What do you consider the working class?

EDIT. this was meant to be titled 'What do you consider the MIDDLE class?'

So, we're always hearing that the middle class is shrinking, we also hear that the vast majority of Americans consider themselves middle class.  I've never seen a rock solid concrete definition of who or what the middle class is/are.  This came up again as I was listening to a podcast on the 'shrinking' of the middle class and they used a definition of middle class (in US terms) of someone who makes $25-100k per year.  Two things stuck me about that, first it's considerably lower than I thought, and also they were referring to individuals rather than households.  I realize it's a question along the lines of 'how long is a piece of string', but I guess we all have our own definitions and I wonder how they differ.  

So, what are peoples personal definitions of 'middle class' and or any other categories?  

Before I get to my view there are a couple of things I take into account.  First I think in terms of 'households' rather than individuals for a couple of reasons.  While traditional family units of two married spouses with 2.4 kids is rapidly changing, the fact is that most people in this country still live in an average 'household' of 2.5 people.  That sounds to me like a lot of couples with kids, offset by single or couple older people (empty nesters) and young single / couples starting out in life.  Also there is the famous statement/statistic/opinion that says approx. $75k is the amount of money a person/household needs to take care of all first two steps of Maslow's' hierarchy of needs without out stress of worry.  

Now obviously even keeping this to the USA, there's massive differences.  $25k is probably fine for a single person living in a moderate climate away from a large (expensive) metro area, but a couple with a baby are going to be in deep doo doo trying to survive on $25K in NYC, so this obviously talking in very general terms.

So finally my thoughts:

• Poor < $25K/yr
• Working poor $25-50K/yr
• Middle class $50k-150K/yr
• Upper middle class $140-200k/yr
• Wealthy over $200k/yr and or assets over $2mil

I really want to keep this to what peoples thoughts are on the middle, or other 'classes' and want to steer clear of the flounder fishing grounds by avoiding the 'shrinking middle class', 'growing inequality' side of the equation.  I already think this is an unanswerable question, but interested to see how my view of the world is similar / different from the rest of this merry band of dorks.

First of all, I would say "class" is not really an appropriate term (not your word I know).  It implies a rather clear definition, which there isn't, and some sort of general difference (e.g. cast).

I would say, without exact numbers, it's more a mater of averages and means within a community.  As you noted, it will change rather radically with location.

As such, I would say it is impossible for the middle class to be shrinking because as things change, the definition change a also.

This is the breakdown I found on Google. I would say that these numbers are pretty reasonable for today's dollars. 

Poor or near-poor  $32,048 or less

Lower-middle class  $32,048 - $53,413 

Middle class  $53,413 - $106,827 

Upper-middle class  $106,827 - $373,894

Rich  $373,894 and up

Yeah, I used to make $80 grand/year, and considered myself rich (single person household). I had to take a step down to  $30 grand/year, and until my girlfriend and I combined forces, I was constantly in the red. With the huge inflation we've seen since Covid, I think the above metrics need a reassessment. In some areas $30 grand a year may be a living wage, but not where I'm at.

I use fuzzy numbers.

I think your definition of "... the amount of money a person/household needs to take care of all first two steps of Maslow's' hierarchy of needs without stress of worry..." is pretty spot on for my fuzzy definition of "middle class".

Middle Class - Able to comfortably afford the basic necessities of food, shelter, transportation, healthcare, education, etc. without undue worry. Luxuries or emergency events (natural disaster, accident, major health issue, etc.) could be anywhere from a hardship to budget for up to causing major financial distress.

Lower Class - Affording the basic necessities of food, shelter, transportation, healthcare, education, etc. is a struggle that will require budgeting and likely sacrificing or requiring significant public assistance to handle basic needs. Luxuries and emergency events can not be budgeted for.

Upper Class - Basic needs are no concern. Major luxuries or emergencies are generally little to no concern.

