Single-parent households have always made less money, and the percentage of single-parent households has doubled to about 25% since 1960. That creates a lot of downward pressure on the income "median household" that is the result of sociological rather than economic factors.
Married couples where only the husband works make almost twice as much now, in constant dollars, as they did in 1950. Married couples where both spouses work make almost three times as much as they did in 1950.
I see some comments in this thread along the lines of "back in the day, middle class people could afford a house, two cars, college for their kids, and vacations." I think this view is more based on mistaken notions of what middle class families could actually afford in 1950. Partly, this is the byproduct of the fact that media always dramatically overstates the living conditions of people at any given income level.
Take, for example, "Leave it to Beaver" which is portrayed as archetypal of a 1950's middle class family with stay at home wife. But the Cleavers are an upper class family! Both parents attended college; the husband drives a top of the line car and has a white collar job. In the show, they have a nice colonial home, a small TV, and one nice car. Today, they'd be a dual-income couple with a McMansion, a couple of BMWs, and several flat screen TVs.
Why are you using 1950 as the baseline? My understanding is that concerns about middle class stagnation are due to flat or declining incomes starting in the late 1970s to the early 1980s.
> that is the result of sociological rather than economic factors
Economic and sociological factors aren't completely separable.
Specifically, you can't assume that economic factors don't drive marriage rates. For example, people with college degrees are more likely to get married. Is that because they can afford to? Because the same type of people who commit to schooling also commit to marriage? Would decreasing the cost of tuition increase the marriage rate?
It's a correlation, and trying to infer causation from it is always going to be dicey.
That is still an interesting graph though. For example, looking at the top line (dual income) and light green (married, only husband has income), it looks like basically since the 70's wages for men have been flat. The growth appears to be almost entirely accounted for by growth in wife's wages.
I am glad this is the top comment, people today are up in arms about inequality, but they fail to realize how much we have today that we did not have then. Not to say that inequality is not an issue, but many people are screaming from the top of their lungs with twisted facts and stats.
The 1950s aren't so far back in time that people can't rely more on their family's and other families' experience of what it was like in the 50s. Or are we really more informed by TV shows and sitcoms than we are by actual experiences?
My grandparents raised 6 kids in the 1950s and 60s on the salary of my grandfather, who was a sales account guy for a cardboard box manufacturer and spent a lot of time on the road.
But they never talked about it as a time of ease and plenty, and the kids all went to college on scholarships, not parent payments. My grandparents were nostalgic for some cultural norms of the 1950s, but not the economic conditions. They seemed to think their kids had much nicer lives with more opportunities, and the grandkids even more so.
I think the disconnect is that these people have an Upper Class salary nationally (the student linked at the top), but choose (and I stress the word choose) to live a middle class lifestyle locally.
For instance, with that upper class salary they could likely get a home outside the city with a pool, park a couple expensive bmw cars out front and go on expensive vacations, buy the latest toys, etc.
Or, they can live close to work/coast/lake/whatever and be house-rich, but poor everywhere else.
Middle-class people don't have such an option. Their salary leads to outskirt/suburb house without pool, without bmw, etc. And no option to live close to what they desire. People in the bracket sniffing the upper-class usually buy token "I'm rich" status items (designer clothes/phones/etc) which they can't really afford except maybe sporadically.
Poor people are worse off, they live in location with an x-block radius they rarely leave.
While this is something to this, you also can't separate cost of living from salary comparisons. People making a lot, but having to spend a lot, working in the Bay area, NYC, DC, LA, etc. etc., don't have the options of keeping their salary and moving to a Cleveland suburb for the lower cost of living.
Even if there were enough jobs for people do it, they wouldn't pay enough.
They are essentially getting a premium salary because they have to pay a premium COL. It's not really a choice because the premium salary only comes if you work on the premium area.
So it's not really accurate to call a developer who make 130k in Palo Alto "upper class" and call a developer who makes 70k in Arlington Heights, IL middle class. They probably lead similar lifestyles.
This is true, but the developer in Palo Alto has the option to scale back her lifestyle and bank a lot of cash, whereas the developer in Arlington Heights will bank much less cash if he scales back his lifestyle.
Not arguing, just adding more "shape to that curve" :-)
A key quote, which almost doesn't need context: "But here’s the thing: Being able to afford those things is pretty good definition of affluence in modern American society."
That quote (and article) doesn't jibe with the definition of affluence, at least according to various dictionaries [1] (e.g. "great wealth", "property", "abundance of wealth"). Not having much left over is not having an abundance.
The definition of affluence seems to presume various sources of passive income.
