At Work

The Middle-class

Political rhetoric today is focused on the middle-class and its decline and uphill battle against inequality. The middle-class is typically defined by income in this rhetoric and it is framed so that it appears we are talking about a fixed population void of new entrants and departures to higher income ranks.

There is more to middle -class than income, it includes life styles, education, aspirations and more. Some people are perfectly content being middle-class; others have higher ambitions.

Listen to the likes of Old Bernie Sanders and you may believe the next rung above middle-class is millionaire. That simply is not true.

You will hear that the wealth and income of those above middle-class has grown faster than all others. We should ask why? The stock market growth is one significant reason, the competition from the global economy affecting middle-class jobs is another, an influx of people into the lowest range of middle-class lowers the average income of the group, etc. In other words,  the higher growth in one income group over another is not because of some nefarious plot or a “rigged” system.

As you can see below middle-class income varies greatly. A family earning $150,000 in NJ is not wealthy. Retire to Mississippi and you may be wealthy.

  If the concern is raising these numbers, what does it take to do so? Simply taxing the millionaires and billionaires more is no answer, that’s populist rhetoric. There are two challenges. Getting people to grow out of the middle-class and growing the income of the middle-class. From the numbers here you can see raising the minimum wage has little impact on this group. A tighter labor market will increase wages. Possessing sought after skills will help individuals climb the economic ladder. Simply growing the economy and higher inflation will help. Raising wages in a low inflation environment is difficult; just ask senior citizens and even federal government employees.

Then there is the matter of wealth. Wealth comes in many forms, especially for the middle-class and below. While the politicians rant about the wealth of millionaires and billionaires the wealth quietly accumulates for the middle-class in the form of growing value of such things as Social Security and Medicare funded not only by the individuals but mostly by general tax revenue and the taxes being paid by younger citizens.  Here is an interesting assessment of this impact on wealth.  In addition, as you can see below, many middle-class families pay no income tax.

Finally we have the overall perception of the middle-class beyond the stats and data; the real world so to speak.  I was at a house party yesterday and in attendance was a good representation of the older middle-class.   Among them were several retired teachers (all who retired long before age 60), a credit manager, a former salesmen, etc. Needless to say, sooner or later the discussion turned to Social Security and the lack of a COLA.  The consensus was they were being ripped off, the numbers were being manipulated and all the rest. Two said their Social Security benefit had decreased by $10.00, which even if they were paying a supplemental Medicare premium (which they were not) was not possible.  Let me also mention that these struggling middle-class seniors have condos in Florida where they spend their winters or they rent a place for the season, they travel frequently and take advantage of every discount they can get.  One proudly explained how he “used” money from a part-time construction business he once owned. “I never lived off my salary as a school teacher.”  he proclaimed.  “I just took $500 from “petty cash” three times a week and we bought what we wanted.”  I wonder how many other middle-class Americans have income that doesn’t find its way into the data bases? 😱

The fact is, the largest target for tax audits is the sole proprietorship business, the ones that deal mostly in cash, the middle-class.


2 replies »

  1. There are people moving up and down the income ladder all the time, but the data shows the top 30% have done much better than the bottom 30%. But you have to realize the number of real good paying jobs has gone down over the last 40 years. Not everyone can make $100,000 or more, there are just more people than there are high paying jobs, period.
    That is why we have college grads working jobs that do not even require a college degree.
    You have to know that most of the household income listed in the charts above are 2 or more workers bringing home a pay check.

    The tax code is a mess and the politicians will not fix it.

    Too much income for many is exempt from taxes, because of something that person did. Bought a house, an electric car or an exempt bond. Or had 8 children. But this class warfare does no one any good. The left will fix nothing, they have had control of the White House and Congress and did nothing but raise the cost of government since 2009. And the right had control of the federal government from 2000 to 2008 and did nothing but increase the cost of government.

    Each person has to be responsible for what they have in this life, period. If you are waiting for the government to make things better, you will be waiting a very long time. I do not think it will ever happen. I have lived well in the lower middle class since age 18. Raised 4 children, my wife never had to work outside the home, and I think that is why I have 4 Adult children that are in the middle class today. Never been homeless, never missed a meal and have been able to purchase everything i have ever wanted.
    Most people in the USA have it too good and should be thankful they were born in the USA. .


  2. I propose a new definition of middle class which is based on the amount of government support.

    The poor are people who receive 100% government help for everything from food stamps, medical, housing, and other social services.

    The middle class is anyone who receives some kind of government help in the form of reduced school lunches, tuition aid, child tax credits on their income taxes, free bus rides, Obamacare tax credits or anything else that you have to qualify for provided by the government.

    The upper class are the people who get no tax credits unless they are available to everyone else. No free lunches. No tuition aid. They get to pay extra taxes because they make too much.

    I would like to see the number of people that get some kind of government support and how big the middle class still is.


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