What Is the Middle Class?
The middle class is a description given to individuals and households who typically fall between the working class and the upper class within a socio-economic hierarchy. In Western cultures, persons in the middle class tend to have a higher proportion of college degrees than those in the working class, have more income available for consumption, and may own property. Those in the middle class often are employed as professionals, managers, and civil servants.
Key Takeaways
- The middle class is a socio-economic strata that falls in between the working class and the upper class.
- The middle class constitutes about half of the U.S. population, but it has shrunk over nearly half a century.
- Those in the middle class have enough disposable income to afford minor luxuries like vacations or restaurants but also rely on borrowing for big-ticket items like homes and cars.
Understanding the Term "Middle Class"
The word "middle" may be misleadingin thatit suggests that those in the middle class have earnings within the middle of the population's income distribution, which may not be the case. Middle class families tend to own their own home (although with a mortgage), own a car (although with a loan or lease), send their kids to college (although with student loans or scholarships), are saving for retirement, and have enough disposable savings to afford certain luxuries like dining out and vacations.
Karl Marx referred to the middle class as part of the bourgeoisie (i.e. the "petit bourgeoisie:, or small business owners) when he described the way in which capitalism operates, in opposition to the working class, which he termed the "proletariat". The term "middle class" itself has shifted in meaning over time, having once referred to persons who had the means to rival nobles to the contemporary meaning that is more akin to the upper end of the working class.
Recently, there has been talk of a "disappearing middle class" in modern society, as income inequality has tended to "hollow out the middle" and largely benefit the top (e.g. the top 1%). At the same time, the term has shifted to include upper-middle and lower-middle classes to account for the increased stratification.
50%
The number of Americans who belong to the middle class as of 2021, according to the Pew Research Center.
What Constitutes the Middle Class
The birth of the middle class, in some respects, has been linked to federal funding and support through programs such as the G.I. Bill, which offered funds for education and the start of businesses created by veterans who were discharged. The combination of incentives and salary increases helped elevate working class citizens into the newly forming middle class.
The income parameters that define the middle class continue to change and not solely based on the rate of inflation. Regional disparities in income and the cost of living mean that salary-based measures of the middle class can vary greatly. Different income barometers describe the middle class as having income from $50,000 to $150,000 or, in some instances, $42,000 to $125,000. Other measures of middle class set the upper-income mark at $250,000.
A 20$ Minimum Wage
If wages increased at the same rate as labor productivity since 1968, the hourly minimum wage would now be over $21, according to the Center for Economic and Policy Research.
Characteristics of the Middle Class
The concept of middle-class society may include a presumption of earning a salary that supports owning a resident in a suburban or comparable neighborhood in rural or urban settings, along with discretionary income that allows for access to entertainment and other flexible expenses such as travel or dining out. While it is assumed that middle-class households generate sufficient income for retirement savings along with standard expenses, an increasing segment of this portion of the American population is also living paycheck to paycheck.
An ideal commonly held among the middle class is that it is possible to increase their income to higher economic strata through career advancement and salary upgrades. The pace of such upward mobility aspirations, however, has changed over the decades with the costs of goods and services, in some cases outpacing the growth of salaries.
What Income Is Considered Middle Class?
The Pew Research Center defines "middle class" as an income that ranges between two-thirds and double the median income. The exact boundaries of a middle-class income vary by family size and location, due to the geographical differences in cost of living. That works out to an annual income between $52,000 and $156,000 for a three-person household, as of 2020.
How Large Is the Middle Class?
According to a 2022 analysis by the Pew Research Center, about 50% of Americans were in the middle class as of 2021. That represents a sharp decline from 61% in 1971.
How Much Should the Average Middle-Class Person Save for Retirement?
As a rule of thumb, many financial advisors recommend saving at least three times your annual income by the end of your thirties. Since the median income for a 35-year-old is $63,000, that means saving around $189,000.
The Bottom Line
The middle class is the economic stratum between the working class and the wealthy. In the United States, the middle class occupies about half of the population, mainly consisting of people who work in white-collar professions, small businesses, or skilled trades. The middle class has declined since the 1970s, due to the loss of highly-paid manufacturing jobs and increasing economic inequality.
