Who Are the "Middle Class"?

Who Are the "Middle Class"?

Order Code RS22627
Updated October 22, 2008
Who Are the “Middle Class”?
Brian W. Cashell
Specialist in Quantitative Economics
Government and Finance Division
Summary
There is no consensus definition of “middle class,” neither is there an official
government definition. What constitutes the middle class is relative, subjective, and not
easily defined. The mid-point in the distribution is the median, and in 2007 the median
household income was $50,233. How far above and below that amount the middle
stretches remains an open question. The U.S. Census Bureau has published figures for
2007 breaking the income distribution into quintiles, or fifths. The narrowest view of
who might be considered middle class based on that presentation would include those
in the middle quintile, which includes households with income between $39,100 and
$62,000. A more generous definition might be based on the three middle quintiles,
those households with income between $20,291 and $100,000. Surveys suggest that
from 1% to just over 3% of the population consider themselves to be upper class.
Comparing those figures with the income distribution would put the dividing line
between middle and upper class close to, if not above, $250,000. Similarly, survey
responses suggest that the lower end of the middle class might be close to $40,000.
Much of the legislation considered by Congress is in the name of the so-called
“middle class.” But there is no consensus definition of middle class. Neither is there an
official government definition, and it is not the aim of this report to establish one. What
constitutes the middle class is relative, subjective, and not easily defined. Most people
likely have decided views as to whether they are middle class. At the same time, those
who refer to the middle class have a rough idea whom they have in mind. How closely
these two definitions correspond is another matter.
In some contexts, the term middle class may refer to a group with shared values or
views, but much of the time it is intended to refer to those who fall within a particular
range of incomes. For example, a tax cut proposal may be promoted on the grounds that
it would benefit the middle class. Where the distinction is based solely on income, the
term “middle income” is sometimes used. This report will use the terms middle class and
middle income interchangeably. What defines the middle class is discussed here solely
in terms of income.
This paper attempts to put the term middle class, or middle income, into some
perspective. It begins by presenting available income distribution data as a way of

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identifying what constitutes middle income. Then, it presents the results of some
subjective surveys in an attempt to identify what income levels are considered to fall into
the middle class. Finally it discusses some economic findings that may help explain how
those in the middle class feel about their place in the distribution.
What Income Level is the Middle?
For the purposes of this report, the measure of income used is household money
income.1 The Census Bureau publishes income distributions for both households and
families, with households including slightly more of the population. Households are
relevant to the discussion here because members pool whatever income they have and can
be presumed to share a common standard of living.2
Any discussion of the middle income necessarily starts with the very middle. The
mid-point in the distribution is the median household income, and in 2007 it was $50,233.
How far the middle stretches above and below that amount is the issue.
While distribution figures are available for fairly small income classes, what many
analysts find most useful are data showing the distribution by “quintile.” The population
of households is divided into fifths, and these quintiles are arranged from lowest to
highest income. Table 1 shows what income levels separate the five quintiles from one
another in 2007, and also show what share of total household income is accounted for by
each quintile. In addition, the Census Bureau provides separate data for the top 5% of the
households in the income distribution.
Table 1. Household Income Quintiles, 2007
Income
Income Range of Quintile
Share of
Quintile
bottom quintile
less than $20,291
3.4%
second quintile
$20,291 to $39,100
8.7%
middle quintile
$39,100 to $62,000
14.8%
fourth quintile
$62,000 to $100,000
23.4%
top quintile
more than $100,000
49.7%
top 5%
more than $177,000
21.2%
Source: U.S. Department of Commerce, U.S. Census Bureau.
1 Money income accounts for a wide range of income sources, but it is usually incomplete.
Money income includes income from earnings, interest and dividends, Social Security, and other
forms of social insurance. It does not include the value of non-money benefits such as food
stamps or housing subsidies. Neither does it include capital gains.
2 In 2007, there were an estimated 116,783,000 households in the United States.

