What’s Behind the Ballooning Upper Middle Class? Education
bloomberg.com
bloomberg.com
The study appears to define "middle" as 90% of respondents, which is laughable. Everyone thinks of themselves as middle, no matter how far from the actual middle they are.
The obvious definition would be percentiles of income, or wealth, or other measurable advantage. This would put a lot of readers in an upper class, as which people really don’t like to think of themselves.
Wealth and income aren't very good markers for class, there are plenty of working class members who make more money than many middle class members.
Here in the US I've heard families earning from $30k to $200k, working jobs from manual labor to white collar, call themselves "middle class."
$200K is definitely considered middle class in the US, especially by the left. For example, both Clinton and Sanders use $250K as their upper limit[0].
As for manual labor vs. white collar - it depends on what context you're talking about, but in terms of sheer economic purchasing power, that doesn't really matter that much. (Incidentally, a lot of white-collar office jobs pay a lot less than many blue-collar positions). There's definitely a class and status aspect to the term 'middle class', but that's much harder to quantify (and is also only loosely correlated with income - hence the existence of the term nouveau riche.
As an aside, $200K isn't necessarily as much as people think it is, which is (one of the reasons) why people like Clinton and Sanders consider $250K to be middle class[1]. A lot of people who "make" $200K in gross income are often working jobs which require them to cover a lot of large expenses (such as vehicles/equipment) out-of-pocket, or are running their own businesses[2]. While they might seem rich if you just look at the $200K figure, that doesn't mean they're really rich in any meaningful sense of the word - even if they're frugal, they could still be living quite hand-to-mouth on that amount.
[0] http://money.cnn.com/2016/02/18/news/economy/clinton-sanders...
[1] There are more cynical, political reasons for doing it as well, but there is a factual justification for it as well.
[2] I'm not talking about startups, but genuine 'small businesses', for which they're often the sole proprietor or one of very few partners.
I think that has more to do with politics than economics. $250K is an income limit that is politically expedient.
To call yourself middle class when you're making 5x the media household income is kinda silly. And yes, I know many live in HCOL areas.
A lot of people who "make" $200K in gross income are often working jobs which require them to cover a lot of large expenses (such as vehicles/equipment) out-of-pocket, or are running their own businesses[2].
This doesn't make any sense to me. Your gross income is your gross income. Nobody reports what their business revenue is as gross income. You need to take out expenses first.
Cost of living matters a whole lot, though. You'd have a higher standard of living in Cleveland at $100k than in San Francisco at $250k.
That’s a hyperbolic exaggeration. If you pay for a 2 bedroom apartment, transportation, food (even if the SF person only shops at Whole Foods or wherever), utilities, comparable health insurance, etc., then the SF person on a $250k salary is going to have considerably more left over to spend on whatever else they want.
The price of a two bedroom apartment in SF will get you a 3,000 sq ft house with a quarter acre of land elsewhere.
>double the rooms...for little tangible advantage.
I grew up in a mixed-class suburb, and many of my friends were the children of professionals (doctors, dentists, lawyers, businesspeople, etc.) with very large houses. So yes, I understand that some people think it’s important/useful to have a large house. None of them seemed to have a higher quality of life than my friends whose parents were professors, artists, teachers, etc. and lived in “normal-sized” 1000–1800 sq. ft. houses. In general, the large-house parents worked all the time, commuted longer distances, spent less time with their kids, and seemed generally less happy. On average the kids were probably also somewhat less happy. Having a big house, and having fancier material possessions more generally, isn’t really the most useful priority for most people to meet their primary life goals, in my opinion. YMMV.
At a world-wide scale, if every family needs to have a 3000+ square foot mansion on a separate lot, we’ll stay on track to wreck the planet.
Your opinion here really only matters on the order of 1/300millionth of the whole.....
It amazes me that Texas and Florida professional sports teams aren't overwhelmingly dominant, given that the contracts that they can pay athletes are effectively 10-25% better than other states, due to lack of state income tax.
To take a simplified example, if you lived in low-tax Nevada, but traveled to high-tax/high-population California to play shows, you're earning money based (at least in part) on the large audience in California. Why shouldn't you pay California part of that revenue?
