Not Everyone Defines “Middle Class” Like President Obama
Politicians talk about the “middle class” often. The President highlighted policies aimed at helping the middle class in his budget proposal. And the New York Times recently wrote about the shrinking middle class. But how do we define the “middle class”? Who is and who isn’t in it?
Economists usually favor definitions based on numbers and data. Politicians are a different story. But I am an economist.
Almost everybody defines the middle class by income. One way to do it is to designate the middle class to be the middle portion of the income distribution, say, between the 20th and the 80th percentile. In other words, if we were to rank all households by their income from lowest to highest, the lowest 20 percent of households would be below the middle class boundary, and the highest 20 percent would be above the middle class boundary.
The middle class, itself, would consist of the middle 60 percent of households. Using data for 2013, the most recent available, this definition would put into the middle class all households with income approximately between $21,000 and $106,000.
Not everybody agrees with this type of definition, because it implies that over time the level of income, and thus the standard of living that puts one into the middle class, would shift. If the overall prosperity changes over time, the income distribution shifts, taking the boundaries of the middle class with it. The table below shows the boundaries of the middle class for the past 10 years under this definition.
Others prefer to define the middle class between two fixed levels of income. For example, the New York Times analysis uses the $35,000-$100,000 household income range for this purpose. It is a bit different from the range they would have gotten had they used my definition of the middle class.
But there is a big conceptual difference between these definitions. Had they defined the middle class as I did, they would not be able to say that the middle class shrinks! If the middle class is defined as the middle 60 percent of households, it can never shrink. It will always contain exactly 60 percent of households.
So if the goal is to determine whether the middle class is shrinking, the answer depends a lot on which definition you use.
Table: The Middle Class Income Range (20th-80th percentile of household income, real 2013 dollars)
Source: Income and Poverty in the United States: 2013. U.S. Census Bureau.