You also get lower-middle and upper-middle. Lower-middle is able to handle all the necessities of life with no special public assistance (e.g. if you live Canada, you're getting publicly funded education and health care, but so is everyone else), but you likely require careful and creative budgeting, finding extra work, and/or coming up with creative community solutions. There's always food on the table and clean clothes, but you're working out a deal with the neighbors to trade child care a couple nights a week to pick up a bartending shift. Upper-middle you're really not stressing about those luxuries, but you keep them modest or budget well.

I'd also put a category of "Rich" above "Upper Class", where you have sufficient resources to basically not GAF.

What actual numbers these look like vary a lot with location and situation. My wife and I are solidly Upper-Middle class as DINKs in Columbus, but would be a lot lower if we were trying to raise a family in SF or NYC. The actual numbers will always be in flux. The middle class can definitely expand or shrink or based on job markets, buying power, and if a location provides more universal public services or social safety nets that remove the risk people suffer injury, illness, job loss, etc.

The dollar has certainly taken a beating in the last year or so. I don't think it's going to get any better anytime soon. 

From personal experience - and I'm not sure exactly how this slots into the predefined categories - but it felt like a major leap forward to go from "paying our bills" to "being able to cover unexpected expenses" without too much worry. 

Lower class - $0 net worth (paycheck to paycheck)

Middle class - negative net worth (large purchases not fully paid for yet)

Upper middle - $1 net worth to financial independence (Fi is when net worth >= 25*annual spending)

Upper class - Financially independent (ie make all their money from existing assets)

Income brackets alone are less than useless. 

Beer Baron's distinctions seems more useful than pure numbers.

For instance, depending on your situation and/or lifestyle- you can live very comfortably with very little- producing your own food, power, etc.  Very dependent on part of the country, though- there are places were it's easier to live "off grid" than others.

On the other hand, you can have income well above the off gridders, but doing the work somewhere in a large metro area- the costs of doing that are so high that it will be a constant struggle.

And calling the regions "working" is also kind of a misnomer.  It's quite possible to have a physical labor job and make a "middle" wage.  Just like it's quite possible to work at a desk all day and barely make any decent money.  Or even more extreme- there are incredibly physical work environments where the workers make real mint.

That, and pretty much everyone works (or did work to earn their retirement).  A CEO who has >1M$ income will say they work.

Not too long ago, like....2 years or less, you could live on 25k in my area. Rent was cheap, $500-700 is a good range, utilities were cheap and cost of living was relatively cheap. You weren't wealthy but you could make your bills.

Now rents start at $1000 and easily go into the $2k range. Basic costs everywhere have jumped a lot. It's kinda terrible because wages are just starting to go up, for years the local grocery store was at $9 an hour. Now it's $14 and it's still not enough. People are being squeezed out of their rentals because a house that was worth maybe $75k is worth $250k, landlords are selling and I don't blame them.

It's kinda sad to see really, but the area has been found out

Well, its an artificial construct, so its all inherently blurry. 

That said, if you want a way to roughly do locality adjustments for cost of living, the government does that for the GS payscale. 

https://www.federalpay.org/gs/locality

alfadriver said:

Beer Baron's distinctions seems more useful than pure numbers.

For instance, depending on your situation and/or lifestyle- you can live very comfortably with very little- producing your own food, power, etc.  Very dependent on part of the country, though- there are places were it's easier to live "off grid" than others.

On the other hand, you can have income well above the off gridders, but doing the work somewhere in a large metro area- the costs of doing that are so high that it will be a constant struggle.

And calling the regions "working" is also kind of a misnomer.  It's quite possible to have a physical labor job and make a "middle" wage.  Just like it's quite possible to work at a desk all day and barely make any decent money.  Or even more extreme- there are incredibly physical work environments where the workers make real mint.

That, and pretty much everyone works (or did work to earn their retirement).  A CEO who has >1M$ income will say they work.

 

True, for quite awhile my bottom line was $100 a week. That paid my minimal bills and bought food for me. My mortgage is very little, no power bill, no water bill, no garbage etc. 

