, at present. It is Us vs. Them.

33

Oh, to ensure that this thread gets further replies: Kim Kardashian has said she wants to have George Zimmerman’s baby and then abort it due to guns being so popular nowadays with Miley Cyrus and Justin Beiber. Just sayin.

34

So, what does all that mean to us plebs? :slight_smile:

I’m still not really clear on what the calculus is for determining what places a person in a class because someone who makes no money at all personally, but is a member of a wealthy family, can still be considered upper class. What about the guy who makes $200K per year, but manages his income so poorly that he’s virtually destitute?

35

If you have a “Bell Shaped Curve”, you find the middle and then figure two “standard deviations” in either direction.

Of course, a picture is worth 1,000 words.

36

In the real world though, middle class people worry just as much, if not more, about the thug robbing them at the ATM than about robber barons. THe middle class sets itself apart from the poor just as much as the upper class does.

37

Where does debt figure into the equation? How do you classify people who look like they’re living a middle-class lifestyle, and who have all the things on Ambrosio Spinola’s “middle class wish list”—but only because they’ve charged a lot of it and run up substantial credit card debt, and/or have large outstanding student loans, and/or took on an unsustainable mortgage?

38

Depends. Poor people don’t usually get the opportunity to rack up major debt. I’ve found that poor people don’t rack up debt to live a middle class lifestyle so much as middle class people rack up large amounts of debt to live an upper middle class lifestyle.

39

Nevermind. Millionaire is a status of wealth, not of income. Apples and oranges again on my part.

40

My personal view would be to use the following demarcations. The income values I suggest are guesstimates and may be totally off, the attitude towards money is the main thing.

Upper Upper class: you can buy anything you want on a whim be it a personal Jet or a Senator. A million dollars could float through your fingers and you wouldn’t really miss it. (Income range $50 million + per year?)

Upper class: You can buy pretty much anything you want from personal jets to Island Villas but you will have to pay attention to it. (Income range $5-$50 Million per year?)

Lower Upper class: You can buy most luxury items without worrying about cost. Yo9u can go helicopter skiing on a whim and You fly first class as a matter of course, spending several thousand dollars on your wife’s birthday present is not unusual. But some extreme items are out of reach. ($500K-$5 Million a year?)

Upper Middle Class: As long as you don’t go for luxuries, you don’t need to worry about money, as there is always enough. You can go to Disneyland with the kids without altering your budget but will probably fly coach. You may need to slightly adjust your finances to send your kid to a prep school and will want to set up a plan to save for their college education, but it is more a manner of planning than it is sacrifice. ($150K-$500K per year?)

Middle class: You are financially secure and have a safety net built up, but have to watch your money. You can go out to eat now and then but not as often as you might want to. A family vacation to Disneyland is possible but you will have to save up for it. In order to go to college you are either going to have to very carefully save money early on rely on financial aid to send your kids to college. ($40k-$150K? Varies widely depending on location)

Lower Middle class: You can get by but have to watch every penny. Going out to a nice restaurant to eat is a luxury. A trip to Disneyland would be something you would have to save for many years to achieve. You have little if any savings so an unexpected emergency repair or medical expense can throw your finances into crisis mode ($20K-$40K)

Upper Lower Class: You have some income but rely on the government and cheritable organizations for your substance. You live hand to mouth and buy what you can with the money in your pocket hoping it will last you until the end of the month. ($8-$20K)

Lower Class: You have no regular income but get by entirely on welfare. Otherwise you’re similar to Upper Lower class. (Income 0-$8K)

Lower Lower you are living on the street making any money you can through begging and relying on shelters and soup kitchens for your survival. (Income 0-$5k)