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These figures make it possible to consider a more inclusive definition of the middle
than median income. A narrow view of who might be considered middle class would
include only those in the middle quintile, those households with income between $39,100
and $62,000. But it seems unlikely that so small an income range would correspond with
many impressions of who is middle class. A more generous definition might be based on
the three middle quintiles, those households with income between $20,291 and $100,000.
That group accounts for 60% of all households and 46.9% of all household income.
Perhaps the broadest definition of middle class to be had from these numbers would
be to add the part of the top quintile just up to the point where the top 5% begins. That
would put those households with income between $20,291 and $177,000 in the middle
class. That group accounted for 75.4% of all household income in 2007.
One other consideration as to where to draw the lower income limit for the middle
class is the official poverty threshold. There are multiple poverty thresholds depending
on size of household and ages of children. Given that the average household size in 2007
was 2.6 people, the poverty threshold for a family of three might be appropriate. That
threshold was $16,530 in 2007. Whether a household just above the poverty threshold
might be considered part of the middle class seems subject to debate. Clearly the further
a household is above or below the median income, the more subjective its inclusion in the
middle class becomes.
Evidence from Surveys
Since who is middle class is a subjective question, the way the term is used might
help define it. Thus, opinion surveys might provide some basis for identifying the
relevant income bounds. A number of surveys in recent years have asked people to
indicate to what social class they consider themselves to belong. The classes they are
usually asked to choose from are lower, working, middle (sometimes divided into lower
and upper middle), and upper.
For example, a New York Times survey, in May 2005, asked people to identify their
social class.3 The results showed only 1% of those surveyed considered themselves to be
upper class, 67% considered themselves to be middle or upper-middle class, 35% were
working class and 7% were lower class. That the official poverty rate in 2007 was 12.5%
suggests that either some who are in poverty consider themselves to be working class
(which may be because they believe their poverty status to be temporary), or there were
problems surveying those at that end of the distribution. In the Census Bureau’s detailed
household income distribution data, the highest income class is $250,000. The share of
households with income over $250,000 accounts for 1.9% of all households. If the survey
answers correspond to the income data, then the self-reported middle class, broadly
defined, includes households with income over $250,000. Similarly, comparing the
survey responses with the income data puts the lower end of the middle class just over
$40,000 in 2007.4
3 The New York Times published a series of articles in May 2005 under the title “Class Matters,”
which are available at [http://www.nytimes.com/indexes/2005/05/15/national/class/index.html].
4 Because the upper end of the income distribution is a small proportion of the population, it is
(continued...)

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The National Opinion Research Center (NORC) at the University of Chicago has
asked people to identify their social class in a number of surveys beginning in 1972. The
cumulative results of those surveys can also be used to compare the income distribution
with self-reported class divisions. The average of the NORC survey data between 1972
and 2006 suggests that 3.3% of the population consider themselves to be upper class.
That would put the dividing line between middle and upper class at just over $200,000
in 2007. The NORC surveys indicated that 4.8% of the population considered themselves
to be lower class, and 47.8% classified themselves as working class. That would put the
dividing line between working class and middle class at about $52,500, again assuming
a correspondence between the survey data and the income distribution.
The Pew Research Center sampled opinions regarding middle class attitudes.5 They
found that 53% of Americans considered themselves to be middle class. Comparing the
proportion of those who identified themselves as middle class could include incomes from
about $25,000 up to $95,000. When those who considered themselves to be either lower
or upper middle class the income range expanded to include those with income near
$10,000 up to just under $250,000.
Given the income quintile data presented in the previous section, the survey
responses seem to suggest that while some households in the second quintile ($20,291 to
$39,100) might be considered middle class, the term middle class might be more likely
to refer to those in the middle and fourth quintile ($39,100 to $100,000), and to many of
those households between the 80th and 95th percentile ($100,000 to $177,000) in the
distribution as well.
Economic Considerations
Among the many assumptions economists make to facilitate analysis is that of
diminishing marginal utility of income. This concept refers to the assumption that as
income increases, each additional dollar yields less satisfaction than the one that came
before. With respect to middle income it is meaningful because, if true, it means that
there are greater gains in satisfaction to be had moving up into the middle class than there
are to be had moving up from the middle to the upper end of the income distribution.
It might not be unreasonable to say that those who consider themselves middle class
are relatively content, at least with their economic situation. But while a middle-income
household may be well above a subsistence level of income, the satisfaction or happiness
afforded by that income may also depend on where that income level fits into the overall
income distribution. The idea that happiness depends on both the absolute and the
relative level of income is known as the relative income hypothesis. If individuals care
about where they are situated in the overall distribution, that would seem evidence of the
economic importance of a middle-income group with a shared stake in the health of the
economy.
4 (...continued)
possible this group is under-represented in surveys like this. That would mean relatively greater
measurement error in their response.
5 Pew Research Center, Inside the Middle Class: Bad Times Hit the Good Life, April 2008,
available at [http://pewsocialtrends.org/pubs/706/middle-class-poll].

