$250k is not the same in, for example, California and Iowa. If your family income is $250k in cities like San Francisco or New York, that definitely doesn't put you in 95-percentile.
San Francisco incomes statistics are undoubtedly skewed by stock option cash-outs that are one time (or at least relatively rare) events. So if you have a 250k/yr salary you might not be in the top 5% for any given year, but I bet you're in the top 5% for, say, any given 5 year period.
Really depends on what you call an "upper-class" quality of life.
A penthouse with a view of the park and the finest dining isn't affordable on 250K.
A house in a great neighborhood (unless you insist on sticking to Manhattan), private school for the kids and not worrying about most financial decisions is quite affordable on 250K even in NYC.
We should banish the term "class" when discussing tax rates. It's got too much connotational baggage. Even if someone making $250k considers themselves "middle class", unless they lack all perspective, they don't consider themselves "middle income".
Well, middle class used to mean the family lived on one income, the mother stayed home/kids/charity, the house in the suburbs was owned and you would have a car.
Would $55k get you this today? I don't think so. Would $250k get you this today? Maybe.
There aren't a lot of places where you can't live on an annual gross income of 250K. The quality of life will vary, if you living in New Jersey for example and commuting over to Manhattan, or out in Livermore taking the train into San Jose or Oakland. You would be doing just fine in Portland and much of Seattle. Places like Albuquerque and Des Moines would have you really living well.
But looking at it a different way, where is the money going in those various locales? Given the cost of living in the Bay Area compared to the Columbus metro area, the amount of 'pay dollars' is generally flowing out at a much higher rate in the Bay Area, but they are soaked up just as quickly as they are in Columbus. So who is getting them? Banks with their Mortgages? Schools? Government? Restaurants? How can you have a population of people making $200K a year in one place experiencing the same level of "wealth" as people making $100K a year in another place? That makes for an interesting conversation.
It'd be interesting to see when this balance tipped on a timeline.
There's a lot of factors at play here. I can imagine a time where not everyone in the middle class had an expectation of going to college. I could also imagine a US advantage on skilled labor that would have yielded far better wages which has steadily eroded under globalization. I am also imagining a time when taxes where less burdensome. Probably some other factors at play that I am overlooking as well, still I wonder when the tipping point was 1980s?
The real problem is talking about absolute values. $250k/year makes you king in many places, but in several cities you'll be hard-pressed to buy a house or even an apartment.
Owning your home has long been the staple of middle class. In places like San Francisco even the very high income engineers mostly pay rent. Especially the ones in their 20's.
(source: me and my girlfriend put together make just over $200k/year, we wouldn't dare think of buying a place, probably ever. According to the article we're top 96th percentile)
I wouldn't expect it from politicians, but am surprised how even experienced writers on this topic can't seem to understand the real factors at work here and contribute to an objective conversation about income, wealth, and class in America circa 2015...
If my wife and I work 80 hours/week for an energy company that is highly cyclical, we are very different than two physicians who work 80 hours a week but have lots of job security, who are in turn very different from a retired police captain who collects $250k from two spiked Government pensions, who himself is very different from a retiree who lives on $250k in dividend income from a $10 million dollar portfolio of index funds. Not to mention who owns their own home (inherited perhaps), and who doesn't. It's almost like ''income is the worst way we have to measure relative prosperity, except for all the others''.
At some point you need to realize that the middle class is also geographically gated.
There's a reason why the classical middle class picture is a nuclear family in the burbs and not on 5th avenue.
The American middle class was never "rich" it was very financially prudent. If you still willing to live in the burbs 250K in NYC will get you a very nice house, a car and even college tuition for your kids.
Even in the golden age of the American middle class there were plenty of areas that were out of their reach, thats why the middle class expanded into new sub-urban developments. The cities were mostly polarized as they housed both the very rich and the very poor.
I agree with you but the NYC tri-state area is a strange place and not a great example for the stratification effect. You're worse off in the NYC burbs in in many cases, one would think it would be the opposite but it's not. The amount of money it takes to break out of the middle class quality of life is more around 400k per year for the NYC tri-state area. In the burbs the houses are not nice or good for the price, they're overpriced and property taxes are outrageous- property taxes can actually be worse in the suburbs than they are for a Manhattan condo or coop. The commute is also a killer, while Metro North is somewhat reliable and on-time relative to other rail systems, the length of the commute is just brutal. At least while you're paying more per square foot in NYC you do get some convenience out of it, although this gets more complicated if you have kids. If you've got to worry about education for children, you MUST buy a coop/condo in a NYC district with good zoned schools, this isn't common and those district command the highest prices per square foot. If you can't afford those districts your looking at private school for the kids, and that runs 30-40k, somewhat less if you choose a Catholic school but still a huge chunk of your budget. Trust me, there are places you don't want your kids going to public school- and I'm not talking safety, this is in regards to the piss-poor quality of the education. You'd be better off home schooling in some places. The burbs do have better schools overall, but you're still stuck living a middle class lifestyle with a soul-sucking commute in the NYC burbs on 250k.