Antihero (Forum Supporter) said:

Not too long ago, like....2 years or less, you could live on 25k in my area. Rent was cheap, $500-700 is a good range, utilities were cheap and cost of living was relatively cheap. You weren't wealthy but you could make your bills.

 

Now rents start at $1000 and easily go into the $2k range. Basic costs everywhere have jumped a lot. It's kinda terrible because wages are just starting to go up, for years the local grocery store was at $9 an hour. Now it's $14 and it's still not enough. People are being squeezed out of their rentals because a house that was worth maybe $75k is worth $250k, landlords are selling and I don't blame them.

 

It's kinda sad to see really, but the area has been found out

IMHO, that is going to happen in quite a few places with WFH in the Tech world.  Who happen to have "homes" in some of the most expensive cities in the country.  

Well, with one caveat- assuming that there is good high speed internet.

But it won't take much movement to have a pretty significant impact.

Related to this, my kid works at my friends shop and talks a lot. The other week he was on a lovely "rich people" rant. My buddy reminded him that he has a full college fund and his parents have a 911 and a summer house. But he's 17 and feels more "working class" than his friends that live in nicer neighborhoods and drove newish cars in high school. 

We tend to grade ourselves by our struggles and others by their appearances. Those can be very different things. 

aircooled said:

First of all, I would say "class" is not really an appropriate term (not your word I know).  It implies a rather clear definition, which there isn't, and some sort of general difference (e.g. cast).

I would say, without exact numbers, it's more a mater of averages and means within a community.  As you noted, it will change rather radically with location.

As such, I would say it is impossible for the middle class to be shrinking because as things change, the definition change a also.

I agree with your statement that the middle class isn't shrinking, it's definition is changing.  The big Q is what that change is, and is it good/bad/non quantifiable.

I can't do much about the term 'middle class', I get your point about it implying some kind of rigiged cast system, but it's a phrase the whole world recognizes even if they can't define it.

Robbie (Forum Supporter) said:

Lower class - $0 net worth (paycheck to paycheck)

Middle class - negative net worth (large purchases not fully paid for yet)

I don't know about these two. Most "lower class" I interact with working paycheck to paycheck tend to credit themselves into oblivion trying to afford nicer things giving themselves a huge negative net worth. 

Toyman01 + Sized and said:

The dollar has certainly taken a beating in the last year or so. I don't think it's going to get any better anytime soon. 

That's getting close to the fishing grounds so I want to stay away.  I did say at the start I was considering this from a specifically US POV.   But considering the value of any currency against the other as we're starting to exit a period of major economic upheaval for the whole world is tough to do.  I don't want to flounder either so I won't post my opinion on the why's and wherefores of what direction and when the $$ will go.

Adrian_Thompson (Forum Supporter) said:

I agree with your statement that the middle class isn't shrinking, it's definition is changing.  The big Q is what that change is, and is it good/bad/non quantifiable.

It might be shrinking. I'm not sure. Is the same proportion of people able to comfortably and securely afford the necessities of life? Or is an increasing number of people struggling to provide necessities for themselves and dealing with increased risk if a catastrophe drops a major expense on them or leaves them unable to work for a period of time?

iansane said:

Robbie (Forum Supporter) said:

Lower class - $0 net worth (paycheck to paycheck)

Middle class - negative net worth (large purchases not fully paid for yet)

I don't know about these two. Most "lower class" I interact with working paycheck to paycheck tend to credit themselves into oblivion trying to afford nicer things giving themselves a huge negative net worth. 

Most newish doctors with student loans and a mortgage are way more negative than a "lower class" person could ever hope to be. They just have a way out of it. 

Some thoughts on the comments above.  These aren't necessarily accurate or 'correct' just thoughts from reading some of the replies.  I find it interesting that the term 'working class' seems to have, if not vanished, been relegated to an after through.  I think working class used to mean what some people now think of as middle class.  There is nothing wrong or negative about the term, but I think part of the issue with the concept of a 'middle class' is that many people who used to be (or are) working class self redefined as middle class for a feeling of upward mobility.  Times change and we people note that (for example) someone earning $25-50k finds they are falling behind their (or societies) perception of middle class.  Hence 'the middle class is shrinking'.  As I said, not a fully formed thought, but something that came to mind reading this.

