It seems that everyone thinks s/he is middle class. How do I know whether I am considered middle class? What is middle class anyway? How much do I need to earn to break into upper-middle or wealthy? And will earning more money make me happier?
Social Class Based on Income
The American middle-class is generally defined as those who make between 67% and 200% of the median household income (median is the half-way point, with half of the people making more and half making less).
For 2017, that would mean that middle class households are ones that earn between $46,153 and $138,460. This incorporates 45% of the households in America.
People Think They Are More Poor Than They Are
It’s interesting to see that many people say they are poorer than they are. A survey by Pew found that, while only 32% percent of people are lower-middle class or poor, 40% of people classified themselves as lower-middle class or poor. And while 26% are technically considered to be rich, only 16% of people classified themselves as rich.
Class Tiers Based on Income
In the USA, 15% of households are considered to be living in poverty. They are defined as having incomes of $20,000 or less.
Low income households consisitute 23% of the population. They earn between $20,000 and $44,999 a year.
In America, 45% of households are considered to be middle class. But the range of middle-class income ranges from $46,000 to $138,000. That’s quite a range. It’s easy to see how the lifestyle of a family earning $46,000 a year may vary drastically compared to a household bringing in $138,00 a year.
Only 2% are considered upper-middle class. Those households are defined as having incomes ranging from $140,000 to $149,000. I considered my current lifestyle to be one of upper-middle class. When I heard this number, I realized that this is well above what my household will earn, even if my husband does eventually return to work.
High income earners (7%) range from $150,000 to $199,999. And the wealthy 8% are those earning $200,000 a year.
Other Definitions of Class
An article published by The Balance on What is Considered Middle Class Income lays out what some experts believe to be other methods of determining middle-class. A similar article by CNN What Is Middle Class Anyway? also points out that many people can afford a high standard of living without having a large income (e.g. retirees or people who are financially independent). Net worth, Spending, and Values are some other gauges of class.
Individuals who are in debt have negative net worth. Those whose net worth is in the middle three-fifths of the wealth spectrum (net worth of $0 to $401,000) are middle class. And those with a net worth of $401,000 or more are considered wealthy by NYU Professor Edward Wolff’s wealth definition.
Related article: Net Worth Calculation
How much one “consumes” (I loathe referring to people as consumers) is another possible indicator of class. Those in the middle-fifth of spending on food, transportation, housing, and entertainment are considered middle-class. Notre Dame University Professor James X. Sullivan found that a four-family household spending between $38,200 and $49,900 is middle class.
A 2010 White House Report found “middle-class families are defined by their aspirations more than their income” (p. 10). Aspiring to own a home, vehicle, college education for their kids, health care, retirement savings, and occasional vacations makes one middle class.
Many people across many incomes hold these aspirations. But the report acknowledges that achieving these six goals is challenging if not unattainable for many people, especially those who earn less.
Going by this definition, it makes sense that everyone considers themselves middle class.
It’s All Relative
These definitions of middle class are based on life in America, one of the wealthiest nations in the world. When we make comparisons based on people who are so similar to ourselves, we lose sight of how fortunate we all are. Among those of us with similar incomes, we have sturdy houses, electricity, potable water, easily accessible food, education, clothing, transportation, and choice of jobs.
The Dollar Street study really puts class into perspective. Imagine that there is one street on which all 7 billion people in this world reside. The poorest people in the world live on one end of the street and the richest on the other end.
Researchers asked college students in Sweden where they would live on the street. Where did they put themselves? That’s right, they put themselves in the middle of world income. In reality, they were at the top.
For the Dollar Street study, photographers went to 264 homes in 50 countries to show how people with different levels of income live. In each home, they took pictures of the same things (e.g., front doors, beds, stoves, toys, shoes, and even toilets). Pictures were then lined up by income.
It’s easy to take for granted how many people don’t own shoes, toothbrushes, spoons, or sofas. There are people throughout the world who live without indoor stoves or toilets. Some children sleep on the floor under leaking roofs and do not have toys.
There are people who live so simply that they do not produce waste. Some people can’t afford not to use every resource at their disposal.
The Dollar Street TED Talk shows us how the rest of the world lives, organized by income. It provides a new perspective on the haves and have-nots.
Does Having More Money Lead to More Happiness?
Back in 2010, JD Roth from Get Rich Slowly wrote about how money really can buy happiness. Soon after, he wrote a follow-up article on how a study from Princeton found that emotional well-being peaked at an annual household income of $75,000. People with more money reported more life satisfaction, but not more happiness. So money can buy happiness to an extent, but a high income does not result in more happiness.
Put in the context of the Dollar Street study, these findings make sense. Once our needs are met, more money doesn’t increase happiness. Remember that those who earn more money typically work longer hours or in high-stress jobs.
Related article: Breaking Free from the Golden Handcuffs
Do you consider yourself to be poor, middle-class, upper middle-class, or wealthy? Knowing that after a certain level of income more money does not make us happier, how much more time are you willing to spend working?
There are a number of online resources you can use to compare yourself based on income and geographical location.