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Interest in the economics of happiness has led to a number of studies that have found
evidence of the importance of one’s place in the overall distribution of income. While
ultimately happiness is subjective, one study analyzed what would seem to be an objective
measure of happiness (or, more accurately, unhappiness). Daly and Wilson looked at how
changes in income may have influenced suicide rates.6 They found evidence that changes
in relative income had a significant influence on suicide rates.
The authors used three measures of relative income: the ratio of income at the 90th
percentile to median income, the ratio of median income to income at the 10th percentile,
and the ratio of income at the 90th percentile to income at the 10th percentile in the
distribution. Among their findings was that an increase in the 90/10 ratio, interpreted as
an increase in overall income inequality, was not associated with an increase in suicide
rates. However the study also suggested that an increase in the 50/10 ratio was associated
with a decline in the suicide rate, and that an increase in the 90/50 ratio was associated
with an increase in the suicide rate.
This was considered evidence that relative income had an important influence on
happiness. In particular, those at the middle (50th percentile) were happier the larger the
gap was between them and those at the lower end (10th percentile) of the distribution. At
the same time those at the middle were less happy the larger the gap was between them
and those at the upper end (90th percentile) of the distribution.
Luttmer also presents evidence that relative income is an important determinant of
happiness.7 He used survey data that matched individuals’ self-reported happiness with
income data. He found that an increase in one’s own income raised reported happiness,
but that an increase in one’s neighbors’ income had a negative effect. Further he found
that a decline in one’s own income resulted in about the same decrease in happiness as
occurred when one’s neighbor experienced an increase in income.
Easterlin surveyed the literature addressing the connection between happiness and
income and developed a model to explain it.8 He found a number of studies showing that
at any given time cross section comparisons were likely to show that higher income is
correlated with greater happiness. At the same time, it was also typical that as income
rose over the course of one’s lifetime there was no corresponding increase in happiness.
Easterlin suggested that self assessments of happiness at a particular income level are
dependent on aspirations. As incomes rise, so do aspirations. The rise in aspirations has
an effect on happiness that tends to offset the effect of rising income. This hypothesis
would explain the apparently contradictory evidence that in cross section analysis,
happiness rises with income, but that over time as income rises happiness is relatively
stable.
6 Mary Daly and Dan Wilson, “Keeping Up with the Joneses and Staying Ahead of the Smiths:
Evidence from Suicide Data,” Federal Reserve Bank of San Francisco Working Paper 2006-12,
April 2006, 41 pp.
7 Erzo F.P. Luttmer, “Neighbors as Negatives: Relative Earnings and Well-Being,” Quarterly
Journal of Economics, August 2005, pp. 963-1002.
8 Richard A. Easterlin, “Income and Happiness: Towards a Unified Theory,” The Economic
Journal, July 2001, pp. 465-484.

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The conclusions of these studies might not seem robust, since they are based on
crude self assessments of happiness or well being. But if they are correct, they may be
relevant to the notion of a middle class. Together they suggest that happiness, insofar as
it is determined by income, depends on one’s status in the overall distribution. The Daly
and Wilson study looked at specific points in the distribution to reach their findings and
related them to median income (50th percentile). But it might not be unreasonable to
apply their conclusions to a larger group at the middle of the distribution. In other words,
the happiness of the middle class, however that might be defined, could be argued to
depend on both keeping up with the Joneses and staying ahead of the Smiths as they put
it in their article. The happiness of those who identify themselves as middle class would
seem to depend on what happens to those with less as well as those with more income.
Conclusion
No attempt to identify the middle class in the income distribution can be expected
to yield a precise answer. But the term is used so often that it is worth the effort to attach
some numbers to it. If the middle class is taken to be those who have more than enough
to afford basic necessities, it can be presumed to exclude those at or near the poverty
thresholds. Surveys indicate many people felt an income near $40,000 was the minimum
to be considered middle class. On the other end, surveys suggested that those with
income approaching $200,000 might still be considered middle class.9
Whatever else they may have in common, those who constitute the middle class may
have, more or less, similar sentiments regarding their position in the income distribution.
Being well above the bottom is a source of satisfaction. But, when those at the upper end
of the distribution fare better than they do, it is a source of consternation.
9 If those who consider themselves to be upper class were under-represented in the survey, then
the actual number of those who consider themselves to be upper class would be larger. If that
is the case, the actual level of income that divides the middle from the upper class would be lower
than is suggested by the survey.