How middle class is doing all depends on definition

Those of us who work in the boating industry know that, despite what many politicians in Washington, state capitals and city halls across the country think, boating is a middle class activity. So a recovery for the middle class is imperative for a continued rebound for boating.

What has been disconcerting about that has been a disconnect between the experts and the average middle class family. Ask economists, and they'll tell you the middle class is recovering, but ask the so-called middle class family and they'll tell you things continue to get tougher.

A new report by economists at the St. Louis Federal Reserve explains some of what is going on. They say we need to go beyond basic income ranking to look at demographics -- approach the issue like a sociologist, not an economist.

"It is common to define the 'middle class' based on a simple ranking of families' incomes or wealth. For example, the middle 50 percent of families in the 2013 Survey of Consumer Finances (SCF) included all families with annual income between $24,349—the 25th percentile in a ranking from lowest to highest family income—and $89,887—the 75th percentile. According to this definition, every family with an income between about $24,000 and $90,000 in 2013 would be in the middle class."

That simplistic approach doesn't account for changes in age, education, family size, etc. Instead, the authors identified a demographically defined middle class.

"To avoid the ambiguity and temporal instability associated with an income- or wealth-based definition of the middle class, we focus on three persistent characteristics of every family head—his or her date of birth (hence, age at a given time), highest educational attainment, and race or ethnicity. We think of a middle-class family as one whose demographic characteristics suggest it is unlikely to be persistently rich or poor."

Under that definition, the middle class is 44 percent of all families with a head of household more than 40 years old in 2013. While the average income of those above and below them has increased, that group experience a 16 percent decline in median income from 1989 to 2013.

There are more charts and data in the report - definitely worth a read to get an alternative view of what has happened to the "middle class."

 

One comment

  1. The middle class are the true job creators. Middle class needs disposable income.the middle class unfortunately has been worked over on every side. I get angry when i hear that mega corporations need more tax cuts so they can create jobs. They know better but serve those that contribute to them. Demand is the only job creator. The push to china happened for one reason, increase profits with no thought to future of this country. We are sick of junk but our mfg. industry has been dissasembled. We have not fought competitively against our economic enemies.I am a small business owner and i am not a socialist but this country desperately needs a strategic vision designed by someone without a vested interest in particular outcome.

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