If someone said, we'll I'm middle class with my $1M income because my salary doesn't go very far in Beverly Hills, would you agree?
Well, sure, that's true. But it's also possible the most important thing you're getting is a high paying job that wouldn't be available in a less expensive area. And it's possible that, like me, you would consider living in a dense city to be more downside than up.
It occurs to me a large factor in whether or not I'd consider people on the borderline either middle class or wealthy has to do with how much flexibility they have in then income. If you're getting a quarter million dollars every year from a trust fund and can live wherever you want, you're wealthy. On they other hand, if you and your spouse are grossing a quarter million dollars a year from jobs that requires twelve hour days in a very expensive city you don't necessarily like (and don't see much of in any case), you're middle class.
This is a good example of how "standard of living" is kind of a meaningless concept -- to someone who values "enough backyard to play catch in," you're correct; to someone who values "not living in Ohio," you're completely wrong.
I think it's a very useful distinction. I've seen similar things in demographic statistics. Where e.g. parents education was more predictive of their child's outcome than their income. Career choice and success is somewhat noisy and random.
> Here in the US I've heard families earning from $30k to $200k, working jobs from manual labor to white collar, call themselves "middle class."
Sounds perfectly reasonable to me. Where I'm from, the most important marker for middle class is that you value education very highly, and that you don't value physical labour above any kind of work.
Obviously, the people in your example at the low end of the pay scale would most likely be lower middle class, and those at the upper would be upper middle class. The major distinctions between those would be how to perform social interactions and the size of their social networks, but they all agree that life's goal is to send your kids through college.
(As opposed to being working class which means you do not value education highly, and you value physical labour ("real work!") higher than any other kind of work.)
TV labor-economics is a special category composed exclusively of hand-waving that lets the writers portray cool stuff without having to actually use nothing but the idle rich as characters.
In the UK on the other hand, a lot of our characters seem to be from working class backgrounds with a lot of money troubles and lower key living conditions. Like say, basically anyone from a UK soap opera (like Eastenders or Coronation Street). Or the main characters from Only Fools and Houses or Steptoe and Son.
He's a nuclear safety inspector; does that count as blue-collar? I don't really know much about the job frankly. I don't think it's implausible that it may be quite enough to support a family, especially in a small town.
Not to defend the realism of the Simpsons wrt his job, but I'm pretty sure the joke is that he manages to keep his well-paid, relatively important job.
Given that defining class is entirely and inherently arbitrary in nature, it means your premise is no more valid than an American that chooses to define themselves on class by income.
I'm talking about social class, which is a very real and well-documented phenomenon. Money is not a very good predictor of social class, because it only controls what you can buy.
To belong to a higher class, you have to use your money to buy the props that are necessary to perform that higher class, and you have to be able to do the performance as well.
For example: You buy business class tickets for your entire family for a vacation in Europe, and you still complain about how horrible flying is. Congratulations, you just performed upper-middle class!
I wouldn't consider either of these things something to proudly stick to.
The definition of middle-class is someone whose economic survival and security are reasonably assured. If you're middle-class, you usually aren't worrying where your next dollar is coming from. You have at least a little discretionary spending money. You have some free time.
In a rural area, where the cost of living is very low (and maybe you raise some of your own food), that might be possible on $30k. In the city it's likely to take at least twice that.
Conversely, as long as you have to work to maintain your lifestyle, you're middle-class, not upper-class. Even if you're making $600k, if quitting your job is not a realistic option because of the mortgage on your mansion, the payments on your Ferrari, and a couple of failed investments -- you're middle-class. You're way at the upper end of the middle class, but you're still middle-class.
Now, certainly, if you're making $600k and you're reasonably careful with your money, you have a golden opportunity to make investments that can, in a relatively short time, put you into the upper class. But you're not there until you have enough passive income to live on indefinitely.
In contrast lottery winners, successful plumbers or grocers and other businessmen will almost never become upper class, even if they are independently wealthy.