Does it matter how much money they make? My understanding is that the difference between middle class and upper class isn't how much they make, it is how they make that money. The upper class is the only class that makes the majority of its income from investments, while lower and middle class make their income from wages and salaries.
In other words, the "job" of the upper class is to manage their wealth.
Exactly. The terms "low," "middle," and "upper" imply that your economic class is somewhere on a spectrum based on a single income measurement, and you're just kind of sliding around on that spectrum as your income changes, potentially even gradually moving between classes.
I think it's more accurate to look not at your raw income number, but what percentage of it derives from labor (or investments backed by labor, like a pension) and what percentage comes from capital investments. For most of us, 99% or more of our income ultimately comes from labor, and close to zero comes from capital. For the real rich, it's the reverse. Throughout your life, your percentages tend to be pretty sticky. You don't tend to move suddenly or even gradually from a labor-based lifestyle to a capital-based lifestyle.
Lots of people think, "oh, if I made $XX,XXX more a year at my job, I'd finally move from middle upper middle class to upper middle middle class," or something as ridiculous. But in reality you're not relying on your labor to make more money. You're not even close to the class of people who don't even have to work to make money.
I agree, but another thing to consider is that income is only part of the picture. There is also wealth. Non-liquid assets are a good example: if you live in a $5 million McMansion that is fully paid off, but only make $30k a year, you're still solidly upper class.
My unscientific definition of "rich" is having enough money so you don't have to work. Of course, now that I am approaching 60 years old, I am going to call it "retirement".
I don't believe that there is any true definition of classes here in the states. Some look only at the numbers, some look at how money is made, some look at the type of work, etc.
To me the distinction is all about quality of life. The "middle class" software engineering DINK couple in the bay area making $250,000 is absolutely in the upper class despite the fact that they still have to work every day.
My personal definitions for class boundaries are as follows:
-Poor: Can't afford basic necessities without assistance.
-Lower: Can't afford leisure time or discretionary spending. May work multiple jobs.
-Lower-middle: Earns an hourly wage. Works at least 40 hours per week, and receives overtime premiums for more.
-Upper-middle: Earns a weekly salary. Expected to work 40 hours per week or less, and additional hours are compensated appropriately.
-Upper: Works only to the extent needed to pay for luxuries. Never fears the loss of a job.
-Rich: Never needs to work: is completely secure financially.
Those are somewhat subjective, but they work for me. That DINK couple is solidly upper-middle class, but that is the class with the most potential for individually motivated upward mobility. If they voluntarily limited annual expenses to $50k, got annual raises of 1%, experienced annual expense inflation of 5%, and earned 6% on their investments, they could meet expenses without working after 6 years. Their investment income would exceed their working income after 17 years. They could retire in the 18th year, and would never need to work again. Practically speaking, they would likely continue working, for additional self-worth, savings, and social status, but with the confidence that only "go to Hell money" can imbue.
(Of course, income taxes make such a rapid rise impossible. With an income of $250k, you're likely paying at least $100k in taxes alone. Ignore that for this thought experiment.)
They won't be rich. They wouldn't buy a nice house without a loan, for instance, but they would surely get the most favorable interest rate available. They could still be threatened by a market crash. They wouldn't be VCs, but they could be angels or entrepreneurs.
I think those definitions are over-thought-out. There's little fundamentally different among those first five. To me, if you depend on someone else (have to work, or get assistance) to live the way you want to live, you're in one class, and if you don't, you're in the other one. Everyone in those first five groups are N paychecks away from $0, the only difference is what that number N is.
I think those are pretty good definitions. But I would emphasize that the distinction between lower and middle classes is that middle-class people have at least a little bit of discretionary income. Lower-class people have to spend everything they get on food, shelter, and clothing.
> The "middle class" software engineering DINK couple in the bay area making $250,000 is absolutely in the upper class despite the fact that they still have to work every day.
While, to me, they are, as people working at wage labor, either working class or, if they have sufficient capital assets that they could reasonably subsist primarily or entirely on capital income for a non-trivial period of time if they chose to use it that way rather than saving it for the future -- that is, if labor is a practical (e.g., not economically coerced) choice rather than a necessity -- middle class. (If their capital is such that they can live comfortably on the proceeds while continuing to accumulate capital, then they are upper class -- whether or not they choose to work -- but I don't think many Bay Area DINK couples making $250K meet that standard.)
To me, economic class is about practical economic choices.
I disagree... In my mind, "class" is about wealth, not income. That $250k couple likely has little or nothing to their name. They are yuppies, middle class people going through the motions of projecting affluence. They think a lot about money.