As a family just inside that 5% mark, my first reaction is to object to the idea that I'm somehow part of a wealthy elite. However, my second reaction is shock that the median household income is $53,000. If you've got a couple kids in Portland, Oregon and you're making $53,000, you're going to have a bad day. I guess I'm left with a feeling of doom that I'm going to be asked to support so many people when I feel like I have so little margin. We're investing in our retirement, investing in our kids' 529, and paying down debts. With a home loan and student debt, we're worth considerably less than zero. I've never been overseas, and I mostly vacation in state. If I'm the mule that's supposed to carry this load, I fear we're all going to have a bad day.
Elizabeth Warren keeps banging on about housing, health-care, education, and energy being the four out-of-proportion expenses in a middle-class budget. They are also some of the most amenable to state intervention.
Middle class is not principally about income, its about the method by which you participate in the economy. If your primary means of support is applying your labor to your capital, you are middle class (yeoman farmers, independent small business owners, professionals that own or are full partners in their practices, etc.)
If you primarily live by renting your labor to be applied to someone else's capital, you are working class.
If you primarily live off your own capital, with most of the labor applied to it being labor you rent from others, you are in the capitalist class.
Income correlates with economic class, but neither strictly determines the other. $250K a year is not middle class in the same way that, say, wearing a bowtie is not middle class.
Its possible to be in any (of the three mentioned) economic class and have $250K/year income.
Classification is hard. By your definition a heart surgeon is selling his labor the same as the ditch digger so they are both middle class.
What about something like: Do you feel like your needs are met and some of your desires are indulged? If you are, you're living a middle class lifestyle.
No, if they're both selling their labor, they are both working class, not middle class.
Though heart surgeons often own practices and contract with facilities rather than being employees, so they are often middle class.
And, yes, real economic relations are complex and don't fall neatly into the categorization, are not of a continuum (e.g., lots of higher income workers that are don't actually love by applying labor to their own capital nevertheless have some some, potentially substantial, capital from which they derive some income (in many cases, not used for current needs but reinvested), and therefore don't face the same insecurity as most of the working class, while still having to deal with employer/employee relations the same way as the rest of the working class. This group shares some features of the working class (because of their primary source of support), the middle class (because the both rely on their labor and have non-trivial capital holdings that are important), and the capitalist class (because generally , to the extent they derive income from capital, it is not through application of their own labor.) Nevertheless, their primary engagement with the economy is as hired laborers, so dominantly, from an economic class perspective, they are working class.
(This is distinct from lifestyle, and from group identity -- indeed, the political manifestation of the divergence between identity and economic class explains a lot of apparent political irrationality jn which people expend considerable effort working against their own economic interests in the political realm because of an identity with an economic class that is not their own.)
- is why I love HN - you open the comment section to leave a comment explaining why the author is an idiot and someone else has already beautifully done it already as the first comment.
I think the set of people you are classifying as middle class- applying their own labor to their own capital, which they own free and clear- is a pretty rarified bunch. Practically speaking, the middle class is a myth created by politicians to justify policy that is against working class interests. There are in my view only two classes: working class and capitalist or ruling class.
The biggest problem is that 250k a year is is barely middle class in a large city.
If you have three children, and 250k income, that will provide you a decent living, maaaybe allow you to purchase a home, and just barely afford college funds. That's what's broken.
I'd have to disagree, I live in New England in a second or third tier city and know many families making $250k/y who are comfortable sure but its not Lifestyles of the Rich and Famous.
As others have pointed out, there's not much margin there if you are doing what you are supposed to be doing, i.e. owning a home, paying your bills, saving for retirement for two and saving for college for 2.5.
I'd agree with others sentiment here, the median income being 53k/y is the real problem. There is no excess capital to redistribute from the top of the 95% to the bottom. It just doesn't exist anymore.
Two entry level developers at Facebook would make >$250k combined. As would a CRNA married to a nurse. As would almost any post-residency physician working 50+ hours per week. As would any big law associate beyond 3rd or 4th year. There are a lot of poor people out there, but there are a LOT of $250-$500k/year households too.
