The Muddle in the Middle

Posted by Brad Osborne on August 15, 2012 · 2 Comments 

As campaign rhetoric flies rampantly from both camps, we will consistently be hearing the term “middle class”. I could spend time lamenting the fact that we live in a “classed” society, but historically there has always been a socio-economic division in any society. I am sure, even at the dawn of man, there was some Neanderthal that had a bigger cave, nicer club, and tastier dinosaurs to eat. Even in more modern socialistic societies where wealth is distributed, there is an elite class of leaders whose lifestyle exceeds the norm of the governed people. It is what it is, and probably always will be.

That being said, the perceived effect on the middle class will be an important factor for most people in electing our next president. President Obama has stated that families with an annual income below $250k were middle class. And many legislators have suggested higher income levels of $500k and even $1m as the cut-off level. These suggested higher income levels could be tied in part to a gain in Republican power resulting from the mid-term elections and an effort on the Democratic side to facilitate some common ground.

The problem is that “middle class” is a relative term. In an April 2008 survey (most recent data on the specific topic I could find) conducted by the Pew Research center, 4 in 10 Americans with income below $20,000 said they were middle class, while one-third of those making more than $150,000 defined themselves as middle class. See what I mean?

Part of this is driven by the fact that a very small percentage of Americans are filthy rich, with income and assets in the billions. Add to that the fact that we have more “millionaires” now than ever before. These statistics would make someone with an income of $250k a year vehemently oppose the idea that they are “rich”. Now ask a family with an income of $40K and they may well see a $250k annual income as being wealthy. Low income is easy to delineate. All of our social programs have required income levels so low that there is rarely a conflict on whether these people need assistance in providing for basic necessities. It is everything above that we don’t have a handle on. And the $250k level just doesn’t seem to be in the middle at all, unless of course you make $250k. And if you do, it may pain you to know that you are in the top 4% of the American populace. That is why it is hard for others to see you as middle class. I personally would love to be “just getting by” on that kind of income.

So where is the middle? Well, luckily we have the 2010 Census data to help us find the middle. So what is the median income for all households in the U.S.? $250k? $500k? Try $49,455! This is nowhere near the numbers that both parties are using to define middle class. How can they be so far off? It’s possible that much of their campaign donations come from people at or above those levels. Gee, I wonder why those people have expendable income to donate. If they propose to increase taxes on income levels above even $100k, they may be pissing off a lot of their supporters.

But the math would work like this in the real world. Current Federal minimum wage effective January 1, 2012 is $7.95/hr. x 2080 hours per year for full-time employment = $16,536. So let’s round up and say incomes levels for middle class start a $20k (although I am sure they won’t necessarily feel like they are living in the middle class). Average median income is about $50k and I wouldn’t begrudge anyone their ability to make more than average, including two income families, so let’s double that or better yet triple it to $150K.

So middle class is combined household annual incomes of between $20k and $150k. Give everyone in this range a break, continue or increase the support to low-income households making under $20k, and get the people making more than $150k to start paying a fair share. Gosh, why can’t it be just that simple?

© 2012  Commonsensibly Speaking ~ Brad Osborne

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