The "upper class" makes money as they sleep. They don't think about the money the way you do.
If you need a ratio/figure, I think looking at housing/income ratio or housing/cash flow ratio would tell a good story. Or, look at the 1st standard deviation of non-retirement wealth.
> That $250k couple likely has little or nothing to their name.
I don't even make half that and I have six figures in savings. A $250k/year DINK couple should most definitely have very much to their name.
The only reason people could ever trick themselves into thinking $250k is merely middle class is because they assume that one simply must own a huge home to be middle class. This is a notion which I challenge. The middle class has never predominantly owned homes in major cities. The vast stretches of middle America have long been and continue to be the haven of the middle class, and this DINK couple should be able to buy a ranch home in that haven for cash.
This "middle class" family with the $2M home and the $250k income could sell that home, move to middle America, get a ranch home for < $200k with $1.8M left over, and retire, never working again. They probably have investments and retirement savings on top of the home, but even completely ignoring that they could get a $70k annual income just off 4% of that $1.8M. That already puts their passive retirement income above the median HHI in the US. And that's ignoring social security, which when they come of age soon they'll be able to draw at the maximum possible amount.
They're not going to do that, though, because they enjoy the power, status, and income of living in the heart of one of the nation's richest and most powerful industries and working for its top companies.
They paint themselves as victims, like they're doomed to live in a horrid one-story home. They chose that. They prefer the perks of living where they are over the perk of having a huge house in a cheaper part of the country. The fact that they were even able to make that choice makes them not middle class.
Whether they're "upper class" is another discussion. One can easily see various tiers in the upper class, with this family occupying the lowest one and billionaires on the highest rung. You'd need to throw in political luminaries somewhere as well -- the President should probably get on the highest rung even if he's not a billionaire, for instance.
> This "middle class" family with the $2M home and the $250k income could sell that home, move to middle America, get a ranch home for < $200k with $1.8M left over, and retire, never working again.
That assumes they already own their home outright. It still takes a while, even earning $250k a year to pay off a $2M mortgage.
|I don't even make half that and I have six figures in savings. A $250k/year DINK couple should most definitely have very much to their name.
Well if you make close to half of that, then you basically make that as single income... The parent comment assumed bother parters were engineers making roughly the same amount.
Bottom line, is the difference between upper and middle class is where the money comes from. Doctors are upper-middle class until they have enough wealth (not income) to live of their investments alone. That is, they have similar money worries to other middle class people. Not necessarily stuff like "can I afford rent" (which would be lower class), but rather "what happens if I get injured and can no longer work?"
No. As others here have said, the distinction between middle and upper class is exactly that the upper class do not have to work.
And if you think $250k of job income in the Bay Area makes you upper class, all I can say is, if you were in that situation you would see how ridiculous that idea is. Housing is so expensive here that for most people, the bigger their income, the bigger their mortgage. And with a mortgage, you're tied down; you don't have the freedom to quit your job just because you feel like it.
This definition is a bit leaky. For example, the executive who lives month to month live in a luxury penthouse "has" to work to pay his mortgage...but has the option to not pay that mortgage, save for a year (or two), stop working, and live off wealth. I wouldn't call someone with that option "working class".
My wife and I live in Oakland on ~$160k a year, own a home, and live a relatively lavish lifestyle. So yeah, I'm in a "worse" situation then I outlines and in reality, in the upper class of quality of life.
That definition puts high performing doctors, lawyers, and surgeons making $250k+ solidly in the middle class, no? Even two married doctors, together making $500k+. Can that really be middle class?
Yes, especially when you take into account that your two married doctors will likely be working off debt/opportunity cost related to becoming doctors for over a decade. At the point that they have paid off all debt, and start having a positive net-worth, things might turn around.
At the point that they have saved enough that they can live off investing their savings then that is upper class.
Which is why "working class" is preferred by some. But "middle class" in the modern vernacular seems to be more about living standards than means-of-income... and the middle class seemed to be doing good in the latter half of the 20th century, while now terms like "working class" seems to become more apt to describe the haves and the have not so much.
I think the issue here is that both sides are talking past each other.
Middle class used to mean 2 separate things.
1) You made a certain income.
and
2) you were able to support a particular life style on that salary( detached house, 2 cars, vacations, able to put your kids through school), or what every your definition of middle class was.
The problem is that with inflation on some of these things, notably houses and university, someone who is middle class by definition 1 ins't middle class by definition 2.
Here is the original piece that the article is commenting on:
For what its worth I tend to agree with the original article.
