STOCK MARKET WATCH - Wednesday, 11 February 2015

[Demeter]

7. Only 20% are Middle-Class, Most Don't Come Close

http://www.economicpopulist.org/content/only-20-are-middle-class-most-dont-come-close-5679

Noah Smith (at Bloomberg) recently wrote: "A plurality of Americans still consider themselves middle-class.” (A plurality meaning, more than any other, but not an absolute majority.) But he linked to The Guardian to make his case, which appears to be saying something completely different:

The number of 18-29 year olds who consider themselves lower-middle-class has doubled since 2008 reaching 49% ... Average household income hovers around $51,700 – which is how much Americans were earning back in 1995. Yet even as 14.5% of Americans meet the actual definition of living in poverty, only about 7% of them will define themselves as lower-class. The definition most of them prefer is lower-middle-class. According to the Pew Research Center, the number of those who define themselves as lower-class or lower-middle-class has gone up to 40% in 2014, increasing by 15% since 2008 ... In 2008, 21% of [wealthy individuals] identify as in the upper-class or upper-middle-class. Even Hillary Clinton, who reportedly made over $100 million along with her husband President Bill Clinton since leaving the White House, said that she didn’t consider her family as being "truly well-off".

Noah Smith also believes if you think “I’m doing OK, and most people around me are doing OK too” — then you’re in the middle-class. He also links to Ezra Klein at VOX, who recently wrote:

There's no analogous middle-class line. In the New York Times, [they] try to create one, defining middle-class as households making more than $35,000 and less than $100,000. Using this definition shows that the ranks of the middle-class have been thinning for decades ... "Although many Americans in households making more than $100,000 consider themselves middle-class, particularly those living in expensive regions, they have substantially more money than most people."

Ezra Klein also says, "Middle-class is, in some ways, a state of mind, or at least a state of comfort." He links to a New York Times poll which shoes that 38 percent of Americans considered themselves middle-class. (This might be the "plurality" Noah Smith was referring to.) But almost as many — 33 percent — considered themselves working-class. And another 12 percent thought they were upper-middle-class.

On the extreme peripheral of this debate (as to what defines middle-class), Stephen Moore at the Heritage Foundation (when discussing the inheritance tax) actually used the term middle-class when referencing a $5 million tax exception in the same sentence — as though trust-fund babies and middle-class workers were one and the same.

But if by using the New York Times' definition for what might be considered middle-class (those earning more that $35,000 a year, but less than $100,000), then according to Social Security data for wage earners, then 34.5 percent earn a middle-class wage.

58.5 percent earn $35,000 or less
34.5 percent earn between $35,000 and $100,000
6.9 percent earn $100,000 or more

But who can seriously believe that $35,000 a year (especially when compared to other incomes) is a reasonable middle-class income? Can one pay a mortgage, make a car payment, raise two children, save enough for college and also plan for a modest retirement — all on a mere $35,000 a year? A more reasonable assumption might be (at the very least) $50,000 a year before payroll taxes — in which case, only 19.4 percent of all wage earners would generate a true middle-class income — meaning most others don't even come close. Whether they admit it to themselves or not, they are either lower-middle-class, lower-class, or poor. (And for the sake of argument, for a dual-income household — if each wage earner were making $50,000 a year — only then might we assume this to be an upper-middle-class household.)

MUCH MORE AT LINK