Well, the problem is that we can’t decide if we are discussing the middle class as an economic, social or political group. If we are just doing an economic analysis, then we can just assign some arbitrary bands.
However one cannot perform an economic analysis without examining the social and political context that makes someone lower, working, middle, or upper class. Why do the lower and working classes make less money? What opportunities did one person have that resulted in them now earning $500,000 a year versus a mere $35,000?
To my mind, “class” is a confluence of a number of factors - range of income adjusted for location, type of occupation, level of education, social attitudes towards things like money, education, work, etc.
It resists any simple or single answer, but there is a broad degree of congruence among those factors - an “upper middle class” person is more likely to work in a professional field, have post-secondary education, value education and work above many other things, believe in obtaining financial security under their own steam as a realistic (and desireable) possibility, etc.
It is primarily but not wholly a cultural one, with the culture having a high degree of impact on the financial situation of the individual (put not an absolutely determinative impact).
The concept of a “middle class” has evolved from the time when people were either serfs or land owning aristocrats. As societies became wealthier, there was a greater need and demand for various crafts and services. The concept is important because it meant you had options in life other than working on some jerks farm.
The idea of the middle class is still important today because it represents a belief that, for most Americans, if you work reasonably hard, you should be able to find a profession that will allow you to raise a family and live in a comfortible manner. And you shouldn’t have to be the child of a wealthy business executive or otherwise somehow extraordinary to do so.
Its funny to see the classes listed beside incomes early in the thread. In the UK as far as I know class is not set by how much you earn. There is also very little movement between classes. For instance take someone like Alan Sugar. Started off working class, self made man, became a millionaire, became Sir Alan Sugar, then became Lord Sugar. I’m pretty sure he’s still considered working class.
I saw a documentary a few years ago where John Prescott (I think) was seeing how the other half lived. He was talking to a young woman and asked her what class she thought she belonged to. She said middle class. He said that she would probably be considered working class as she was on benefits. Her response was “But I don’t work”
From my perspective, being middle class is primarily (as others have noted) a self descriptor. If you are poor, you pretty much recognize that fact rather quickly. For the rich and those middle class folks bordering on rich (wherever that line may be) it’s a tad harder so reliance on that self descriptor is a must.
No it doesn’t. AGI includes interest, dividends and capital gains. It is also after deductions for various things (the “A” of AGI = adjusted), such as contributions to retirements accounts, tuition costs.
I agree with this, but would also flip the final paragraph around as being an additional truth: the financial situation of the individual also affects the ability to maintain the cultural middle class lifestyle, e.g. it is easier to get a higher level of education for you or your children if you can afford to pay for it.
Me: Earned income relates to AGI
You: No it doesn’t.
Really? I agree AGI includes many other calculations, deductions, etc., but I’ll still claim that earned income goes into AGI. You think it doesn’t?
The post I was commenting on was calling gift from parent “income”. I still maintain that is a different category of “income” from what we had been discussing so far.
If you get $50K salary and someone else gets $50K gift from parent, the net after taxes will be different, due to IRS formulas.
I didn’t say that. In your post, which I should have quoted fully, you were suggesting that “unearned income” is not included in the AGI. I pointed out that AGI does in fact include all the main types of unearned income.
That is indeed true. From a tax point of view the gift from a parent is not income at all and does not appear on the recipient’s tax return.
Yes - the $50k received from a parent incurs no tax for the recipient.
Absolutely, there is a synergy at work there (and belief in the efficacy of the synergy - that is, ‘if you get a good education and work hard, you can succeed’ - is of course a primary one typically held by the middle class).
Yes, because the people who don’t believe that tend to not work hard or educate themselves and soon find themselves in the lower income classes. And of course the wealthy already have money and don’t have to worry about it.
Of course it helps when you grow up in an environment where education and hard work is valued and where people have high expectations. If you come from an environment where people view those who enjoy some level of comfort or success as merely “lucky” or “stuck up”, you probably aren’t going to adopt the behaviors that lead to success.
Anything thing is I believe a lot of people’s expectations are out of wack. If the median household income is $50,000 (or whatever it is), why would you expect to make significantly more than that unless you were doing something above average?
Although the “real” middle class is getting squeezed hard there. The wealthy can afford tuition. The poor will get aid - and often grant aid, not loan aid. The middle class will generally pay for higher education for loans and enter into indentured servitude in order to pay them back - when you graduate from college owing $100k for your undergrad, and take a $30k a year job, that eats into your ability to maintain a “lifestyle.”
Yep. If they stop spending, they can dig themselves out and still live comfortably. And they are going bankrupt in high style. Where the person making $15k is frankly hosed - its hard to live on that. But neither is making ends meet.
The assumption is that you will receive raises and promotions and won’t continue to make $30 k a year your entire life. No one graduates from college making $150,000 a year.
Besides, even if you never got a raise (:dubious:) or promotion (:dubious:), it seems like a reasonable ROI to me…$100k investment for a $30k/year return, you are going to break even between 3-4 years and after that you are in the butter zone. No?
Well of course, but there are many degrees that will get you jobs starting at significantly more than $30k that will be subject to the same type of raises and promotions. And you are very likely to be able to get a degree without going $100k in debt. To spend a lot of money to get a (relatively) low paying job puts you in a significant financial hole. The Dave Ramsey show gets tons of callers from people in financial difficulty because they have spent a bunch of money getting a degree that leads to a job that doesn’t earn enough to pay off the loan.
Well no. Our hypothetical graduate would probably have earned about $24,000 anyway. So the actual ROI is only $6,000 now. But within a few years it will be much, much more.
Not really. Here is an article on the supposedly best degrees. Only one is actually at or under $30k, but if you go down to the bottom of the table you will see the degrees with starting pay $29.5 - $33k that only pay 30 - 50% more after 15 years. There are one or two that do better higher up.
If our prospective graduate really can earn $24k without going to college, then that person will also get raises and promotions with experience, just likely not as quickly or as much as the graduate. I ran some numbers assuming a real rate of increase for the non-graduate of 1%, and for the graduate of 2.5% (which gives the sort of salary seen in the survey after 15 years - a 50% increase). Allowing for the non-graduate starting work 4 years earlier and the graduate having to pay off the loan over 20 years, we find that, in today’s dollars:
the graduate is worse off than the non-graduate for 12 years (including the 4 in college)
debt payments are nearly 30% of gross income initially
it takes 27 years for the graduate to catch up with the non-graduate in terms of lifetime earnings.
over 40 years, the graduate earns $270k more
So the graduate does come out ahead, but it takes a long time and the debt is a heavy burden for a while. Anyway, my point is not that it does not pay to go to college, but that it is not financially prudent to spend a lot of money in order to get a degree that results in a low-paying job.