A lot of old noblemen look down on the capitalists / nouveau riche. At the same time, the realise they need capitalists to help them generate decent yields on their inherited fortunes. It's an interesting world at the top. Some are accepted into the group, and others are not.
Source: my mom is friends with several people who carry a title.
For example, most of them are still quite wealthy (i.e. a net worth of >€5m). One cardinal rule is you don’t flaunt your wealth. You can talk about investment returns etc, but you don’t drive around in flashy $500k-1m cars. Some capitalism is good, too much of it is bad. Most also like art. They enjoy living outside of the spotlight. A lot of people of nobility have been brought up to help fellow citizens in any way they can (i.e. not just giving money, helping them out with various stuff).
Overall, these are mostly good members of society that enjoy living their life outside of the spotlight. They respect the society they live in. It's not because you have you money that you shouldn't have respect for society. If you are well educated and respectful, you won't have too much trouble being accepted.
But only in the abstract. Saying "I bought some IBM shares which then went up 7%, which was nice" is fine. Saying how much your capital gains were in the last fiscal year is absolutely faux pas.
I suspect talking about wealth in concrete numbers is deemed unacceptable because it confronts people with the moral consequences of hoarding wealth and inequality, and they really don't want those uncomfortable conversations.
> They don’t really think in terms of class these days.
Because their social networks are ruthlessly narrow. They don't think in terms of class because they never interact with people who aren't at least at the social level of an educated professional.
Or more likely, because it gives out confidential information about how much you're really worth, which one should never do (for reasons varying from "avoiding hangers-on" to "avoiding loss of status").
Another reason why they often don’t talk about their total net worth is because most are actually incapable of growing their wealth, even if they wanted to. A few percentage points of yield, sure. But taking calculated risks to double their money is hard for them.
> They don't think in terms of class because they never interact with people who aren't at least at the social level of an educated professional.
What I find interesting is that wealth is often not the main driver behind their relationships. You can be relatively poor, and be accepted by them (but maybe not by society as a whole), as long as you share their values. They will regard certain people as their peers who, while looking at it from a monetary perspective, should not be.
But yes, their social networks can be extremely interesting. In Belgium especially, it is not uncommon to see people of nobility achieve great things (whether that is in business or in public service). They carry around genuine chauvinism / patriotism. At the same time it has shown that, for example judges in court, tend to be less strict in applying the laws on nobles. Not exactly sure why that is, but it makes for an interesting case study. Maybe because some judges carry a title themselves?
This one is easy. For the same reason judges give harsher sentences to people of color than to white people. Harsher sentences to men than to women. Harsher sentences for street crime than for financial crime. They give harsher sentences to uneducated people than to educated people. Good looking people get lighter sentences too. Confidence and charisma pays off too.
It's so much easier to empathize with somebody who looks exactly like the people you went to school with, you went drinking with in college, who talks like you do and who cares about the things you care about. So naturally their defense will sound reasonable in your eyes, and a lighter sentence follows.
That's because old-money knows very well that society as it is underpins their status. Disrespecting it, you disseminate an attitude that will ultimately dismantle it, bringing about your own demise.
European old-money dynasties have seen quite a few upheavals, some of them prompted by their own carelessness, and have learnt what is necessary to survive and prosper: anonymity, peace, and making sure nobody will rock the boat.
Regardless of how they acquired that land in the first place, that's pure theft. And I've also heard several stories of how they lost significant wealth due to shady characters.
Regardless? Really? Even if the way the family acquired the land was also "pure theft"? At bottom it's conquest + inheritance for nobility. IOW, pure luck. I think it appropriate that government redistribute such land someway.
Ditto for the various religious organizations too. Henry VIII took much land and wealth from the Roman Catholic Church.
If I remember right, that family received it as a gift from a king at the time. While in principle I agree with your notion, I don’t think the government should be taking away property in this day and age anymore.
At the end of the day, how far do you have to go back to protect property rights? If a family has owned a plot of land for nearly a thousand years, is it not yours then? Do we need to go back further?
Manifests itself a lot in questions of access to the higher positions, career growth and so on. It's fairly common to get refused on a promotion because you are a noname and know no one of the right folk.
