Wednesday, September 26, 2012

Who is the middle class?

Will Barratt, Ph.D. 

The contemporary idea of the middle class is wonderfully flexible, and this flexibility gives rise to confusion.  This flexibility also makes the term a media and political favorite.  One sociologist will use “middle class” one way, one blogger will use “middle class” another way, and a politician may use “middle class” in two or three more ways. 

So what is and who are the middle class?  The European origin of the idea is in 1745 when it was used first by James Bradshaw in his Scheme to prevent running Irish Wools to France (OED, 2012).  The term was used to describe the group of people in the economy who were between the peasants and the nobility.  The rising merchant class, those people who bought and sold goods rather than produced goods like the peasants, were the inspiration for this term.  That idea of the group in the middle between other groups, peasants and nobility, still provides a framework for describing the middle class.  The problem arises when you try to define the contemporary version of peasants, politely called the working class, and nobility, politely called the upper class, and identify the boundaries between these groups.

Divisions within the middle class
Many scholars divide the middle class into smaller groups, which creates more opportunities to establish your place in the class hierarchy when there are smaller groups.  The lower-middle class, the middle-middle class, and the upper-middle class are traditional ways to discuss this undefined middle class group.  Dividing 30% of the population into ever smaller groups seems a little suspect and this leads to an exploration of how we choose the dividing lines between working, middle, and upper class groups.

Education as a dividing line between class groups
Zweig in Working Class Majority (Zweig, 2000) makes the argument that the distinction between the working and middle class groups in the US should be a college degree.  However if you use the idea of middle class membership as requiring a college degree, you are only including roughly 30% of the US population over 25 (United States Census Bureau, 2012a) as middle class.  New boundaries for the middle class can be created to expand this 30% group if you lower the threshold of educational attainment.  Including those with an Associate’s degree expands the middle class to nearly 40% of the US population.  Expanding it further to include those with some experience in college increases it to nearly 60% (United States Census Bureau, 2012a).  With the boundary between the working and the middle class set to the right point you can create a majority middle class. 

Conveniently the educational attainment metric also creates an educational nobility.  People with a Professional or Doctoral degree compose about 3% of the population (United States Census Bureau, 2012a).  Since this group includes me, along with most of the people who write about social class, I am in favor of this particular way of defining the nobility.  Please note that motives for setting the boundaries between class lines should be explored carefully. 

Pay, pay periods, and the economic nobility
Another way to define this divide between the working and the middle class is pay periods.  Bi-Weekly employees, those workers who are paid every other week, can be seen in the US economy as the working class.  Monthly employees can be seen as the middle class.  Those who need not work because their income comes from investments can be seen as the economic nobility.  The criteria for who belongs in the economic nobility get fuzzy when you consider that retirees don’t work and have income solely from either social security and / or personal retirement investments.  However retirees get monthly checks, so pay periods may serve as an effective class boundary metric.

People with extreme wealth can be seen as the upper class or the contemporary economic nobility.  There a few people with a lot of wealth and there are a lot of people with little or no wealth.  What is wealth?  At the most basic level wealth is having more money than you owe.  So, if I have $100 dollars and owe $50 dollars then I have wealth.  Having ready money, or cash, is a good thing but not all of my wealth may be ready to be spent.  What about having things like stocks, bonds, and a family home that can be converted into money?  Assumptions as to what counts as wealth are slippery.  It is easier to turn a stock into cash than to turn a family home into cash. 

One metric to define the economic nobility in the US is to set an arbitrary bar for income, say at the top 1%.  According to the US Census Bureau (2012b) the median household income in the US was $50,054 in 2011; half of all households surveyed make more than that and half make less.  The income level of the top 1% earners in the US is in some dispute, but a good estimate is $700,000.  (See the Congressional Budget Office Trends in the distribution of household income between 1979 and 2007 for a detailed and data driven analysis of this topic.)  This $700,000 is personal income, not household income!  This income may be from investments or from a salary and according to the CBO (2011) this income is increasingly from work related income. 

To define the economic nobility in the US we can start with this $700,000 annual income.  Assuming a conservative 5% return, this would require $14,000,000 in some form of investments to generate $700,000 in annual income.  While the yield from investments would be higher than 5%, building capital requires not taking all of the yield from investments.  Saving all of your $700,000 a year income for 12-14 years (depending on interest rates) would create $14,000,000.

Middle class and identity
Many people who would not meet any of the middle class criteria above may yet self-identify as middle class.  Their reasons for self-identifying as middle class are probably social and psychological rather than economic or related to educational attainment.  Middle class is normative and lower class / working class is the losing group.  Consequently self-identifying as working, or lower class, is fraught with psychological and social issues.  Social class as an identity is not to be underestimated, especially in a turbulent political and economic climate.  It is useful for politicians and financial institutions to encourage people to self-identify as middle class. 

The middle class can be defined in any number of ways depending on your purpose.  It can include up to 60% of the people, using educational attainment as a simple criteria, or as few as 30%, using the same educational criteria.  Adjusting the boundaries between the working class and the middle class is a value driven decision. 

The next time someone uses the phrase “middle class” ask them what and who them mean.  If you cannot ask them, then think for a minute about their motives for using the term as an inclusive or exclusive term and who they think it includes.  Similarly, when someone uses the current “47% of people who don’t pay taxes” term think for a minute about their motives for using that term and who they think it includes.

Congressional Budget Office. (2011). Trends in the distribution of household income between 1979 and 2007. Retrieved from
Oxford English Dictionary. (2012). Retrieved from
United States Census Bureau. (2012a) Educational Attainment in the United States: 2011 Detailed Tables. Retrieved from:
United States Census Bureau. (2012b). Income, poverty, and health insurance coverage in the United States. Retrieved from:
Zweig, M. (2000). The working class majority: America’s best kept secret. New York, NY: Cornell University Press
Special thanks to Jeff Fabus for helping me with the savings calculations