Your understanding of what middle class looks like is ridiculously skewed. You live in a bubble where you barely even get a glimpse of what people living on a median income look like.
"Middle class" doesn't have to be precise or correct, because it's not a mathematical term. When a politician uses that term, they're doing it because they know that the guy making $20K (who doesn't want to identify with poverty), and the guy making $300K (who still feels a sting when he needs to buy a roof for his McMansion), and everyone in between considers themselves middle class. Hillary Clinton is just saying "I won't raise taxes for you, Friend."
I think we have a problem in the US where we think the success that we've had since WWII was something other than an anomaly. For some reason we think that this comfortable model, where if you work hard and follow the rules and go through the motions put in front of you, that you can live a comfortable life with a white picket fence, a couple children, and with one of the parents at home with the kids.
It doesn't work like that in most of the world. In spite of how interconnected we've become, we're still largely blind to the terrible conditions of hard working people who follow the rules in the rest of the world.
So now you're seeing a lot of people upset that they're following the rules and ending up in bad places-- in a lot of student debt, or unable to find jobs, or unable to find well-paying jobs. They look at their parents and grandparents and think that it must be some small systemic problem-- the 1% isn't taxed enough, or even worse, they think that it's not some systemic problem, and that this is just a result of the 2008 economic downturn.
I think the problem is a bit worse than that. I think we're on the tail end of our post-war powerup. I think we're going to try to tax our way out of it and end up with a broken country. I think we need to face some hard truths and be a bit more concerned about our national debt; a lot of people on either side don't seem to realize that a devalued dollar only hurts people that hold dollars-- you know, lower and middle class Americans. The Trumps of the world hold capital and couldn't care less about an inflated dollar.
If you click my comment history you'll see that I'm a jaded man that speaks a lot of doom and gloom, so who knows. I'm just not comfortable simplifying this as much as the article does. America can't stay on top of the world forever.
I'm a bit astonished that it doesn't seem to be pointed out in these comments (and even a bit more astonished that it's not mentioned in the OP) that there are a great many people whose income tax returns will say $250k+, but they are paying taxes on a small business and may not be realizing anywhere near that much gross income personally.
If I own half of a small business that made $500k in profits, you're right that I will show $250k of partnership income on my tax form. But whether I take it as salary or not is moot. You only pay taxes on business profits, so that wealth exists somewhere and 50% of it is mine.
Yes, that, and it also depends on what state taxes on business look like, and you would also pay taxes on any of it that you put back into the business.
The point is just that there are many people with arrangements such that they might have to file on $250k+, but never realize that as personal income.
Every state that has personal income tax taxes llcs the same as the irs. I think you've bought into this canard that business owners are regularly paying taxes out of pocket and it can certainly happen but it's not common. And that's why the article didn't mention it.
But that doesn't show up on your tax return. The commenter I replied to has repeated a common trope that there are small business owners who would be hurt by considering $250k as wealthy because of a quirk in our tax code (pass thru taxation). It's a canard because if you own half of a business making $500k in profit nobody should be worried about your tax bill. Income or not, you own a profitable business that is worth a lot of money. And he suggested that you pay taxes on money you invest back into the business which is not true. You pay taxes on your profits not your revenue.
ITT a bunch of yuppies that live in a bubble and whine that even though they travel on an airplane for several trips every year, and go to nice restaurants all the time, just because they might not be able to afford their dream house in one of the most expensive places to live in the country they aren't rich damn it. It's other people who are rich.
Living in San Francisco is a luxury good.
Buying a house in San Francisco is one of the most expensive luxury goods there is.
At time of writing most of the posts are about defining the term "middle class." Don't know if you're projecting or just overly eager to accuse others of being a "bunch of yuppies in a bubble."
Any definition of "middle class" that extends to the top 5% is stretching the term so far as to be silly. And it gets stretched that far because some people are unwilling to face the fact that they're rich and accept some of the responsibility that comes with that.
I make 370k per year and live in a 500 sqft studio in with my gf (who makes 120 of that). We have student loans, a little credit card debt and so on. We likely can never buy a house in Berkely and really are thinking hard if we can afford one kid.
We rent our time just like anyone else and eventually our time will be worth less. But right now we are taxed heavily to be middle class.
No, it's that 53k a year is near poverty but no one wants to tell America that the majority of its citizens are so badly compensated for their time.