With Montessori (private school) for 2 kids, a nice house in a good neighborhood in a big city, and the fact that I reinvest all my money back into my company it certainly feels like I'm living a middle class lifestyle.
I also completely agree that you can't use just salary as your measure of middle class. It looses meaning when comparing small town to a city like NY.
From the early 90's, a take on how hard is it live on six figures on the Upper West Side. (I coincidentally happened to listen to an old cassette tape with this, and then read this thread.)
That sounds upper-middle if not upper class to me ;-)
Disposable income going into high-risk investments after securing an excellent education for 2 kids - if the rest of the middle class were so lucky, our entire next generation would be pretty well-positioned.
ITT and every similar conversation in the US, people desperately redefining middle class such that they are comfortably in it. In Lake Woebegone all children are above average but their parents are definitely middle class.
It would be a harmless cultural quirk but for the fact when it comes to talking about taxing the rich (or other means testing) it turns out that there aren't any.
I'm sick to death of hearing about salary in connection to the middle class. How much money you have put away in the bank is of far greater consequence than how much you made last year.
I have two friends, one is a Public Defender and one is a Software Engineer. The Public Defender comes from money and has no problem going to nice restaurants, she drives a nice car, etc; her father pays for her to go home for visits (she's a sweet girl, but she's rich). The Software Engineer is paying off his loans from an Ivy League school and has to pay for all of his flights back home.
Edit:
What I was trying to say is that salary is a poor indicator of wealth.
Don't try to enter a profession dominated by trustafarians. (I have not heard of PD as such a profession, BTW, and you may not have been saying it was.) Life is hard enough without fighting uphill on Maslow's hierarchy of needs.
One thing a Bay area friend of mine pointed out is that Amazon charges the same price regardless of your cost of living (modulo sales tax, in some cases). Stuff just doesn't seem as expensive making $100,000 in SF as it does making $60,000 in Ann Arbor.
House? Yes. Bar of soap at a Sacramento St. boutique? Yes. LEGOs on Amazon? Not so much.
That's a good point, but it also depends on disposable income. If after rent (or mortgage), food and other basic necessities you have $1000 left per month then it doesn't make a difference whether you earn $100,000 in SF or $60,000 in Ann Arbor.
And then for both examples a $50 Lego toy is 5% of the monthly disposable income.
This is actually a nice summary of data, not an opinion piece.
In contrast I hate hyperbolic statements like "the middle class is vanishing" which pretty much has to be literally untrue but I can appreciate as an attempt to express something true about the objective difficulties of the middle. I just don't think it helps much to hammer on a rhetoric that is calculated to fog the brain.
Good short summaries like this are I think easy to understand and contribute better to a national dialog.
If you took a strictly income- or wealth-based definition of "middle class", which I don't, I suppose the existence of a middle class is tautologous in the same way as "half our schoolchildren are below average".
It doesn't have to be untrue at all. If you only have two classes then there is no middle class.
If the trend is that the middle class is moving toward size 0 while the upper and lower classes are growing or staying the same size then the middle class is indeed vanishing.
It's not hyperbolic it's a statement of the current trend. Will the trend continue? Maybe. Maybe not. But pretending the trend can't exist is literally denying reality.
> If the trend is that the middle class is moving toward size 0 while the upper and lower classes are growing
I think you've hit on it, there would have to be nobody on the income distribution curve in the middle, between the vast bump of poor on one hand and the smaller bump and long tail of rich on the other hand.
But that's not what we have. We have a literal median with most people making money in the middle, and it has gradually shifted higher, but not as quickly as the rich, which is the real problem.
I think your argument assumes that economic classes must necessarily be divided into exactly three buckets, therefore there is always something defined as "middle". Obviously there are other ways to define classes that do not result in three distinct classes.
>About the data: We used the family income data from the 2013 American Community Survey. This counts only families, which the government defines as households with two or more people related by birth, marriage or adoption.
I find the fact that the data doesn't include data from single adults interesting and a potentially large gap in the data.
Interesting discussion. I don't know if I have ever read a serious definition for segregating the income streams. There are people who are 'oor', people who are 'not poor', and people who are 'rich'. I've always assumed the people who were 'not poor' and 'not rich' were the folks being referred to as 'middle class'. If you read pg's essay on money he discusses "wealth" versus "money".
That difference, for me, explains why you need a bigger salary in the Bay Area to cover basic expenses rather than say El Paso, so a $150K salary in the Bay Area might make you exactly as "wealthy" as a $50K salary in El Paso.
So then the question for me is, does wealth define rich/middle/poor ? Someone with two houses rich? one house middle? no houses poor? transportation? food?
