As opposed to the unofficial policy of conservatives to cut taxes for the rich and 'pay for it' by putting the nation (and hence, all of us) deeper in debt? Please. If anything the democratic party seems to be more 'fiscally conservative', because at least they're not afraid to raise taxes to pay for their spending.
They define upper-middle as a household earning between 75k-127k. But, before that, they mention that a member of the upper-middle class, Mr. Yu, purchased a new home, a duplex, and an 8-unit apartment complex during the pandemic. Is there any wonder he’s getting squeezed? He’s trying to play outside of his league using other people’s money.
The real story is that the “upper middle class” played too fast and loose at the top of the longest bull market in decades and now reality is setting in.
Upper middle class as a household earning between 75k-127k is pretty surprising to me.
Here in Phoenix, $127k is about the household earning you need to afford a 4 bedroom home ~500k/~2500 mortgage). I wouldn’t consider that an upper middle class lifestyle.
Yeah, seems low to me. The multimillion dollar houses I think about when I think successful high-paying career for upper middle class seem to be out of reach for that income bracket.
People use "upper middle" to mean different things. Some use it to mean the upper portion of the middle class, by income. Others use it to mean a distinct (and much smaller) class between the middle and upper, with distinct tendencies and preferences, comprising people who live something close to a "rich" lifestyle but are distinguished from the actually-rich by having to work to maintain it, rather than being able to live a very nice life off investment income alone. Doctors, lawyers, other very-well-paid white-collar types, constituting perhaps a single-digit percentage of the population. I'm not sure which, if any, definition has a credible claim to being, in some sense, most-correct.
It depends on context. A household of two earners working for big techs living in a $2M home in Bay Area is definitely comfortable, but by no means upper class. Most of their incomes are still from a W2 form and they still have to budget for kids' school, retirement, etc.
That’s what I was thinking. I was riding around a few days ago thinking, “what is considered the middle class?” And I definitely would consider this range around it.
Maybe I’m just out of touch with the situation but 75k for a household seems like borderline poverty.
drive out to a rural area and ask ppl their household income, not a boomer retiree, but a middle aged couple with a few kids.
averages:
georgia 61980
tennessee 54665
alabama 51734
south carolina 56227
now, people with these incomes would have a house and a car or two. they would shop at regular stores and do more or less okay until quite recently with inflation. to put this in a more real sense, in several of these states, you could until 2019 find large (around 1300 sqft) two bedroom apartments for less than 1k/mo if you left major cities out of your search. if you wanted to buy a home, you could get one at around 2000 sqft for less than 200k.
I find it more useful to talk about “security” than “class”.
Are you or do you feel secure in your ability to secure shelter? Water? Food? Transportation? Land? Education? Healthcare? Retirement income? Vacation? Disability income? Legal services? Ability to give friends and family money? Permits and political access/favors?
I doubt any household with $75k income in the US is securing their retirement, or even healthcare.
Upper class -> buys land/property/house, (solidly 6+ figure stuff) to signal an image to others in their class
Upper middle class -> selects their car or children's education (5, sometimes just brushing 6, figure stuff) to project an image to others in their class
Middle class -> selects their clothes and consumer goods (2-3, occasionally 4 figure stuff) to project an image to others in their class
For salary bands, Wikipedia does a better job for middle class as opposed to middle income, which the article seems to deliberately conflate. Middle income is near the floor of the income range of the "middle class."
I agree, it looks low, especially in cities with high housing prices. Looking at income distribution, you'd think a floor for upper middle would be at least 100k for a household.
I would guess that they're defining "upper middle class" via income quintiles rather than via lifestyle. Those numbers roughly line up with the boundaries for the 4th quintile in 2017, 77k-126k. 2020's fourth quintile was 85k-141k.
> I wouldn’t consider that an upper middle class lifestyle.
I don't know that the conceptual upper middle class lifestyle actually matches the reality anymore. I think that's true of most quintiles. The upper middle class lives like the middle class used to, the middle class lives like the lower middle class used to, etc.
That "upper middle class lifestyle" upshifted and is the domain of the lower rungs of the top quintile now.