I remember there was an episode of the Cosby Show where Dr. Huxtable told his kid that the definition of "rich" was when your money worked for you versus you working for your money.  That always sort of stuck with me.  I also think that it's very much a relative term since just having ready and cheap access to clean water makes a person pretty wealthy compared to many parts of the planet!

You kind of need to take in to account some non-tangibles when it comes to making break points between "classes" as well.  It's a little hard to put a value on it (unless you're an actuary, of course!), but being relatively young and having an established professional career in a growth-type industry as a "knowledge worker" makes a negative net worth a much different proposition than being a physical unskilled laborer who's pushing 70 years old after spending 5 and a half decades trading your body for a wage. 

In reply to mazdeuce - Seth :

That's a good point that goes far beyond doctors and the ilk.  Understanding and managing debt is something that too many people don't or can't do.  One thing I've noticed is that I see a lot of people with wildly disparate incomes that from the outside have the same apparent standard of living.  I think way  way too many people monthly payment themselves into a lifestyle they think they 'deserve'.  I see many folks with $100k family incomes who's car(s), mortgage payments, gadget's and toy's are in the same general range as households earning $150-200k a year.  One thing that seems to be a constant is the wealthy people I know project a much lower 'status' lifestyle than the average person would expect if you told them their net worth. 

mazdeuce - Seth said:

iansane said:

Robbie (Forum Supporter) said:

Lower class - $0 net worth (paycheck to paycheck)

Middle class - negative net worth (large purchases not fully paid for yet)

I don't know about these two. Most "lower class" I interact with working paycheck to paycheck tend to credit themselves into oblivion trying to afford nicer things giving themselves a huge negative net worth. 

Most newish doctors with student loans and a mortgage are way more negative than a "lower class" person could ever hope to be. They just have a way out of it. 

A mortgage is not a negative net worth unless the house is worth less than the mortgage. 

Agreed on the loans though.

On college debt.  The single best piece of advice I've ever read is "don't borrow more for your education than the average starting salary for your degree".  That amount of money you can reasonably pay back in a few years working if you keep your debt in check.  So for a doctor where the median first year salary is $200K, borrowing that much isn't too big an issue.  But if you're planning on being a high school teacher, you better limit your education loans to $$35-40 as that's the National average first year teaching salary.  

I look at the question literally...working class = you have to work.

My calculus for rising above working class is simply...

What gross dollars per year do I want - 120K as 25% effective tax rate takes me down to 90K minus 25K to provide top quality health insurance for my family leaves me with 65K.

A retirement style (conservative) portfolio will average a 6% annual return minus 3% to keep up with inflation so that leaves 3% for spend.

Multiply the 120K gross income goal by 33.3 (reciprocal of 3%) = four million dollar portfolio.

Add a million for a paid off house (because California) and 500K for my two daughter's 3C's (College, car, continued health insurance) and you've got 5.5 million total.

Essentially, I'm building a perpetual retirement model which is independent of age (i.e. I'm not planning to retire when I'll reliably die before running out of money).

I ignore Social Security & Medicare benefits to add a little extra cushion and inheritance only gets factored in if / when I receive it (don't count your eggs...) but if it pushes me over my 5.5 million number, fine, hasta la vista baby).

Added later...

Flanking my 5.5 million number with a confidence interval (because statistician), I think...

5.0 million = Don't need to work but a little more money would be of use.

5.5 million = Perfect balance between the risk of working too long and the risk of decreasing inflation adjusted net worth over time.

6.0 million = Hard stop...spray Steve Austin Meme's to everybody on my way out the door.

I'll be 57 at the end of June...I've busted my a$$ my whole life, always lived well below my means, and invested wisely / responsibly.

I think it would be depressing to watch everything I've built up in my life slowly get bled down in retirement...I'd rather just leave a $hit ton to my daughters.