For scholars, the value of any definition depends on the question they are trying to answer. Our new Future of the Middle Class Initiative will be settling on a working definition soon, and we would love to hear from you. In this paper, we describe the various approaches to defining the middle class, along with their pros and cons. Is middle-class status a reflection of economic resources, especially income or wealth? Is it, rather, a state of mind, a set of aspirations, or revealed through behavior, cultural tastes, or by certain kinds of consumption?
Is it a question of how we define ourselves? What is the difference between the middle class and the working class? Scholars working in different disciplines come at this definitional question from various angles.
Philosophers and anthropologists tend to focus on culture, education, and power. Economists largely rely on definitions related to wealth or income. Our goal here is not to argue that any of these definitions or boundaries are right or wrong. Simply that each will delineate a different group, leading potentially to different diagnoses of trends, challenges, and opportunities, and therefore sometimes to rather different policy solutions. Definitions of the middle class and indeed of classes generally tend to fall into one of the three broad categories, based on economic resources; on education and occupation status; or on attitudes, self-perception, and mindset.
For the first cash , we need to see your bank balance. For the third culture , we need to see inside your head. These definitions will of course overlap with and reinforce each other. Levels of education, for example, are highly correlated with income through earnings , and becoming more so. People doing jobs with a certain social status are likely to define themselves as middle class. Aspiring to college or having a saver mentality are likely to lead to a bigger bank balance, and so on.
But it is important to be as clear as possible about which of these three broad approaches we are adopting for a particular purpose, especially when it comes to policy. Economists tend to favor class definitions that are based on financial indicators, especially on income. This is partly for convenience, since data on income are widely available, and partly because income tends to be highly correlated with the other trappings of social class, such as economic security, education levels, and consumer preferences.
We start by looking at income-based definitions, before turning to those focused on wealth, and briefly discussing other related approaches. Richard V. Reeves John C. Some authors are careful to avoid the word class when focusing solely on income. Note, too that there are many different ways of defining and measuring income.
Should we look at market income, or disposable income after transfers and taxes? Should we adjust incomes for household size, and if so how? How should we treat households who report zero income? What data source is the least likely to suffer from underreporting? And so on. For the purposes of illustrating different income-based definitions of the middle class in this paper, we use data from the Current Population Survey Annual Social and Economic Supplement on pre-tax household money income, adjusted for household size using square root equivalents, and expressed in dollars using the PCE deflator see more details in the Technical Note below.
Trends in median income are often used as a litmus test for middle-class progress. While the economic circumstances of the median household can be a useful indicator of overall economic health, changes in median income must be understood in the context of changes in the composition of U. In terms of looking at the middle class as whole, it is generally more useful to examine households within a certain income band around the median. In one of the most widely cited definitions of the last five years, Pew Research Center defines the middle class as all households with incomes between two-thirds and twice the national median.
Alan Krueger has popularized an income band of 50 to percent around the median. Several researchers have used Lester C. Note that the income ranges we show here are not necessarily the same as the ones produced by these authors themselves. Our goal here is simply to show the results of applying various definitions to the same income distribution.
Under a median income approach, the size of the middle class can change over time. For instance, Pew finds that the share of adults in the middle class fell from 61 percent in to 50 percent in But this might depend on where the formerly middle class households end up. Of the 11 percent of adults who exited the Pew middle class between and , 4 percentage points fell into the lower class and 7 percentage points moved into the upper or upper-middle class.
Another common indicator of middle-class welfare is the share of income going to middle-class households. Again, some care is needed here. If the size of the middle class shrinks, then the income share will almost certainly shrink as well, without anybody necessarily being any worse off.
The per-capita share of income could be declining, rising, or staying the same. Income share is a more telling indicator when the share of households in the middle class is held constant, as in definitions based on percentiles of the income distribution. Rather than tying the definition of the middle class to median income, some scholars prefer to look at a fixed slice of the distribution. A common approach is to divide the population up into fifths by income to produce quintiles.
