Educate Me: What is Middle Class?

by JT McGee

Who is the middle class in the United States?Everything centers around middle America.

And yet, Americans don’t seem to know exactly what middle class actually means.

Are we just too dumb to find a midpoint, too smart to realize meaningless divisions are…meaningless? Or are we simply unaware of our surroundings?

Who is the Middle Class?

Apparently, 40% of people with incomes below $20,000 and incomes above $150,000 consider themselves to be middle class. I’m not making this up—the data’s in a Pew Research study.

Now, I don’t really consider $20,000 per year to be middle class. That’s only slightly above the 150% of poverty level thresholds used for so many government models on wealth—you’d stave on that amount of money in many American cities. Is starvation middle class? I hope not.

On the other hand, people who make $150,000 per year, where I live, are far wealthier than the middle. The median being just above $30,000 per household, $150,000 might as well be a million bucks. But I live in an inexpensive part of the United States, so my view of $150,000 isn’t even close to those who live in…say, New York, California, or any big city in between.

In many areas, $150,000 could be middle class, even though it doesn’t seem to be middle class from my (cheap) perspective.

My Arbitrary Definition for Middle Class

In defining the middle class, I think numbers are mostly beside the point. How much you earn is relatively unimportant, especially if we fail to ignore how much it costs you to live. In a post about the economics of real estate, I made mention of the fact that the United States’ real estate environment is a bit of an outlier—we have plenty of livable real estate, but we haven’t filled it.

Real estate is a critical point in how I define middle class. Here are three criteria that I believe define the lower limits:

  1. Available employment – Finance has no respect for the here and now, so what you earn today, in my view, is far less important than the possibility for earnings potential. My definition of the middle class assumes that you are gainfully employed, and also that there are a number of job opportunities available to you should you leave your current employer. To give an example, someone who works in a small town where they work in a “niche” profession and earn $60,000 per year is not middle class because they are one of a few in their locale. If because of layoffs or the movement of operations this person was to search for a new job, one could not be found in their immediate area. Thus, not middle class.
  2. Mortgage qualification – My second criteria is that you can afford and qualify to purchase the property in which you live. Being able to buy a home requires a certain amount of earned income, and also job stability. I’m essentially borrowing a few extra criteria for the middle class from the banking system, which may make my model more difficult than I suggested it to be, but this is, as a package, a single criteria.
  3. Mini-Me’s – The ability to have and afford children seems like a good qualification as well. While few people actually consider the cost of having children before having them–it seems to be a “no-no” in personal finance, even if I say it’s a “yes-yes”–having kids is middle class. Kids are, in many ways, an asset. You invest in them until they leave, then they provide you with benefits when you get old. Some people take offense to that, but the reality is that having two or three children is a great way to make sure you have someone to take care of you later in life. Kids are a retirement plan, an asset, and a “buffer” in maintaining a middle class lifestyle through retirement.

So, if you have employment stability, the capacity to purchase property in which you will live, and the ability to have children, you are, by my definition, middle class. I think it’s reasonable, fair, and fairly “open” to most everyone who is responsible with their money. However, I have only defined the lower limit, as I’m not quite sure how we would define the upper limit.


Help me out. What do you consider the lower and upper limits for middle class?

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{ 10 comments… read them below or add one }

PKamp3 October 31, 2011 at 10:21

I like your definition using real estate – it means you can can get a (very) quick estimate at the middle class in a country just by looking at home ownership rates (Canada > the US in that regard, US > California). Available employment is harder to track, but it’s also definitely a good marker of middle class.

Kids – that’s the toughest one to link. Throughout history, kids were the retirement plan of millions of people. In poorer countries today, people will have kids because it’s more hands to work the farm, and infant mortality rates are still high in some countries, leading to yet more births. There are also incentives baked into welfare programs here at home – “have more kids, get more money”, that sort of thing. I would refine it to be “having 2 or 3 kids without receiving government benefits for their births”. More wonky, sure, but something that the CPS is equipped to handle if someone wants to take a shot at it.

Good summary!


JT McGee November 1, 2011 at 12:38

I like the criteria for government assistance. It only makes sense; although most everyone in the middle class does get a tax credit for children, an effective subsidy.


Eric J. Nisall October 31, 2011 at 12:39

(Stepping up onto the soapbox & clearing my throat…ahem) Isn’t it funny that for all the bs surrounding judging by age, race, class, etc. this country still finds itself segregating people into those exact same molds and making huge deals about them in the financial community?

I never really cared for labels in any respect. Rockers perform country songs. Young adults can be more responsible than some baby boomers I’ve seen. People who make nothing spending all their money on flashy things to seem rich, while the truly wealthy tend to live modest lifestyles. Regardless of what “class” you fall into, money can’t buy real class and that’s what I look for in people. It’s all a joke to me.


JT McGee November 1, 2011 at 12:39

So I’ll put you in the group (see what I did there?) who doesn’t like labels.

“Money can’t buy real class and that’s what I look for in people.” Brilliant!


Eric J. Nisall November 1, 2011 at 13:17

You can put me in the “everyone can go screw themselves” group. I’d really like to knock some of the people in the head who draw the lines and determine who gets asked to be part of such *important* surveys such as the consumer confidence index and the like.


krantcents October 31, 2011 at 15:17

Middle class seems arbitrary! It is that huge group of people between poverty and rich. I realize it is more than that, but I think it remains a just a name for the group of people between rich and poor.


JT McGee November 1, 2011 at 12:40

But the label is sooo powerful! Everyone says they’re in the middle class, so it’s great for the politicians.


Darwin's Money November 1, 2011 at 15:15

I don’t think “middle class” has much economic measurability any more. The term’s become politicized and even the very wealthy like to call themselves part of the middle class. $150K is TOTALLY middle class in most parts of the country, especially if that’s dual income from a working couple. A couple kids in daycare, new cars, nice home mortgage? Around me, people like that aren’t even getting ahead and my cost of living area is probably slightly above average. We do OK because my wife’s home and we don’t have daycare expenses or go out much…and I have blogging income.


101 Centavos November 6, 2011 at 13:37

Agreed, if real estate is used as a qualifier, then location has a huge impact on what a middle-class lifestyle is. A nice-sized home in small-town Oklahoma is probably up to third or even a quarter to one of comparable size on the West Coast.


Frank November 23, 2011 at 16:58

I agree it is difficult to define a relative term like middle-class. The way I see it there people incapable of meeting their own needs, the poor. There are those earning enough to take care of their needs and some wants, the middle-class. Then their are people that have enough ASSETS to supply their needs and wants, the wealthy.

The reason we have such a relatively small wealthy class is 99% are not willing to sacrifice their wants for wealth.

As a person that awoke to this fact just a few years ago, I have diligently correcting my past behavior and working towards wealth. Once one begins the journey, it’s not that difficult. Intact, it is quite enjoyable.


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