I can't wrap my head around why you would stay there. If you moved to Seattle, for example, you'd maybe make $75K less, but you'd be able to buy a house, have a family, and pay off your debts, while probably doing the same work you're already doing.
You are literally the 1%, even in the Bay Area. Either you're lying, have way more debt than you are letting on, are planning on retiring after a few years of work, or have a fundamental disconnect from reality.
You should be netting 200k or so a year, and even a fairly lavish lifestyle should let you save 100k a year, given that you have no kids and live in a place that should cost less than 10% of your net income.
I've lived in the Bay Area for several decades, and I could buy a very nice house tomorrow if I made 370k this year, even starting from flat broke.
The 250K is a very well selected figure from a political stand point as it incorporates most of their current voting base and any one who's on the fence.
Families with income of 50K and below are more likely to identify as Democrat in the current political climate, 50-150 is more or less evenly split and the higher you go the more ground the democrats usually lose.
Over 250K it most likely won't matter as their political opinions might not be swain but 150-250K is quite a lucrative poaching ground for both parties, the republicans spread fear that those are the people who'll suffer the most under the Dem's taxation policy and the Dem's advertise that they are part of their precious middle class that must be protected.
The 150-250K range is also where quite a few of the Dem's force multipliers lie; young educated professionals which are tethered to social media and are quite likely to be politically active on various social issues attacking and preserving them is quite paramount for the Dem's long term strategy if they want to keep the white house for another 8 years.
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[ 50.1 ms ] story [ 2427 ms ] threadWould $55k get you this today? I don't think so. Would $250k get you this today? Maybe.
edit: typo
But looking at it a different way, where is the money going in those various locales? Given the cost of living in the Bay Area compared to the Columbus metro area, the amount of 'pay dollars' is generally flowing out at a much higher rate in the Bay Area, but they are soaked up just as quickly as they are in Columbus. So who is getting them? Banks with their Mortgages? Schools? Government? Restaurants? How can you have a population of people making $200K a year in one place experiencing the same level of "wealth" as people making $100K a year in another place? That makes for an interesting conversation.
Which I think is far more interesting.
There's a lot of factors at play here. I can imagine a time where not everyone in the middle class had an expectation of going to college. I could also imagine a US advantage on skilled labor that would have yielded far better wages which has steadily eroded under globalization. I am also imagining a time when taxes where less burdensome. Probably some other factors at play that I am overlooking as well, still I wonder when the tipping point was 1980s?
Banks and landlords, mostly. Local governments would love to get in on it all, but Prop 13 restricts their ability to raise real-estate taxes.
Owning your home has long been the staple of middle class. In places like San Francisco even the very high income engineers mostly pay rent. Especially the ones in their 20's.
(source: me and my girlfriend put together make just over $200k/year, we wouldn't dare think of buying a place, probably ever. According to the article we're top 96th percentile)
If my wife and I work 80 hours/week for an energy company that is highly cyclical, we are very different than two physicians who work 80 hours a week but have lots of job security, who are in turn very different from a retired police captain who collects $250k from two spiked Government pensions, who himself is very different from a retiree who lives on $250k in dividend income from a $10 million dollar portfolio of index funds. Not to mention who owns their own home (inherited perhaps), and who doesn't. It's almost like ''income is the worst way we have to measure relative prosperity, except for all the others''.
How large is that going to be?
> With a home loan and student debt
Elizabeth Warren keeps banging on about housing, health-care, education, and energy being the four out-of-proportion expenses in a middle-class budget. They are also some of the most amenable to state intervention.
Is your LTV ratio greater than 1? I suspect you might be not including the market value of your home against your loan.
http://blogs.wsj.com/numbers/one-in-four-american-households...
"The proportion of one-person households increased by 10 percentage points between 1970 and 2012, from 17 percent to 27 percent."
If you primarily live by renting your labor to be applied to someone else's capital, you are working class.
If you primarily live off your own capital, with most of the labor applied to it being labor you rent from others, you are in the capitalist class.
Income correlates with economic class, but neither strictly determines the other. $250K a year is not middle class in the same way that, say, wearing a bowtie is not middle class.
Its possible to be in any (of the three mentioned) economic class and have $250K/year income.
Plus I'd bet they invest their residual salary in capital.
What about something like: Do you feel like your needs are met and some of your desires are indulged? If you are, you're living a middle class lifestyle.
Though heart surgeons often own practices and contract with facilities rather than being employees, so they are often middle class.
