The View from the Middle

It may not be what you think.

What does it mean to be middle class? Deeply embedded in American culture is the idea that we are all middle class. It’s probably a holdover from our centuries as an English colony; in the British class system, the middle class is defined by lack of a title, not by the amount of money one has.

From a purely economic perspective, middle class is based on having median income and median wealth. But it has become laden with all sorts of markers of status and values so as to be almost meaningless.

We’re in a presidential election season, so we’ll hear a lot about the middle class. Candidates will try to cast their policy ideas as helping the middle class, whether or not it helps the middle class as any particular voter understands it. Does the $12,920,000 estate tax exemption help the middle class? What about Pell grants for college?

Last month, I received a press release from H&R Block about its study of the American middle. It draws on data collected from 20 million people who use its tax return services, supplemented with qualitative interviews of 1000 people. (My non-US readers are marveling at the need for a tax return service. Did you know that in Sweden, you get a postcard with what the government thinks you owe, and if you agree, you’re done?) The company defines middle class as having income between $45,000 and $145,000, which strikes me as fair given that the US median income is about $75,000.

Here are the interesting tidbits from the report:

• The most common occupations in this group are teacher, manager, truck driver, salesperson, and military.

• People in the middle income range are more likely to live on the coasts rather than in the middle of the country.

• Incomes are not keeping pace with inflation, and this is giving people a lot of anxiety.

• The middle class is having children at older ages and have smaller families with less age dispersion among the children than in past years. Unlike me, fewer people have uncles just seven years older than they are.

• Millennials are most likely to pay with credit and are most likely to take a tax refund advance. (Note: tax refund advances are ridiculously expensive and should be avoided.)

• Millennials are most likely to report income from two or more jobs.

• Baby boomers are pushing out retirement age.

So that’s it. Private equity fund managers taking home $750,000 are not in the middle, sorry!

What do you think?