Are You in the Middle Class?

A photo to accompany a story about the middle class Getty Images

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Are you middle-class? 

68% of Americans would say yes to that question, according to a Northwestern Mutual study. But technically speaking, only 52% of us are actually in the middle class, based on recent Pew Research Center findings. 

The bigger question we should be asking is: What is the middle class, anyway?

According to Pew, the middle class represents households that earn between two-thirds and two-times the median income of a given area. On a national level, that equated to an annual income of anywhere between $45,802 and $137,406 in 2019, according to the United Census Bureau

Pew provides a calculator to help determine where you fall on the economic spectrum, depending on where you live. In Atlanta, for example, middle class income is defined as between $48,000 and $141,000. In New York City, a middle class income is considered between $61,000 and $180,000 for a household of three. 

Does it make sense to classify all of these income ranges as middle-class?

Not really. Without accounting for factors like personal debt, access to career opportunities, and accumulated investments, the term “middle class” by itself has become almost meaningless. Under the income definition, two individuals who are both technically middle class can have widely different economic experiences.

The current framework puts too much emphasis on how much money a person makes or should aspire to make. For a more complete picture of what it means to be middle class in America, maybe it’s time for an inclusive framework that incorporates net worth, relationships, and life experiences.

Forget middle class. Here are some more relevant ways to measure your economic status.

Net Worth

Looking at a household’s net worth — the value of what they own minus what they owe — could be a better indicator of where the household falls within the economic spectrum.

If we only focus on income, in New York City, a household with an income of $200,000 a year saving $10,000 of that income every year is considered upper class. But, in reality, they are not better off financially than a household with a “middle class” family income of $170,000, saving $34,000 annually.

A person’s spending and saving habits are more indicative of wealth than how much they earn. For example, your personal savings rate — the portion of your income that you’re able to save and invest — might be a much more impactful way to measure your economic status than someone else’s definition of middle class. 

Also, when using income to determine the class level, we leave debt out of the equation. However, debt considerably impacts a person’s financials, in part determining how much money is left over to spend every month.

We should also consider investments (real estate, stock market, and businesses) to assess a person’s full financial picture. Some households might not be bringing in enough income to qualify as middle class, but have significant savings or investments. A prime example is people who have retired from their careers and live off their financial reserves. 

Education and Career

A person’s professional occupation, if or where they attended college, and their credentials also impact how society views them. That’s why asking what a person does is common in conversations. It’s a quick way people assess where a person fits on the socioeconomic spectrum. 

For instance, when someone mentions that she is a doctor, most people will assume that she is doing well financially. Though that assumption might not be true, it is worth acknowledging that our professional occupation skews how society views us. It can sometimes even have an impact on how we see ourselves.

Social Network

A person’s social network and personal and business contacts plays a major role in their socioeconomic class. Someone coming from a well-connected family or environment is likely to see more doors open for them. Whether or not the person’s income fits in the middle-class category, their social network can affect their socioeconomic class. Are they less likely to feel like they belong to the middle class than someone who fits the income threshold but whose social network does not qualify as middle class? Should a person’s network and social activities be considered when determining their class level? If so, this could expand the way we think about the line between middle and upper classes.

Final Thoughts 

Under the current class classifications, two individuals who are part of the middle class might not have much in common from an economic standpoint. Once we consider location, education, occupation, how far apart two people are in the middle-income bracket, and who they know, two “middle class” individuals can have widely different economic experiences.

Does the current income framework provide value on where a person fits in society? Let us know what you think by writing to contact@nextadvisor.com.