Definitions for this are all over the place. Fussell's "upper middle class" lifestyle couldn't be stably maintained by households under the top quintile (probably not under the top 10%, even), nor could the upper-middle (also upper, but largely upper-middle) described in the jokey-but-fairly-accurate Official Preppy Handbook, and those books are ~40 years old now. For one thing, both paint decent-or-better private prep school as key for that class, and that's never really been within the reach of the lower four quintiles, to say nothing of the other things you'll need to spend money on to stay in that class.
These are not numbers I'm used to seeing when discussing middle class in the U.S. The middle class in the U.S. has income from $100K to $1M [1]. Middle class is not the same as middle income. The lower threshold for upper middle class is greater than $100K [2].
Are they using adjusted numbers perhaps? Adjusted to what? Ahh... The non-paywalled article uses "middle income" the moment it starts giving numbers, so the title is click-bait.
> I bet 100k today is roughly 50k in the year 2000.
Mean inflation from 2000-2021 (last year on record) was ~2.24%, including a 4.7% increase in 2021.[1]
$50k inflated at this rate would be approximately $80k.
I'm sure others are more qualified to discuss implications, but consider that while inflation erodes nominal purchasing power, it cannot account for effectively deflationary impacts of technology (for an example, see[2]). Of course, we cannot eat technology, at least not exactly; so we probably want to look at metrics related to how easy it is to live. It might be worth looking at cost per calorie, for example, or for commonly-available proxies (e.g., fast food prices).
> Who cares about inflation if your rent/mortgage is 3 or 4 times higher?
Oh, for sure: inflation is challenging to measure, and it probably isn't very descriptive for a lot of common situations. (I think the Consumer Price Index is an attempt to help solve this issue. CPI compounded about about 2.1% per year between 2000 and 2021.[1,2] The CPI includes measures of rent, but it also adjusts for seasonal changes.[3])
Inflation and CPI both obscure a lot of ground-level realities for people--the nature of all summary statistics is that they fail to capture the totality of reality in favor of giving us a broad sense for what's going on. Anecdotally my folks moved after their rent increased by 50% when their lease expired. (That was last year.) These are obviously nontrivial increases that have dramatic impacts on people.
I don’t think it’s really been proven that high inflation hurts the poor more than rich - wealthy people hate inflation as it eats into their returns on capital.
They don’t make for sympathetic victims, but fortunately the WSJ has never been averse to changing facts to fit its narrative.
This depends upon how much is required to be “rich”. The wealthiest people on Earth tend to use the most debt, and debt likes inflation. You pay off your debt with cheaper dollars. Additionally, it is precisely during periods of recession and/or inflation that we see the disparity between the wealthiest and poorest widen most quickly.
> Building on the existing literature, we just published a working paper based on a sample of 10 OECD countries since 1970 that isolates the impact of inflation from other factors driving income inequality.
> After accounting for the effect of other economic variables, we find a negative correlation between long term inflation and income inequality for low inflation rates. The results suggest that this link turns positive for higher inflation rates (i.e. above a threshold that we estimate at an inflation rate of 13%). These results are in line with other previous studies, which also find a U-shaped relationship between inflation and income inequality (Galli and van der Hoeven, 2001, Bulir, 2001, and Auda, 2010). However, they contradict the strong and widespread belief that inflation hurts the poor more than the rich and thus increases income inequality.
How can it not hurt poor people more? Food prices, gas prices, rent increases are things that are critical for survival for poor people. Rich person in a Tesla is not affected. If you are a minimum wage or near minimum wage earner, you have no margin to deal with price increases. We are talking about hurt in the sense of survival, not rich ppl crying about losing their stablecoin.
You're right; my understanding is that for the poor person, inflation is only part of the picture: wage growth is the rest. Inflation is always bad for the investor class. Inflation is only bad for the wage-earning class when their wages don't follow.
Unfortunately, the wages for a vast majority of workers are set by the owning class. I believe some beardy German bloke wrote a couple of volumes all about the consequences of this over a century ago.
I do bristle at the whole "1970s inflation spiral was caused by inflation-pegged wage increases demanded by unions" argument. The logical end of that argument is that when inflation happens, wages should suffer. Meanwhile we have oodles of subsidies and tax/legal carve outs for big business and variously protectionist trade policies. Why isn't it "when inflation increases capital gains tax also increases", hmm?