One might have quite a bit of money, and be unable to do anything about a situation, while the other would know someone who cold make a call to someone else who would "call the elevator down" in exchange for a later favor.
What you call the lower economic class is better known as the precariat. Those who have low income, no wealth, no meaningful social safety net, and no opportunities.
What you call the upper economic class is better known as the independently wealthy. Those who don't need to work at all in order to live well.
I don't think you can meaningfully talk about an "economic class" that is purely a function of one's wealth, income and expenses, which is why sociologists never do.
That's utter baloney.
I know people with $150,000 / year combined income who think of themselves as middle class, despite being in the upper 10% of income in this country.
The problem is that wealth/income is not normally distributed! It is heavily - heavily! - skewed.
https://www.youtube.com/watch?v=QPKKQnijnsM
I would not worry about any family with <250k annual income when thinking about "what do we do about the uneven distribution of income", I would let those people be. They are not the problem. Look at the top 0.01% (see http://www.economist.com/news/finance-and-economics/21631129...).
Even in the Bay Area (which these two are NOT in), they are making DOUBLE the typical Bay-Area median household.
You can't make DOUBLE the amount of money of the median family and then claim to be "middle class". It just doesn't work that way.
And FYI: there's a reason why there's a ton of anti-gentrification going on in San Francisco. The actual middle-class, who is trying to live on ~$80k combined income in that region, is not able to find a house (let alone the lower-class, who will earn much less than the median)
If that family isn't middle class, what are they then?
https://en.wikipedia.org/wiki/Upper_middle_class
$150k is a lower-estimate for this family, they probably beat the $165k to qualify for top 5% household incomes in the country.
High amount of autonomy in their work, advanced degrees (beyond college: masters degree plus continuing education), significantly higher wages than everyone else... yeah, upper-middle class.
Ok, I think we keep talking past each other, because to me, upper middle class is just a subset of middle class. I don't think it's wrong for people who belong to it to describe themselves as middle class, because if you're in the upper middle class, you have a lot more in common with the rest of the middle class, than you have with the upper class.
Do yourself a favour and read the essay on class linked to elsewhere in this thread: http://siderea.livejournal.com/1260265.html?format=light
That's both salaries mother and father combined. You've got to be kidding me if having a takehome income literally TRIPLE the median constitutes "middle class".
Look, I don't even think "middle class" is a meaningful term. Don't ask me.
Despite the name, having to work for a living isn't what puts you in the working class. What you work with, and how you value different types of work and education is what puts you there.
That's kind of why we use the term upper middle class - to distinguish true average incomes from educated professionals (law/engineering/accounting/teaching/ middle management and formerly journalism) from landed aristocracy and CEOs of Fortune 100s.
>The study appears to define "middle" as 90% of respondents
Where do they do this? I think they just defined the lower boundary as the federal poverty level of 30k and the upper bound as where "rich" starts. Seems totally reasonable to me.
> In the latter case, the study literally uses "people who identify as rich".... The obvious definition would be percentiles of income
The study did use a percentile, it did not define rich people as "people who identify as rich". It looked at the approximate percentile of people who self-identify as rich (1-2%) and then found a round number (350k) that was in the range of that percentile (1.8%). This seems perfectly reasonable to me. And arguing about 1% vs 1.5% vs 2% is pointless because as I always say, arbitrary-in arbitrary-out; neither is more or less "correct" than the other.
Apologies if we're referring to different reports.
Using self-identified rich to derive an income baseline for rich still means “rich” is self-identified, no? It still puts us in the 1-2% range.
I suggest that a measurable definition of rich should be those who are clearly above the vast majority of (say) incomes. Being richer than 80% or 90% of the population makes one closer to the top than the middle, so that seems like a better definition of “rich”. Agree that it is necessarily arbitrary, but I think such a definition is pretty conservative.
Regarding the 90%, it’s from this line:
> about 9 out of 10 respondents identified as being in one of the three parts of the middle class
But re-reading, yes you’re right that the lower bound is not self-identified. But the author’s using the $30K number (from the poverty line) puts us at around the 5th percentile: https://en.wikipedia.org/wiki/Household_income_in_the_United...