And, yes, real economic relations are complex and don't fall neatly into the categorization, are not of a continuum (e.g., lots of higher income workers that are don't actually love by applying labor to their own capital nevertheless have some some, potentially substantial, capital from which they derive some income (in many cases, not used for current needs but reinvested), and therefore don't face the same insecurity as most of the working class, while still having to deal with employer/employee relations the same way as the rest of the working class. This group shares some features of the working class (because of their primary source of support), the middle class (because the both rely on their labor and have non-trivial capital holdings that are important), and the capitalist class (because generally , to the extent they derive income from capital, it is not through application of their own labor.) Nevertheless, their primary engagement with the economy is as hired laborers, so dominantly, from an economic class perspective, they are working class.
(This is distinct from lifestyle, and from group identity -- indeed, the political manifestation of the divergence between identity and economic class explains a lot of apparent political irrationality jn which people expend considerable effort working against their own economic interests in the political realm because of an identity with an economic class that is not their own.)
- is why I love HN - you open the comment section to leave a comment explaining why the author is an idiot and someone else has already beautifully done it already as the first comment.
Well done, sir.
If you have three children, and 250k income, that will provide you a decent living, maaaybe allow you to purchase a home, and just barely afford college funds. That's what's broken.
As others have pointed out, there's not much margin there if you are doing what you are supposed to be doing, i.e. owning a home, paying your bills, saving for retirement for two and saving for college for 2.5.
I'd agree with others sentiment here, the median income being 53k/y is the real problem. There is no excess capital to redistribute from the top of the 95% to the bottom. It just doesn't exist anymore.
> Even in NYC and LA, 250k is more than any family you know makes
What on earth does this even mean? If you have 2 professional incomes in a family in any of the cities you mentioned, you're at $250k.
I knew I could never afford a family or house at that level, much less retirement and college funds, so I put off having children, buying a home, etc.
That said - I do think that a family that earns just enough to maintain a 'middle class' lifestyle should be considered middle class.
It doesn't work like that in most of the world. In spite of how interconnected we've become, we're still largely blind to the terrible conditions of hard working people who follow the rules in the rest of the world.
So now you're seeing a lot of people upset that they're following the rules and ending up in bad places-- in a lot of student debt, or unable to find jobs, or unable to find well-paying jobs. They look at their parents and grandparents and think that it must be some small systemic problem-- the 1% isn't taxed enough, or even worse, they think that it's not some systemic problem, and that this is just a result of the 2008 economic downturn.
I think the problem is a bit worse than that. I think we're on the tail end of our post-war powerup. I think we're going to try to tax our way out of it and end up with a broken country. I think we need to face some hard truths and be a bit more concerned about our national debt; a lot of people on either side don't seem to realize that a devalued dollar only hurts people that hold dollars-- you know, lower and middle class Americans. The Trumps of the world hold capital and couldn't care less about an inflated dollar.
If you click my comment history you'll see that I'm a jaded man that speaks a lot of doom and gloom, so who knows. I'm just not comfortable simplifying this as much as the article does. America can't stay on top of the world forever.
https://twitter.com/BrankoMilan/status/668196138332327936
The point is just that there are many people with arrangements such that they might have to file on $250k+, but never realize that as personal income.
Living in San Francisco is a luxury good.
Buying a house in San Francisco is one of the most expensive luxury goods there is.
We rent our time just like anyone else and eventually our time will be worth less. But right now we are taxed heavily to be middle class.
No, it's that 53k a year is near poverty but no one wants to tell America that the majority of its citizens are so badly compensated for their time.
Median income =/= middle class
You should be netting 200k or so a year, and even a fairly lavish lifestyle should let you save 100k a year, given that you have no kids and live in a place that should cost less than 10% of your net income.
I've lived in the Bay Area for several decades, and I could buy a very nice house tomorrow if I made 370k this year, even starting from flat broke.
I don't know the percentile, but $250k in SF is not even top 5% per an article someone else shared in comments. [0]
0: http://www.businessinsider.com/san-franciscos-top-5-of-earne...
Over 250K it most likely won't matter as their political opinions might not be swain but 150-250K is quite a lucrative poaching ground for both parties, the republicans spread fear that those are the people who'll suffer the most under the Dem's taxation policy and the Dem's advertise that they are part of their precious middle class that must be protected.
The 150-250K range is also where quite a few of the Dem's force multipliers lie; young educated professionals which are tethered to social media and are quite likely to be politically active on various social issues attacking and preserving them is quite paramount for the Dem's long term strategy if they want to keep the white house for another 8 years.