All the Children Are Above Average

And as I read Mark Perry’s post at the Foundation for Economic Education, “Why Our Shrinking Middle Class Is a Good Thing”, I could only think, “Oh, for an educated class that understands statistics!” What the statistics he cites in the article really tell us is that in many places in the country a six figure salary barely provides a middle class lifestyle any more.

There is a slim, now more than 50 year old pamphlet titled “How to Lie With Statistics” that should be required reading for every educated person.

What is middle class? I would propose that for the entire country “middle class” should mean median income ±two standard deviations, upper middle class median income +three standard deviations, and “the rich” as median income +four standard deviations. Median income minus three standard deviations are “the working poor”. For individual localities the definitions would vary based on the local median income.

According to the Census ACS median income for a family of four in Chicago is around $66,000 (other reckonings say $47,000). The “middle class” would then be households earning between $45,000 and $85,000. Incomes in Chicago have basically been flat for a dozen years. Note that if you research this yourself you should distinguish carefully among Chicago, Chicago metro, and Illinois.

Using my method the middle class cannot by definition shrink but it can become poorer which is very much what has happened over the last 30 years.

8 comments… add one
  • Gustopher Link

    Your definition of middle class is useless for anything other than stating that there is a middle class.

    After the zombie apocalypse, your definition would still have a sizeable middle class after adjusting the currency to bullets or brains (the zombies would also have a healthy middle class)

    Anyway, here’s my definition:

    Upper class: no longer has to work.
    Middle class: can afford a house, car, food, healthcare, kids, decent education for those kids, retirement.
    Working poor: below that. Probably cannot retire.

    Middle class has been unaffordable on a single income for decades, and has been made much more expensive by rising healthcare costs, government cuts to higher education, rising house prices, etc.

    Almost everyone is working poor these days.

  • Another way is by classes: upper class is when most of your income is derived from the ownership of assets (rents, royalties, etc.), middle class is when most of your income is derived from a salary, and lower class is when most of your income is derived from hourly wages. That’s imperfect, too. At least my method is quantifiable and makes at least some intuitive sense. In Chicago people earning household incomes of $65,000 – $85,000 are obviously middle class.

    You should read Perry’s article, linked in the post. He’s trying to draw a dollar figure around middle class, unmoored to location or what the money can buy.

    Something of which you should be aware if you aren’t already: retirement is a recent phenomenon and may be an artifact of U. S. post-war circumstances. Other than my mom (who was a government employee, a public school teacher) no one in my ancestral line has ever retired. I’m well over “retirement age” and may never retire.

    Middle class has been unaffordable on a single income for decades

    Should middle class be affordable on a single income and why? What if part of being middle class is adopting the mores of the middle class and one of those mores is being married?

  • Gustopher Link

    “You should read Perry’s article, linked in the post. He’s trying to draw a dollar figure around middle class, unmoored to location or what the money can buy.”

    I gave it a skim, and it suffers from a basic problem — middle class is not a percentage of income, it is literally about what the money can buy. Otherwise you end up with absurdities like middle class zombies. Or “good news, after the economic collapse we are all middle class!”

    A middle class, separated from the economic security for oneself and ones family, isn’t a concept that makes sense.

    There has always been some form of retirement, whether it is an ice flow, crushing poverty, living off family, or semi-retirement or living off savings. The simple fact is that unless people die suddenly of a heart attack, they slow down and can do less and less in their old age.

    My single vs. double income comment is to show just how far things have gone downhill since the 1970s for the average family. A stay at home parent isn’t really an option anymore.

  • bob sykes Link

    The US Commerce Dept. tends to use quartiles of the income distribution, so their middle class is essentially the 50% of the people centered around the median income. However, they temper this with various sociological considerations:”This report assumes that middle class families and those who wish to be middle class have certain common aspirations for themselves and their children. They strive for economic stability and therefore desire to own a home and to save for retirement. They want economic opportunities for their children and therefore want to provide them with a college education. Middle class families want to protect their own and their children’s health. And they want enough income for each adult to have a car and for a family vacation each year. Middle class families are forward-looking, and they know that to achieve these goals, they must work hard, plan ahead and save for the future. Indeed, being middle class may be as much about setting goals and working to achieve them as it is about their attainment.”

  • Andy Link

    “A stay at home parent isn’t really an option anymore.”

    Except that the cost of childcare is huge. For example, while our three children were young (before school), the cost to provide childcare so I could work full-time was about $15-20k a year depending on location (we moved a lot – wife was active duty military). Add in the other costs of employment and work you’d need to make at least $20-25k just to break even. Add in the taxes on that marginal income and it gets pushed up even higher. Slide those numbers up or down depending on location.

    Basically, families with more than 2 young kids cannot afford to have both parents working unless they are already earning a decent income.

  • This sounds a bit like an essay question in economics.

    “Under what conditions will wages not decline when the number of prospective employees seeking work doubles?”

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