Are You Rich Or Poor?
There is a lot of talk from candidates about what they will do for middle class Americans. One problem with the talk is defining what is meant by middle class Americans. That is exactly why politicians and candidates us the term.
There is no official definition of middle class. At one time it involved more than income but I believe when people talk about middle class they are talking about income. So lets look at household income published by the Federal Government.
The median household income in the U.S. was $49,901 2006/2007 average. That means that half the households have income above that level and half are below. The table below shows some numbers related to household income by groups of 20 percent of the population and the top 5 percent for 2007.
| Lowest Fifth | Second Fifth | Third Fifth | Fourth Fifth | Highest Fifth | Top 5 Percent | |
| Mean income | $11,551 | $29,442 | $49,968 | $79,111 | $167,971 | $287,191 |
| Upper Limit | $20,291 | $39,100 | $62,000 | $100,000 | $177,000 | |
| Income Share | 3.4 | 8.7 | 14.8 | 23.4 | 49.7 | 21.2 |
The amount on the upper limit line for the top 5 percent is actually the lower limit to put a person in the top 5 percent of household income. The third line shows the share of total U.S. income that each group receives.
The top 5 percent of the population got over 21 percent of the income. If you look at historical tables the amount going to the top 20 percent gets larger each year and has for many years. Yes it is really true that the rich keep getting richer.
Based on the table above what would you consider middle class?
I think there are a lot of people who consider them selves middle class but based on relative income are in the upper tiers of income. I would say that most households that have two earners who are either professional or skilled labor easily fall into the upper 40 percent and many are in the top 20 percent.
McCain’s flippant response that $5 million is the limit for middle class was obviously just that. He doesn’t believe it. But I also believe that many of the people who are in charge are pretty clueless about what life is like for those people who are under the top 20 percent. Why else do they promote a health care package based on tax credits?
Consider that to purchase health insurance for a family could easily cost $9,000 annually. If I live in a household with an income of around $50,000 and a couple of children, no tax credit is going to make the difference between having health insurance and not having it.
One of the most interesting things about this table is that I think there are a lot of people out there who are a lot better off relative to the rest of the population than they realize.
My next post will talk about tax policy and income distribution. Stay tuned. Then I hope to get back to something more pleasant like bicycling. 
In the mean time if you want to look at more information about personal income, and I am sure you do, you can read it here.
September 22nd, 2008 at 1:02 am
It is very interesting that our government is run by the elite, but they consider themselves poor compared to the people that lobby them or some of their other friends. Biden is touted as the poorest member of the Senate, and he makes what, like $250,000 for his combined annual household income. Forget race, sex and partisanship, wealth is by far the great divisor of our nation and yet seems to be the least considered issue by the electorate. Maybe the struggle of the classes seems too much like a Marxist concept for post cold-war Americans to stomach.
September 22nd, 2008 at 9:56 am
Thanks for the link, a lot of really interesting info there. I just wish I knew what to make of it all.
I agree that the distribution of wealth is largely overlooked or misunderstood by most of us. It’s also really hard to step outside of your own financial situation and view things objectively. You bring up a really interesting point that “middle class” used to connote more than just income. There are so many factors that contribute to how well-off we are–the numbers on our tax forms are probably less important than a lot of other things.
I also totally agree about the tax credit thing. A large percentage of the country doesn’t pay any federal income tax anyway–are they talking a refundable credit like the earned income credit? And then you have the problem of how many people are actually going to spend that money on insurance anyway. I suspect that many people will feel that other expenses are more pressing, or just feel that they are invincible and would rather buy a motorcycle or something instead. And it’s not just their problem if they do–it’s everyone else that has to pick up the tab for their emergency room visits.
September 22nd, 2008 at 5:20 pm
This was very helpful and educational. Look forward to more of these articles so do continue in such vein, at least till the elections are over as you are actually doing a public service by sharing this kind of information. Post-elections we can all can wheel around town with you
Ok I am teasing a bit but truly, this is great stuff and you do a good job of simplifying it for folks like me whose eyes tend to glaze over the otherwise boring tables and elasticity curves…
September 23rd, 2008 at 10:29 am
According to the chart there, me and my family of five our currently in the bottom quintile. My oldest son (5 years) recently asked if we could go to Lego Land. I told him, “no, we don’t have the money, we’re too poor to go on a vacation to California and spend $50 per person to go to an amusement park.”
He responded (and this was one of my proudest moments as a father), “Dad, we’re not poor, we have a wonderful family, we’re rich”. I may not make a lot of money, but I would still consider myself the richest man in the world.
September 23rd, 2008 at 11:00 am
Jay: Several authors have written in recent years about how the once populist areas of the country have now gone to the gospel of prosperity movement. Income distribution isn’t an issue and God wants you to be rich.
Sansauto: I believe you are a student. At least I got that idea once from your blog. If you go to the Census site and look at the tables they break out the data by various demographics.
There are, as we would assume, more people in the lower quintiles in households headed by people under 35 than those headed by people in the 35-65 group.
Of course your son believes he is rich. He gets to ride a bike every day.
October 6th, 2008 at 4:59 am
[...] few weeks ago I wrote about income distribution and how people with money just don’t get it when it comes to what is middle class [...]