It's also an odd argument for a supply-failure-induced inflation spike. Fiat currencies just have a hard time dealing with that kind of thing--such situations come dangerously close to making people realize the currency is literally worthless because all you have is this weird paper when you want gasoline. The bug isn't a bug, it's the system working as conceptualized (printed money = the stuff/services you can buy with it).
The question is: why aren't wages also thought of this way? I don't really care that I make N dollars. I care that I can buy N gallons of gas. Unions sought to make that a reality in the 70s, perfectly reasonably, and we've let conservative economists make that the boogie man.
I think a fair counter argument here is "if there's less stuff, we can't guarantee that your wages will always let you get N% of it", but my rejoinder here is why are wages the first thing on the chopping block? It seems like we have a lot of other areas to trim first, but our immediate reaction is "lower wage power by not pegging them to CPI, and raise unemployment by raising interest rates", both of which workers bear the brunt of. That strikes me as pretty unfair.
> my understanding is that for the poor person, inflation is only part of the picture: wage growth is the rest.
Depending on how you define "wage", there might be a 3rd category as well: government-provided benefits. E.g., social security, food stamps, tax credits, etc. My impression (very well could be wrong) is that there's often a lag between true inflation and adjustments to those benefits.
So the wealthy are concerned about their investments, while the poor are concerned about where they’re going to get their next meal, or if they can afford to pay rent next month. And that’s an equal amount of “hurt” in your view?
Inflation hurts those, who have their resources denominated in inflated currency, so cash, bank accounts, even your wage specified in contract.
If you converted into other assets, whose price floats against the currency (stock, real estate, metals, art), the price is affected by the floating, but that floating can protect you against inflation as well. You can lose without inflation as well, the risks are different.
If you have that in foreign currency, you are damaged by their inflation, but not necessarily by domestic one.
And now back to your point: who do you think has the resources, that can be held in non-liquid form, convert back as/if needed? Rich or poor?
If they're poor, their debts are likely not backed by collateral - akin to credit card debt or payday loans.
Those debts are at such high interest rates that inflation and rate hikes have little bearing relative to how much it already costs to sustain them.
By contrast, wealthier people mostly have mortgage debt, backed by real estate as collateral. Those are at much lower interest rates and benefit from inflation.
> Building on the existing literature, we just published a working paper based on a sample of 10 OECD countries since 1970 that isolates the impact of inflation from other factors driving income inequality.
> After accounting for the effect of other economic variables, we find a negative correlation between long term inflation and income inequality for low inflation rates. The results suggest that this link turns positive for higher inflation rates (i.e. above a threshold that we estimate at an inflation rate of 13%). These results are in line with other previous studies, which also find a U-shaped relationship between inflation and income inequality (Galli and van der Hoeven, 2001, Bulir, 2001, and Auda, 2010). However, they contradict the strong and widespread belief that inflation hurts the poor more than the rich and thus increases income inequality.
> The economic channels behind the negative correlation between inflation and income inequality are still unclear. How this negative correlation turns to be positive for higher inflation rates also remains to be better understood.
Until the causes of the correlation is better understood, it could as well just an error in the model.
I guess that depends on how you define hurt. Rich people may lose more in an absolute sense, but poor people will suffer more from their smaller loss. Most or all of their money is needed for survival.
> they mention that a member of the upper-middle class, Mr. Yu, purchased a new home, a duplex, and an 8-unit apartment complex during the pandemic.
A lot of people who though they were "comfortably rich" in the last couple of years are having a bad wake-up call that their loan interest or income was not as predictably favourable as they imagined.
This is probably not the same thing as "being squeezed".
That is what is known as a "mistake". It happens and one day it could happen to you, so don't laugh at the people going through it. None of us should be smug about it or do the "don't invest money you don't have" etc.
What I take offense to in this article is the passive voice around it where "they get squeezed" instead of "I lost money".
The same applies if you took a margin call in the last 6 months after borrowing against $AMZN and buying BTC with it. Does it suck, YES. Worse, you could owe the IRS money for the margin call sale.
All of that said, there was a specific video that this guy reminded me of from "How Money Works".
> That is what is known as a "mistake". It happens and one day it could happen to you, so don't laugh at the people going through it.
Alternatively, it’s called “risk management” and people with conservative risk management feel the urge to laugh in the bad times because those with liberal risk management are often not afraid to brag about it during the good times.