…which effectively puts the “middle” classes at 90% of the population.
Again, thanks for the rigor and let me know if I have misread.
I don't agree with this - I know a guy who makes 500k a year who considers himself "upper middle class", but this report would classify him (probably rightfully so) as rich. I think of the self-identified part as a principled way of defining something arbitrary. In my job I do a lot of analysis that needs to be boiled down to easy-to-understand metrics and definitions, and I personally feel this is the best approach when there isn't a good standard definition. A simple percentile wouldn't work here because the whole point of the study is looking at how income/class has changed over time.
>the author’s using the $30K number (from the poverty line) puts us at around the 5th percentile
Note that 30k is a normalized "family-of-three equivalent", which isn't the same as household income. It's actually a pretty neat way to remove size-of-family effects (which changed over the period of the analysis). Figure 2 shows about 20% of people would fall below middle class in 2014, and 24% in 1979.
>Again, thanks for the rigor
No worries and glad to, I love reading these kinds of studies!
If there's nothing approaching a consensus about what given words or phrases mean then perhaps they shouldn't be used.
http://www.economist.com/news/briefing/21640316-children-ric...
"Not only do graduate couples tend to value education; they also tend to have money to spend on it. And though the best predictor of an American child’s success in school has long been the parents’ educational level—a factor which graduates are already ahead on, by definition—money is an increasingly important factor. According to Sean Reardon of Stanford the past decades have seen a growing correlation between parental income and children’s test scores. Sort the students who took the SAT, a test for college applicants, in 2014 by parental income and the results get steadily better the further up the ladder you climb."
"And on top of spending on school, there is spending outside it: the gap between what rich and poor parents shell out for museum trips, music lessons, books and so on has been widening (see chart 2). In a world where lots of people do well on SATs, cultivating extra skills matters.
The opportunities for parental investment continue in higher education, which is ever more costly (see chart 3) but offers ever greater returns. Between 1979 and 2012 the income gap between the median family with college-educated parents and one with high-school educated parents grew four times greater than the headline-grabbing income gap between the top 1% of earners and the rest, according to David Autor of MIT, rising from $30,000 to $58,000."
http://www.demos.org/blog/12/2/15/why-education-does-not-fix...
Edit: However, it will increase wages in absolute terms:
http://www.nytimes.com/2015/04/01/upshot/why-more-education-...
Then after some time governments start regulating that industry until only the ones with connections and degrees from good colleges have the chance to enter the industry.
This is the moment when this industry ceases to enable people based on merit (smart, working hard) to move up the social ladder.
Eventually this industry dies because of this process, because now it is not the strong willed, smartest and hardest working that make it to the top but instead it's a bunch of drones from colleges that all have the same thinking, manners and world views.
I believe this has already happened in the financial industry and I feel that in the next 1 or 2 decades this will also happen in the IT industry, which currently isn't heavily regulated.
I myself (immigrating from a Socialist country) made it in one of the richer EU countries to the top 0,5% of society without a college education (I dropped out) in the IT sector and I'm quite sure that I wouldn't have made it if this industry was heavily regulated.
I equate regulation to an entry cost to do business in some area. While regulation in itself isn't bad too many regulations can over time create an environment where only the ones that already have money can enter the playing field.
It's kind of like the rich and powerful see that there's an industry where a lot of profit can be made and the first thing they do is to immediately create entry barriers with regulations so only their own offspring can claim future profits in this industry.
I can see why you would have such a viewpoint though. What you describe is exactly what happens in many countries where corruption is more prevalent (e.g. India, Russia etc) with regulations being created precisely to keep out others.
Regulations that allow only persons with certain college degrees to create a business in some fields.
What would you say if in 10 years from now you can't create a small web business that provides you passive income if you don't have some certificate from your government that is only provided to those with a Master or PHD? (or whatever additional barriers they come up with)
For many this is a way to rise on the social ladder and I know that in the EU country I live in there are right now talks within the government of creating barriers for creating new businesses in the IT sector. (but I just know it because I know people that are directly involved in politics)
If this happens it would be especially sad because in the IT sector you generally don't need a lot of money to buy production factors. You only need to be smart and own a laptop. And this is especially great for poor people that nonetheless have the energy to go out and build something.
