#TBT: What is Your (True) Income Class?


Take a look at the three gentlemen above and choose who you believe is more aligned with your income class. Did you think it was that easy? Of course not. There are so many degrees of classes in a Capitalist society that there isn't any way to place yourself in one of three categories.

Politicians on both sides of the aisle love to use the term "middle class" because it evokes feelings and imagines of the hard-working average American with a big family, is God-fearing and is in a constant struggle to put food on the table, which fluctuates depending upon actions made by the federal government -- higher taxes mean tough times, tax relief means more expendable income.

Okay, that's nice, but get that picture out of your mind because the US middle class is WIDELY different with many different lifestyles, concerns, and potential, not to mention where they live. In fact, when it comes to averages, you may be very surprised by where you fall on the income spectrum. I was inspired by this piece from Investopedia and wanted to share with you all.

In his very first speech to Congress, President Trump blamed the shrinking middle class of the US on trade policies and promised to grant them "tax relief." Who exactly is the middle class though?

According to the US Census Bureau, the median household income in the United States is $59,039 -- that means exactly half fall above this line and half fall below this line. While this is nice in determining which half you fall in, this doesn't take into account how big your household is (are you single? or do you have a spouse and six kids?) - that is necessary to determine basic economics, and unfortunately, this is largely ignored by political leaders.

The better question is: where does your household fit in? Let's take a look at a few different groups when it comes to income according to US Census data...

Upper Class

There is no single definition for what constitutes the upper class, but many like to think of this group as "the 1.0%". To be in the richest 1.0% of Americans, a household needs to have an annual income of at least $389,436. However, you could argue that the upper class is much larger than that.

Upper Middle Class

In 2015, 6.1% of US households earned $200,000+ every year and 14.1% bring in between $100,000 and $150,000. This group, is the UPPER middle class. An academic paper from the Urban Institute noted that upper middle-class could be a three-person household with incomes between $100,000 and $350,000 - and this group has actually grown from 12.9% of the population in 1979, to 29.4% in 2014. However, the majority of this growth stemmed from those who already had higher incomes, while those with lower incomes in this range either dropped or stayed the same.

Why is this important? Well, THIS is the group who likes to claim that they are thetrue middle class of America, but they aren't. According to Richard Reeves of the Brookings Institution: "The idea that the real divide is between ordinary members of the bottom 99% and the rich 1% is a dangerous one, since it makes it easier for those in the upper middle class to convince themselves they are in the same economic boat as the rest of America; they’re not."

"Middle" Middle Class and Lower Middle Class

While the upper middle class turns out to be truly "wealthy" after all, the true middle class includes those in the "middle" middle class and the lower middle class. According to the Census Bureau, 41.5% of American households earned between $35,000 and $100,000 in 2015. This means that 26% of American households earn more than this, 32% earn less than this. While this range represents the clear majority in the US, the definitions still vary. The Urban Institute calls the middle class as adults with incomes of $30,000 - $100,000 for a family of three. This becomes more interesting when you take a look at research from the Pew Research Center: you can use the Pew calculator to make your household's income equivalent to that of a three-person household. Within the group is another group: the lower middle class. These are individuals who do not live in poverty, but are one misfortune or large expense away from dropping below the poverty line. Brookings defined this group as "those with income between 100 and 250% of the federal poverty level, or between $18,871 and $47,177 for a family of three."

Poverty Level

The lowest class in America falls in the poverty category, which are individuals who don't earn enough to meet even the most basic needs: housing, food, clothing, etc. The Census Bureau estimates that 14% of the US population (43 million people) live at or below the poverty line. The official poverty threshold is an annual income of $24,257 for a family of four and $18,871 for a family of three. However, these figures are still being debated because many poor Americans live in urban areas that already have a high cost of living, making it likely that people earning more would fit the definition of poverty in a high-cost city or region.

TAKEAWAY:

Ultimately, President Trump was correct that the middle class is shrinking: the group that used to represent the vast majority of Americans now represent only 50% of Americans -- then you have a handful of rich, and a massive pool of poor. That's because those few who could advance since 1979 did just that, but the rest dropped on the socioeconomic ladder and became even poorer. The poverty group grew larger, and honestly, this should be addressed first. The richest nation in the world should not have 43 million citizens unable to feed themselves.

Below is a map of the average annual household income for every county in the US (to see Alaska and Hawaii, you can visit Investopedia's page and zoom out or in). Wealth is concentrated in the cities, while much of rural America falls near the bottom of the scale. Zoom in on areas like New York, DC, or LA to see blue counties.

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