I'm not sure about the definition, I suspect colloquial thought about "upper middle class" differs from being in the 60 to 80 range for household income when the 60 is within 10k of median household income. +~$7.5k to median should yield significant benefits long term, like a couple more easily maxing IRAs every year, but shouldn't be a giant leap in class, especially when distribution of wealth places average household income squarely in middle of the 60 - 80 band.
That said, the example person they used isn't really paying for insane overextension - especially assuming rates are fixed and pre-rate-hike. He's paying because his living margins and costs are more impacted by inflation than his real-estate costs and now the cost of living margin he expected to be relatively stable is going away.
It is its own little universe and not representative of the majority of America. People I know who make silicon valley money by working remote coastal jobs and living here in Kansas all live in the nicest suburbs around, in 3-4,000 square foot McMansions with pools, and lawn care to mow their lush perfectly landscaped yards.
These people are making probably 200k with a working spouse. They’re in the same salary bands as local doctors and attorneys. Quality of life based on income is very different in middle America.
Are they? I always thought of doctors and lawyers as the upper class. The people you’re likely to meet in country clubs and on the golf course, or who might run for political office (and actually win).
They mostly rely on income from their labour, which makes them some strata of middle class. A law firm partner who doesn't do any work could be upper class, but those new law school grads are definitely not upper class.
I think trying to define class by income isn't possible. It should be defined by quality of life I think. That allows for relative lower middle and upper classes. Being a land owner and employer in a tiny town makes you relative upper class even if you're making 75k a year. While as someone else pointed out 127k a year in NYC qualifies you for rent-stabilized apartments, obviously not upper class.
Articles like these are to me indistinguishable from subtle trolling. The person the article leads with just bought a house, a duplex, an 8 unit apartment complex, has a good sized stock portfolio, and has a good job to boot.
How is this person getting “squeezed”? He isn’t. People just get greedy when the stock market goes up and then they overleverage and tell themselves they’re on the cusp of getting rich.
Investor psychology makes people take riskier bets when they see the number in their account go up, despite every investment book explaining why you should do the opposite and derisk during a mania.
It's like those fake Q&A "articles" you see on Yahoo Finance and Google Finance. "I'm 52, my house is paid for (worth $1.2 mil), I have $3.7 mil in the bank, my wife and I make $375k combined. Will I be able to retire?"
George Carlin's take on the middle class squeeze: The upper class does none of the work, and keeps all of the money. The middle class does all of the work and pays all of the taxes. The lower class is there to scare the shit out of the middle class.
I don't see what stocks and other investments going down has to do with this, unless most middle class people are leveraged against their portfolio value, which I doubt. This is really a story about inflation and the value of cash savings and earnings decreasing. The only people who benefit from inflation are debtors, specifically those whose debt interest increases slower than inflation / interest rates - or not at all. This also benefits low income earners, but they are hit harder by rising prices.
79 comments
[ 19.0 ms ] story [ 325 ms ] threadA squeezed upper middle class is good for the climate. Squeeze away, I say.
This is what both parties have been doing for decades with no exceptions. It's time to stop playing tribal games.
https://news.sky.com/story/the-worlds-richest-are-plundering...
https://www.zmescience.com/science/private-flights-from-the-...
https://earth.org/billionaires-single-space-flight-produces-....
The real story is that the “upper middle class” played too fast and loose at the top of the longest bull market in decades and now reality is setting in.
Here in Phoenix, $127k is about the household earning you need to afford a 4 bedroom home ~500k/~2500 mortgage). I wouldn’t consider that an upper middle class lifestyle.
Maybe I’m just out of touch with the situation but 75k for a household seems like borderline poverty.
averages: georgia 61980 tennessee 54665 alabama 51734 south carolina 56227
now, people with these incomes would have a house and a car or two. they would shop at regular stores and do more or less okay until quite recently with inflation. to put this in a more real sense, in several of these states, you could until 2019 find large (around 1300 sqft) two bedroom apartments for less than 1k/mo if you left major cities out of your search. if you wanted to buy a home, you could get one at around 2000 sqft for less than 200k.
I find it more useful to talk about “security” than “class”.
