We hear a lot about the middle class. We know that it’s shrinking. Many of us probably identify with being in this class. But what does it really mean? Is middle class a number? Or is it something more elusive than that? There are actually many different ways to define middle class.
Middle Class as an Income Bracket
When we talk about the middle class, sometimes we’re talking about income. After all, class is, at least in large part, about money. The middle class was historically defined as the middle 60% of income, in between the richest 20% and the poorest 20%. However, that definition has shifted slightly over time.
Nowadays, we have three broad categories of class:
- Lower class is the lowest 29% of income earned
- Middle class is the next 52%
- Upper class is the top 19% of earnings
Looking at this, we can indeed see that the middle class is shrinking. It used to make up 60%. Now it only makes up 20%. We can also see that the lower class has grown by nearly 10%. Fewer and fewer people have more of the riches of the world. And that fact matters because it alters our perception of what it means to be middle class. You see, even though we can define middle class by income, it’s really about so much more than that.
Percentage of Median Income
Another way that we define middle class is by the percentage of median income. If you earn between 67% and 200% of the median income, then you’re considered middle class. According to the Department of Numbers, the most recent calculation for the U.S. median income was $60,336. Therefore, we can define middle class as earning an income between $40,425 and $120,672.
Of course, that’s the national average. Middle class also has to do with how far your money goes where you live. Therefore, it might feel more relevant to look at the median income in your own area. For example, in San Francisco, the median household income is $96,265. Therefore, the middle-class income range between $64,177 and $192,530 if you live here. In contrast, the median income in the state of Alabama is $48,123, which makes their middle-class income range between $32,242 and $96,246.
So, if you make $96,000, you’re going to be middle class in any part of the country. However, if you earn $50,000, you’re technically considered middle class in the United States but might not feel like it if you live in San Francisco (or somewhere similarly expensive).
Income Isn’t Always Representative of Wealth
Even though we typically use income to define middle class, it’s not the only option. It might not even be the most accurate way to define it. Consider, for example, people who have a lot of wealth even though they aren’t currently earning much (or any) income. People in retirement, including those who retire early, may have acquired a lot of wealth but now have very little income. If you looked at just their income, they’d be poor, but if you look at their wealth, then they might have middle or upper-class lives.
One common method of calculating middle class by wealth is to break overall wealth into fifths. The three fifths in the middle are middle class. This also takes into consideration the fact that the middle class, by income, tends to have a lot of debt. If you have debt that offsets your assets, then you may not have much wealth. Therefore, even though your income is middle class, your lifestyle may or may not be.
How Much Do You Spend?
Notre Dame Professor James X. Sullivan argues that middle class can be defined more by what you spend than what you earn. This consumption model of defining the middle class reflects the fact that people with fluctuating income may still have enough money to spend on both necessities and extras. This model looks at spending on food, housing, entertainment, transportation, and other regular expenses. It doesn’t matter if you spend cash, credit, or food stamps. However, it excludes spending on healthcare and education, considering those investments instead of expenditures. With that in mind, if you annually spend between (approximately) $38,000 and $50,000, then you’re probably middle class in America.
What Are Your Aspirations?
Another way to look at spending isn’t just in terms of the concrete amount that you spend each year but also what your aspirations are, which might get reflected in your spending. People in the middle class typically have aspirations that include:
- College education
- Family vacations
- Health care access
- Owning a home
- Owning a car
- Retirement savings
This model is based on a combination of spending and savings but not necessarily on income. Of course, you have to have a certain income to be able to afford these things, but there’s a lot of latitude there. This model reflects that being part of the middle class is really more of a mindset, lifestyle, perception, or culture than it is specifically about money. We think it’s about money because that’s the lens through which we understand it, but it’s really about the way of life you are able to lead.
Recently, one report suggested that the number one thing that defines middle class is access to credit. This aligns with the aspirational model. If you can’t access loans, then you might not be able to own a car or a home or attend college. If you’re in the lower classes, you probably can’t access good loans. Therefore, it’s a mark of middle or upper class, at the very least.
Complex Models of Middle Class
There are also more complex models that take a variety of socio-economic factors into consideration. For example, the St. Louis Federal Reserve Bank uses a flow chart that takes into consideration age, race, and education level to determine whether or not someone is middle class. According to this chart, you’re middle class if:
- You are age 39 or under, of any racial background, and have completed college.
- You are 40 or older, White or Asian, and finished high school but not college.
- Or you are 40 or older, Black or Hispanic, and finished college.
If you’re under 39 and haven’t completed college then you’re probably lower class (or what they call “stragglers.”) On the other hand, if you’re older than 40 and white or Asian and you completed college then you’re probably upper class (or what they call “stragglers”.) While this isn’t a perfect model, it does factor in that there is more than just income at play when it comes to defining the middle class.