>so a $150K salary in the Bay Area might make you exactly as "wealthy" as a $50K salary in El Paso.
So, kind of an aside, the Bay Area example can work out much better for you, if you're a property owner. Since, while you're paying a lot, you're also getting a lot of equity compared to most other places and that equity (assuming a bubble doesn't burst) is the same anywhere you take it. I've met many CA/NY transplants who have brought a lot of equity with them and driven up housing prices because not only are they used to paying a higher % of salary, they also have CA housing equity, I guess what I'm saying is the inflated cost of housing isn't necessarily a sunk cost/equalizer in the long run if you can plan accordingly.
It's making lower and middle class areas into upper and middle class areas rather quickly (not the only reason of course).
Taking a subset of statistical average income is not the proper way to define the "Middle Class." It's better defined by what you can achieve with a specific income. Can you afford higher education both for you and your offspring? Can you afford to own your home? Can you afford reasonable and convenient means of transportation for your area (multiple family cars in rural areas, but maybe one or even none in urban ones)? Can you afford occasional leisure activities? Can you afford to have a savings and retirement account? Do medical expenses not worry you?
Meeting most or all of these requirements is what sets people into the middle class. I agree with the article that this number is different as you need to take into account local cost of living, but a lot of these requirements are not tied to local costs. I also think this probably puts this number at a higher point than many people think. I have many friends that think, "Oh, I make $20/hr. I'm middle class now!" And I don't agree. You're still going to struggle with bills at that level of income. Middle class is about being above that struggle most of the time. There's a freedom that comes with not having a loan for your education, vehicles, emergency spending (credit cards), etc. And a middle class family should have that freedom.
I don't know that I can see $250k being middle class still, but I do think in the SF Bay area, a family making $150k is quite reasonably still middle class. The upper bound of the middle class is I think harder to define than the lower bound. Once you always have the option of not working for long stretches of time (more than several months) that might be a good indicator of upper class.
I think throughout the last 40 years or so we've gradually become so accustomed to the diminishing size of the middle class. We don't realize what it used to mean. We forget that a time existed where a family with a good budget could live on one income and still afford a house, two cars, college funds for the kids, vacations, and savings.
I think throughout the last 40 years or so we've gradually become so accustomed to the diminishing size of the middle class. We don't realize what it used to mean. We forget that a time existed where a family with a good budget could live on one income and still afford a house, two cars, college funds for the kids, vacations, and savings.
The middle class has "diminished" in large part because more households rose into higher income levels[1][2].
Many households could still live on one income, but choose not to because the opportunity cost of not working is too high: Mom and dad would both rather have the money, go on international vacations, eat out more often, take yoga classes, buy more gizmos... All stuff that people did much less of 40 years ago.
This is interesting but not super useful since there's a vast difference even within cities. I live in San Diego and know the areas right along the coast are above even the top of that income distribution but the homes are so expensive even to rent that those people are still probably middle-class.
This does not make them middle class. They are choosing to live in the expensive area and thus paying heavily for it. They could move 20 miles outside of the city, commute longer, keep the same high paying job and live in a mansion. The fact that they have a choice is what makes them not in the middle class. They see value in paying the extra cost to live in the expensive area and thus they choose to pay the premium.
People in the true middle class would not have the luxury of choice. They have no option to live in the wealthy area because they are not wealthy.
When I think of upper class, I think of well-dressed gents and ladies who cruise around the world finding the next humble village that needs their charity.
Driving an hour each way to some kind of desk job to finance a McMansion in the exurbs, eh... maybe it's me but there's just no way I can line that up with any definition of "upper class".
Single-parent households have always made less money, and the percentage of single-parent households has doubled to about 25% since 1960. That creates a lot of downward pressure on the income "median household" that is the result of sociological rather than economic factors.
Married couples where only the husband works make almost twice as much now, in constant dollars, as they did in 1950. Married couples where both spouses work make almost three times as much as they did in 1950.
I see some comments in this thread along the lines of "back in the day, middle class people could afford a house, two cars, college for their kids, and vacations." I think this view is more based on mistaken notions of what middle class families could actually afford in 1950. Partly, this is the byproduct of the fact that media always dramatically overstates the living conditions of people at any given income level.
Take, for example, "Leave it to Beaver" which is portrayed as archetypal of a 1950's middle class family with stay at home wife. But the Cleavers are an upper class family! Both parents attended college; the husband drives a top of the line car and has a white collar job. In the show, they have a nice colonial home, a small TV, and one nice car. Today, they'd be a dual-income couple with a McMansion, a couple of BMWs, and several flat screen TVs.