collage of money, charts, student working and graduating

Are You Middle Class?

The other day, while driving, I listened to one of America’s more talked about radio talk-show host claim that our President is stirring up a “class-war”.  He wanted the listeners to count the number of times President Obama used the phrase “working-class”, as it is, in his words, the “code word for class warfare”.  I was going to watch the State of the Union Address, by President Obama, on Wednesday night, regardless, so I decided to do what I was asked and “count”.  (My first conclusion is that, regardless of which political party you belong to or believe in, there is no denying that President Obama can speak to an audience.)  By my count, he mentioned the phrase “working families” three times, the phrase “middle-class” five times, “working” eight times, and “job” either twenty-two or twenty-three times.  Clearly, the emphasis was on jobs, not class warfare.

This morning, while watching CNBC, I saw an interview with Indra Nooyi, Chairman and CEO of Pepsico, where she discussed what Pepsico’s research is telling them about the US consumer.  It is clear to Pepsico that those that work in labor-oriented jobs, those with less education, are those that are being hit the hardest by unemployment.  Moreover, she indicates that consumers are spending less, regardless of the unemployment rates in their communities.  That is, they are being more cautious, regardless of their personal situation.  It is an insightful interview that concludes that we need more jobs and a well-educated workforce.

This all led me to wonder, do people know what “class” they are in?   Do they care?  So, here are the statistics from the US Department of Labor’s Consumer Expenditure Survey from 2008 (the most recent on their website).  What the table below shows is, simply, how each quintile (five equal size groups), defined by income, makes and spends their money as a percentage of their income.  If we define “class” by income then these would be lower-, lower-middle-, middle-, upper-middle, and upper-class.  I will put a column for the national average, as well.  So, are you middle class – the quintile in the third 20 percent (quintile)?

Item

All Consumer Units

Lowest 20%

Second 20%

Middle 20%

Fourth 20%

Highest 20%

Income/Expenditures

 

 

 

 

 

 

After-tax Income

$61,744

$10,608

$27,843

$46,936

$72,628

$150,692

Average Annual Expenditures

$50,486

$22,304

$31,751

$42,659

$58,632

$97,003

Sources of Income

Wages

80.2%

42.4%

62.4%

76.8%

84.1%

85.0%

Social Security, Unemployment and Public Assistance

11.3%

59.0%

31.7%

16.8%

9.2%

4.0%

Interest, Dividends, & Property Income

2.4%

1.9%

1.9%

1.9%

1.9%

2.9%

Demographics

Average Age

49.1

51.6

51.6

47.9

46.9

47.4

Earners

1.3

0.5

0.9

1.4

1.7

2.0

Homeowner%

66%

39%

56%

67%

79%

91%

White Race%

88%

81%

85%

88%

91%

94%

College Educated%

60%

44%

46%

58%

68%

84%

Expenditure Category%

Food%

12.8%

15.6%

14.4%

13.1%

12.9%

11.3%

Alcoholic Beverages%

0.9%

0.8%

0.9%

0.8%

0.9%

0.9%

Housing%

33.9%

39.9%

36.5%

35.0%

33.0%

31.7%

Apparel%

3.6%

4.3%

3.6%

3.2%

3.5%

3.6%

Transportation%

17.0%

15.4%

17.8%

18.4%

17.9%

16.1%

Healthcare%

5.9%

7.3%

7.7%

6.8%

6.0%

4.5%

Entertainment%

5.6%

4.9%

5.4%

5.7%

5.6%

5.8%

Personal Care%

1.2%

1.4%

1.3%

1.2%

1.2%

1.2%

Reading%

0.2%

0.2%

0.2%

0.2%

0.2%

0.2%

Education%

2.1%

2.8%

1.1%

1.2%

1.4%

3.0%

Tobacco%

0.6%

1.2%

1.0%

0.8%

0.7%

0.3%

Miscellaneous%

1.7%

1.3%

1.6%

1.8%

1.6%

1.7%

Personal Taxes%

2.8%

-3.4%

-1.5%

0.6%

2.0%

5.0%

Clearly, this can create a lot of questions, as well as provide a few answers.  I contend that your financial success has little to do with your income and more to do with how you save your income, spend your income, and act about your income.  Economists often define the “classes” based on an economic resource definition, such as income.  Sociologist and political philosophers define “class” based on who is “powerful” and who is “powerless”.  Seems to me that a person, particularly a young person, has control over their income, through educational attainment and hard work, and, thus, they have power.  Moreover, we can always save our money in order to create, over time, a greater resource base.  What I’m saying is that your class has more to do with your “power” over your attitude and aspirations than it does about your money.

So, are you middle-class?