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:
- 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.
- 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.
- 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?
Photo by: CEBImagery.com