Who would profit from this? Big corporations like Siemens because then everyone that is interested in IT must go and work there as an employee and people who can afford to go to college for 4-6 years. Of course the people that could afford to get the degree would then be the bosses of all the others by default.
Occupational licensing is actually more prevalent in the US than in EU.
> This regulatory practice is known as “occupational licensing,” and it has spread to cover around 30 percent of the U.S. workforce, up from just 5 percent in the 1950s.
http://www.brookings.edu/blogs/up-front/posts/2015/01/26-tim...
There is an explicit comparison made in the full report:
> Occupational licensing is not unique to the United States. Based on information gathered in 2012 from the then twentyseven nations in the European Union (EU), between 9 and 24 percent of European workers are subject to occupational licensing, which translates to between 19 million and 51 million individuals. These estimates of the share of the workforce that is licensed, even at the higher end, are still lower than the estimated share in the United States, which is slightly under 30 percent (Koumenta et al. 2014).
> Similar to U.S. states, the extent of occupational licensing varies widely across countries in the EU: Bulgaria, Estonia, Finland, France, Ireland, Latvia, Lithuania, Malta, the Netherlands, Romania, and Sweden all have less than 15 percent of their workers covered by occupational licensing (Koumenta et al. 2014). Regulation is much more prevalent in other countries, however: at least 25 percent of the workforce in Denmark and Germany, for example, is regulated, and rates are also high in Italy and Spain.
http://www.brookings.edu/~/media/research/files/papers/2015/...
But yes, occupational licensing is a barrier too.
Thanks for the data/links!
All of these require an education and most importantly living in the right places. These industries while booming are better at generating upper middle class with a lot of low wage jobs in between, rather than the healthy middle classes common in older industries like steel, mining, and other union jobs that fueled the 1950-70s middle class boom.
[1] https://www.washingtonpost.com/local/dc-enclaves-reap-reward...
That special piece of paper is simply one of the common trinkets of that lifestyle. Stop assigning magic powers to it.
My parents technically earn below the federal poverty level. They definitely could not have afforded the expensive private education I received.
Yet from a young age it was always expected that I would attend college and a huge emphasis was put on education. Educational values endure across generations more effectively than wealth.
So maybe education is the most important factor if you only count in demand fields.
By contrast, in software there is at least he potential to do things differently. On Friday I was on the interview commitee for a candidate who we accepted. Now I realize that I have no idea what degree she has (if any). Her CV was so full of past projects that I never got around to looking at her education.
It would be different for a fresh graduate, but if such a CV mentioned a vocational school or an online course, then that would be neither better nor worse than a CS degree.
What this doesn't tell you is what percentage of that real GDP growth did the middle class get to participate in. And this is where the growing economic disparity is coming from.
"Between 1979 and 2014 ... there were sizable declines in each of the lower three groups, with the poor and near-poor falling from 24.3 to 19.8 percent, the lower middle class from 23.9 to 17.1 percent, and the middle class from 38.8 to 32.0 percent."
My read of that is that since 1979, there has been a shift up for all income groups. There are fewer poor and near-poor, fewer middle class, and substantially more in the upper middle class.
Isn't this good news? Doesn't it fly in the face of the 'growing income divide'?
Something is not adding up...
It is about pay-walled system of elite degrees - a status symbol brought by family money in the most cases.
BTW, there are many great teachers and courses in these elite schools (I personally love MIT and Yale online courses), so yes, there is also knowledge component in elite education.) But it is paper which makes the difference.
My great grandparents were solidly upper class (they owned a large paper company). Since then, there has of course been wide variation in outcomes, from my mother making $10k/year to my aunt who owns a highly successful architecture firm.
Yet absolutely everyone in my extended family went to college. Values and norms persist longer than money.
Could this be because of the university attended?
The article doesn't mention anything about How the classes are defined however.
Note that "lower class" isn't a thing. It's called "working class". That doesn't fit in your model.