The middle class can then be defined as some combination of these quintiles. Note that this is nearly identical to the income range for households between 75 and percent of median income.
A broader and commonly used definition of the middle class includes the middle three quintiles , encompassing 60 percent of all households. Perotti goes in the opposite direction, choosing the third and fourth quintiles.
Defining the middle class based on income quintiles is particularly appealing because the income statistics released by the Congressional Budget Office, arguably the premier source of estimates on income inequality and tax burdens in the U. Still, some economists depart from the quintile approach to define their own percentile ranges. Under a percentile-based definition, the share of households in the middle class is fixed over time.
This means that for every household that moves into the middle class, another must move out—either rising into a higher class or falling into a lower one. The benefits of this approach include its simplicity and its consistency over time, but these are also its major drawbacks: because the share of the population in the middle class is fixed, shifts in the shape of the income distribution itself tend be lost.
The third income-based approach defines middle-class status in terms of distance from poverty. Sawhill and Haskins set the bar at percent of the FPL for entry into the middle class. However, the selection of a multiple is far from an exact science. Atkinson and Brandolini document that some authors have used an upper threshold of nine or ten times the poverty line, which maps to approximately percent of median income.
The guidelines are simplifications of the thresholds and are primarily used for administrative purposes, such as determining eligibility for financial assistance programs. We use the Census Bureau thresholds based on the Official Poverty Measure, which sets the poverty threshold as three times the cost of a minimum food diet in , adjusted for inflation using the Consumer Price Index.
Alternatively, the Supplemental Poverty Measure preferred by many scholars takes into account current spending on food, housing, and other necessities, as well as geographic differences in the cost of living and the effects of taxes and in-kind benefits on household resources.
The intuition of all of these approaches is to define the minimum income necessary to achieve a certain standard of living; and for the middle class standard of living to be seen in terms of a certain distance from poverty. The fourth income-based approach to defining the middle class is to set boundaries based on absolute purchasing power. In the U. Their lower bound is based on vulnerability to poverty, mentioned below. Wealth, or net worth, provides a different measure of resources available to a household to a pure income measure.
Greater wealth may provide greater economic security, as a buffer against economic shocks, especially in later life. Crude Oil Gold 1, Silver CMC Crypto 1, FTSE 7, Nikkei 29, Read full article.
Gabrielle Olya. The city of Sitka, Alaska at dawn. Fayetteville is the third-largest city in Arkansas and county seat of Washington County. Story continues. Aerial image of downtown Los Angeles, California at night. Denver Colorado capitol hill. Bridgeport, Connecticut. Tampa, Florida, USA downtown city skyline. Honolulu Hawaii. Boise Idaho. Chicago, Illinois. Louisville downtown skyline view with a park with trees in the foreground. Aerial view of the Inner Harbor of Baltimore, Maryland on a clear summer day.
Minnesota St Paul. Downtown Kansas City, Missouri at daytime under a big blue sky and striking clouds. Missoula from Mount Sentinel, in Missoula, Montana.
Omaha Lincoln. The quaint village of Harrisville New Hampshire reflecting on a small pond in autumn. Jersey City panorama. New Mexico. Charlotte North Carolina daytime skyline. Columbus, Ohio. Another way to define middle class is by how much you spend. This more accurately reflects your well-being since income doesn't take into account non-cash government benefits, such as food stamps, or savings and can fluctuate greatly from year-to-year, say proponents of this measure.
Sullivan includes spending on food, transportation, entertainment, housing and other items. It excludes health care expenses and education, which Sullivan says might be considered investments. He defines the middle class as those in the middle fifth of spending. Soon after President Obama took office in , he created a task force aimed at raising the living standards of the middle class.
But first the task force had to define middle class. How did it choose to define this group? Through their aspirations The St. Louis Federal Reserve Bank takes a more complicated approach. They combine sociology with economics to define the middle class.
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