September 10, 2019

How We Define “Middle Class” Has Broad Implications

September 10, 2019

In July, the New York Times asked readers to describe what it’s like to be middle class in America. From more than 500 responses, the Times highlighted stories from seven families around the country with annual incomes that ranged from $75,000 to $400,000.

The story prompted important conversations about how we define “middle class” in America. Should it be based on income? Wealth? How about the share of homeownership or stable employment? Or maybe the middle class is harder to define, instead more broadly implying a sense of stability and security?

Any definition of the middle class will have shortcomings. In 2017, the median household income across the country was $61,372. Even that number paints an incomplete picture—median household incomes range nationwide from $43,441 in Mississippi to $83,382 in Washington, DC.

The Pew Research Center defines the middle class as people whose annual household income is two-thirds to double the national median income, adjusted for household size. The late Alan Krueger argued that the middle class represents a band of income from 50 to 150 percent around the median.

Last year, researchers from the Brookings Institution pulled together 12 different measures of the middle class defined by income. Those estimates ranged widely, with annual household incomes ranging from $13,000 to $230,000 a year, yet most fell within a range roughly between $50,000 and $125,000.

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The range of incomes in the New York Times article is markedly higher than the national median household income, as well as the median household income in each respondent’s state and, in most cases, their city or area.

After widespread critique of their measure of the middle class, the Times issued a response titled “Can a Middle-Class Family Earn $200,000? Yes, Our Editor Explains.” Editor Jyoti Thottam argues there is no agreed-upon definition of middle class and that the households they selected represented a variety of geographies, professions, and experiences.

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Although no one would argue that it’s impossible for someone earning $200,000 to be middle class, given the existing income distribution in the United States, people earning $150,000 or more are likely not representative of what it means to be middle class.

So, what does it mean to be middle class?

And how might a categorization like that in the Times distort our perceptions?

I thought about some basic metrics worth comparing between the families highlighted in the Times and families with less income. These metrics include net worth, the share of people with or without health insurance, and the percentage of people who own their home (versus renting, which is less financially beneficial).

One challenge is that not all data sources and publications have the same income ranges, but the unsurprising common thread is that people with household incomes closer to the national median have lower net wealth, higher health uninsurance rates, and lower rates of homeownership.

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This isn’t to argue that the people featured in the New York Times story are not worried about their finances or feeling burdened or squeezed. But the challenges those families face are likely different from those who rely on less to get by.

As economists and others fret about the health of the broader economy, we must also confront increasing income and wealth inequality, anxiety about the job market, declining health insurance coverage, and questions surrounding retirement security.

Understanding the obstacles faced by middle-class families helps inform how community leaders, lawmakers, and their advisors respond to the needs of the country.

Photo via jhorrocks/Getty Images.

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