Are you or do you feel secure in your ability to secure shelter? Water? Food? Transportation? Land? Education? Healthcare? Retirement income? Vacation? Disability income? Legal services? Ability to give friends and family money? Permits and political access/favors?
I doubt any household with $75k income in the US is securing their retirement, or even healthcare.
Sure, that works, too. Throws the rhythm off, though.
Upper middle class -> selects their car or children's education (5, sometimes just brushing 6, figure stuff) to project an image to others in their class
Middle class -> selects their clothes and consumer goods (2-3, occasionally 4 figure stuff) to project an image to others in their class
Roughly speaking, of course.
https://en.wikipedia.org/wiki/Middle_class#/media/File:Globa...
Upper middle class: has a job and alternate income source, doesn't even consider not taking a family vacation
Middle class: has a job, doesn't worry about root canal or car repair, saves money for a family vacation
Lower middle class: has a job with healthcare, barely past paycheck to paycheck
Below that: has multiple part time jobs or full time hourly position, each check is already spent
https://www.statista.com/statistics/203183/percentage-distri...
> I wouldn’t consider that an upper middle class lifestyle.
I don't know that the conceptual upper middle class lifestyle actually matches the reality anymore. I think that's true of most quintiles. The upper middle class lives like the middle class used to, the middle class lives like the lower middle class used to, etc.
That "upper middle class lifestyle" upshifted and is the domain of the lower rungs of the top quintile now.
Are they using adjusted numbers perhaps? Adjusted to what? Ahh... The non-paywalled article uses "middle income" the moment it starts giving numbers, so the title is click-bait.
[1] https://en.wikipedia.org/wiki/Middle_class
[2] https://en.wikipedia.org/wiki/Upper_middle_class
Mean inflation from 2000-2021 (last year on record) was ~2.24%, including a 4.7% increase in 2021.[1]
$50k inflated at this rate would be approximately $80k.
I'm sure others are more qualified to discuss implications, but consider that while inflation erodes nominal purchasing power, it cannot account for effectively deflationary impacts of technology (for an example, see[2]). Of course, we cannot eat technology, at least not exactly; so we probably want to look at metrics related to how easy it is to live. It might be worth looking at cost per calorie, for example, or for commonly-available proxies (e.g., fast food prices).
[1] https://www.usinflationcalculator.com/inflation/historical-i...
[2] In 1999, hard drives were sized in the hundreds of megabytes and cost more than they do today. See, i.a., https://en.wikipedia.org/wiki/History_of_hard_disk_drives#20....
Oh, for sure: inflation is challenging to measure, and it probably isn't very descriptive for a lot of common situations. (I think the Consumer Price Index is an attempt to help solve this issue. CPI compounded about about 2.1% per year between 2000 and 2021.[1,2] The CPI includes measures of rent, but it also adjusts for seasonal changes.[3])
Inflation and CPI both obscure a lot of ground-level realities for people--the nature of all summary statistics is that they fail to capture the totality of reality in favor of giving us a broad sense for what's going on. Anecdotally my folks moved after their rent increased by 50% when their lease expired. (That was last year.) These are obviously nontrivial increases that have dramatic impacts on people.
[1]: https://www.rateinflation.com/consumer-price-index/usa-histo...
[2]: (270.97/172.2)*(1/22.) ≈ 1.021
[3]: https://www.forbes.com/advisor/investing/cpi-consumer-price-...
They don’t make for sympathetic victims, but fortunately the WSJ has never been averse to changing facts to fit its narrative.
> After accounting for the effect of other economic variables, we find a negative correlation between long term inflation and income inequality for low inflation rates. The results suggest that this link turns positive for higher inflation rates (i.e. above a threshold that we estimate at an inflation rate of 13%). These results are in line with other previous studies, which also find a U-shaped relationship between inflation and income inequality (Galli and van der Hoeven, 2001, Bulir, 2001, and Auda, 2010). However, they contradict the strong and widespread belief that inflation hurts the poor more than the rich and thus increases income inequality.
https://www.cepweb.org/inflation-and-inequality/
https://thehill.com/changing-america/respect/poverty/3572806...
And we know wage growth for the poor unemployed is far below current inflation levels.
