How Much Does the Middle Class Make?

How Much Does the Middle Class Make?

DEFINITION

According to the Pew Research Center, the income of middle-class households, sometimes referred to as “middle-class income,” is typically between two-thirds and twice as much as the income of the median household in the United States.

The Definition of Middle-Class Income, Along with Some Examples

A household is considered to have a “middle-income” according to the Pew Research Center, even though the federal government in the United States does not have an official definition of what constitutes a middle-class income. According to this definition, a household’s income must be between 67% and 200% of the median household income.

According to the findings of the United States Census Bureau, the median income for a household in the year 2020 was $67,521. When compared to 2019, when the median income was $69,560, this year’s figure represents a 2.9 percent reduction. When compared, the median was $63,292 in the year 2000, but it was $58,627 in 2010. (calculated in 2020-adjusted dollars).

The Pew Research Center’s definition of “middle income” would comprise households with an annual income of between $45,239 and $135,042, with $67,521 serving as the baseline.

Every September, the United States Census Bureau releases its findings on the mean and median salaries for the previous calendar year. The most recent publication of these numbers was on September 14th, 2021.

The Structure of the Middle-Class Income

According to an estimate provided by the Census Bureau, there were around 130 million households in the United States in the year 2020. They are capable of being segmented into groups that are consistent with the Pew Research Center’s criteria for the middle class.

The poverty line can be approached by those whose incomes are in the lowest income brackets. The federal poverty line is set to range from $12,880 for a single individual up to $44,660 for an eight-person household as of the year 2021.

The income categories that will be subject to the highest tax brackets for the year 2021 will roughly correspond to those income groups. These include people with an annual income of more than $523,600, married couples with an annual income of more than $628,300, and individuals who are the primary breadwinners in their households with an annual income of more than $523,600.5. (In 2022, they will include heads of households earning more than $539,900, married couples earning more than $647,850, and single people earning more than $539,900.)

Using Census data, this chart breaks down the following levels of income in 2020:

Household Income Range Number of Households (Millions) % of Total Notes
Less than $20,000 17.9 14% Below or near poverty level
$20,000 to $44,999 26.5 20% Low income
$45,000 to $139,999 59 45% Middle class
$140,000 to $149,999 2.9 2% Upper middle class
$150,000 to $199,999 10.4 8% High income
$200,000+ 13.3 10% Highest tax brackets
Total 130

How Is the Income of the Middle Class Measured?

Pew begins with the data provided by the United States Census Bureau regarding the median income for each household. After that, it formulates a unique set of criteria for the middle class in each “metropolitan statistical region.” These are the regions designated by the Census Bureau to correspond to cities. According to Pew, 260 of the 384 metropolitan regions surveyed were surveyed.

Pew does this in order to address disparities that exist around the country in terms of the cost of living. For instance, both the cost of housing and the tax burden in San Francisco is quite high. Because of this, the middle class income in San Francisco is much higher than the median income in the rest of the country.

By using the middle-class income calculator that CNN provides, you may find out where your household income stands in comparison to others in your county. The findings come from research conducted by the Pew Research Center. Additionally, Pew created its very own calculator in-house.

Alternatives to the Income Level of the Middle Class

Robert Reich, who served as the former secretary of labor in the United States, put forward the idea that the term “middle class” ought to be restricted to families whose incomes fall somewhere in the range of fifty percent below the median to fifty percent above it.

If we use the median income found in the Census, which is $67,521, then the middle class would fall anywhere between $33,761 and $101,281.

The Brookings Institution considers the middle class to be the 60% of households that fall in the middle.In other words, those earning 30% more than the median income as well as those earning 30% less than it.

In 2012, former President Barack Obama stated that in order to be considered part of the middle class, a family’s annual income must be less than $250,000. This was stated to support an extension of the Bush administration’s tax cuts that would solely apply to the middle class. He was adamant that people with higher incomes shouldn’t be able to get the tax cut for longer.

The Congress used a more lofty standard to define the middle class. With the American Taxpayer Relief Act, people with annual incomes of less than $400,000 and couples with annual incomes of less than $450,000 were able to get tax breaks.

There are a lot of people who think that looking at money is not the most accurate way to define the middle class. For instance, many people who do not have highly earned salaries can nonetheless afford a high quality of life by drawing from high-value retirement funds, investments, or family fortunes. This is because retirement funds, investments, and family fortunes tend to grow in value over time.

A measurement of middle-class wealth would be similar to that of middle-class income in that it would be the middle three-fifths of the spectrum. Those who have a wealth of zero or less are deemed to be in debt, whilst those who have money in the upper fifth are wealthy. The following is an illustration of a distribution of classes according to net worth:

Quintile Mean Net Worth
Bottom 40% (two quintiles) -$8,900
Third Lowest 20% $81,700
Middle 20% $273,600
Top 20% $2,999,000

What about those who have low earnings yet nonetheless spend a significant amount of money? They could give off the impression that they enjoy a middle-class lifestyle, but in reality, they get by on assets, alimony, or government benefits that aren’t counted as income.

James Sullivan, a professor at the University of Notre Dame, came up with the idea of a consumption-based measurement system that would encompass things like transportation, housing, and recreation.

15 households with annual expenditures ranging from $38,200 to $49,900 were considered to be in the middle class according to the consumption measure.

Key Takeaways

  • According to the Pew Research Center, the salaries of middle-class Americans are typically between two-thirds and twice as much as the median household income in the United States.
  • There are a variety of interpretations of what constitutes an income in the middle class, depending on the source.
  • There are many who believe that money or consumption are more accurate indicators of the middle class.

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