Here’s a riddle: In April, the enterprise payroll provider Dayforce released a report finding that half of full-time workers in the United States can’t cover their basic needs. And yet, in the same news cycle, we saw headlines claiming that more Americans than ever are breaking into the upper middle class.
Both stories are true. Stumped? You’re not alone. What gives? How can so many people be called middle class, and yet so few be able to afford a middle-class life?
If the gospel of realtors is location, location, location, then the gospel of economic policy ought to be definition, definition, definition.
How we define “middle class” determines everything. And right now, the most commonly used definition is woefully out of touch with reality.
Take The Wall Street Journal headline: “More Americans Are Breaking Into the Upper Middle Class.”
That claim comes from a recent report by the American Enterprise Institute, which defined upper middle class as earning five to 15 times the federal poverty line.
For example, a family of three earning an annual $400,000 is upper middle class. But so is the same family earning $133,000 a year. A threefold difference, classified the same.
There are a whole host of problems with using income, and income alone, as a class determinant.
For starters, how far your money goes depends heavily on where you live. Anyone who’s browsed Zillow knows that. But more important, the very method we’re using to classify who is and isn’t middle class is built on the federal poverty line.
6 things we say make us middle class
You remember that scene in “Captain America” when Steve Rogers emerges from a 70-year coma and stumbles into Times Square, only to be confronted with a world he doesn’t recognize?
That’s the federal poverty line. It’s defined as three times the cost of the 1964 food basket — a bare-minimum food diet — adjusted for inflation.
The cost of food, you may have noticed, has increased significantly in recent years. So have a lot of other things not included in a food basket but still very relevant to a middle-class family: A car. A home. Health care.
To call this definition outdated would be like calling the sun warm — a gross, gross understatement. It reflects a bygone era when the cost of a middle-class life was relatively inexpensive. When a week’s vacation seemed for many like an easy thing to afford.
Over the past few decades, the country has witnessed a steady erosion of the group once deemed the engine of the most powerful and prosperous economy in the world. The number on the paycheck is growing, but the lifestyle it can afford keeps shrinking.
If income brackets — and the decades old formula they’re calculated from — are a poor way of understanding the realities of middle-class life in America, what definition should we be using? What does it mean to be middle class?