It's also an odd argument for a supply-failure-induced inflation spike. Fiat currencies just have a hard time dealing with that kind of thing--such situations come dangerously close to making people realize the currency is literally worthless because all you have is this weird paper when you want gasoline. The bug isn't a bug, it's the system working as conceptualized (printed money = the stuff/services you can buy with it).
The question is: why aren't wages also thought of this way? I don't really care that I make N dollars. I care that I can buy N gallons of gas. Unions sought to make that a reality in the 70s, perfectly reasonably, and we've let conservative economists make that the boogie man.
I think a fair counter argument here is "if there's less stuff, we can't guarantee that your wages will always let you get N% of it", but my rejoinder here is why are wages the first thing on the chopping block? It seems like we have a lot of other areas to trim first, but our immediate reaction is "lower wage power by not pegging them to CPI, and raise unemployment by raising interest rates", both of which workers bear the brunt of. That strikes me as pretty unfair.
Depending on how you define "wage", there might be a 3rd category as well: government-provided benefits. E.g., social security, food stamps, tax credits, etc. My impression (very well could be wrong) is that there's often a lag between true inflation and adjustments to those benefits.
You could go write for the WSJ - they need more hot takes about why rich people getting poorer is actually a tragedy.
If you converted into other assets, whose price floats against the currency (stock, real estate, metals, art), the price is affected by the floating, but that floating can protect you against inflation as well. You can lose without inflation as well, the risks are different.
If you have that in foreign currency, you are damaged by their inflation, but not necessarily by domestic one.
And now back to your point: who do you think has the resources, that can be held in non-liquid form, convert back as/if needed? Rich or poor?
Those debts are at such high interest rates that inflation and rate hikes have little bearing relative to how much it already costs to sustain them.
By contrast, wealthier people mostly have mortgage debt, backed by real estate as collateral. Those are at much lower interest rates and benefit from inflation.
> After accounting for the effect of other economic variables, we find a negative correlation between long term inflation and income inequality for low inflation rates. The results suggest that this link turns positive for higher inflation rates (i.e. above a threshold that we estimate at an inflation rate of 13%). These results are in line with other previous studies, which also find a U-shaped relationship between inflation and income inequality (Galli and van der Hoeven, 2001, Bulir, 2001, and Auda, 2010). However, they contradict the strong and widespread belief that inflation hurts the poor more than the rich and thus increases income inequality.
https://www.cepweb.org/inflation-and-inequality/
Until the causes of the correlation is better understood, it could as well just an error in the model.
A lot of people who though they were "comfortably rich" in the last couple of years are having a bad wake-up call that their loan interest or income was not as predictably favourable as they imagined.
This is probably not the same thing as "being squeezed".
That is what is known as a "mistake". It happens and one day it could happen to you, so don't laugh at the people going through it. None of us should be smug about it or do the "don't invest money you don't have" etc.
What I take offense to in this article is the passive voice around it where "they get squeezed" instead of "I lost money".
The same applies if you took a margin call in the last 6 months after borrowing against $AMZN and buying BTC with it. Does it suck, YES. Worse, you could owe the IRS money for the margin call sale.
All of that said, there was a specific video that this guy reminded me of from "How Money Works".
https://www.youtube.com/watch?v=_INmFnlp-hU
It specifically called out "Own a bunch of properties" as a "Buying yourself a new job", rather than being comfortable.
Alternatively, it’s called “risk management” and people with conservative risk management feel the urge to laugh in the bad times because those with liberal risk management are often not afraid to brag about it during the good times.
Conservative: marked by moderation or caution
https://www.census.gov/library/publications/2021/demo/p60-27....
It is probably at the median household income now.
That said, the example person they used isn't really paying for insane overextension - especially assuming rates are fixed and pre-rate-hike. He's paying because his living margins and costs are more impacted by inflation than his real-estate costs and now the cost of living margin he expected to be relatively stable is going away.
I get that the SF Bay Area is its own little universe, but what? You're borderline homeless on that income.
These people are making probably 200k with a working spouse. They’re in the same salary bands as local doctors and attorneys. Quality of life based on income is very different in middle America.
How is this person getting “squeezed”? He isn’t. People just get greedy when the stock market goes up and then they overleverage and tell themselves they’re on the cusp of getting rich.
Investor psychology makes people take riskier bets when they see the number in their account go up, despite every investment book explaining why you should do the opposite and derisk during a mania.