Tuesday, April 3, 2007

The Middle Class

What is the middle class? Is it growing, or is it shrinking? Politicians, mostly Democrats, insist that there is a widening gap between the rich and poor. This “gap” has always confused me since it seems intuitive that over time (accounting for inflation) those at the top end of the social-economic ladder would have higher incomes than those with NOTHING. This is easy math that does not demand the use of a calculator.

Before I go any farther, let me make it abundantly clear for all that I do believe there are people in the USA in poverty, who need help, and we should address their unique situations in a humanitarian manner. I don’t believe the picture is rosy, but I also believe that we are much better off in this country than at any other point in our history. Okay?

Now, Gadabout looked over some statistics from the census bureau department of labor statistics and found that there is no real definition of the middle class. I also went up several blogs and websites from nonprofits, institutes and various other agencies and was left confused. Generally speaking I found that:

- Poverty is defined as household incomes below about $25,000 per year
- The middle class is somewhere around $45,000 to $75,000
- The top 1 percent of households have income above about $340,000

Let’s look at military pay scales since that is what I am familiar with. A married E-1 (the lowest enlisted rank), not yet qualified to swab a deck, makes:

$15,612 Base pay
$6,324 Housing allowance (not taxed)
$3,360 Subsistence allowance (not taxed)
$600 Sea pay

Total = $25, 896 Sort of neat how that comes out above the poverty level! Now, this enlisted person could make much more if in a combat zone and is separated from his family.

Now let’s look at an E-3, a rank that can be easily attained after just one year of service. Remember, we are talking about a 19 year old with very little experience—the annual income amounts to $29,124—not bad for being fully qualified to push a broom.

How about a junior officer, and O-1 in flight school, running around lighting his hair on fire and drinking beer--$42,024. Wow, that’s not bad for a 2.2 GPA from a marginal university!

My point here is that it doesn’t take a whole lot of talent or effort to break out of the defined poverty level and move up through the ranks of the “middle class.” But Gadabout takes issue with “definitions.” First off, I think it would be very hard to raise a family on less than $40,000 per year. That would be the barebones minimum, so I am now setting the poverty line at $40,000 per year. After taxes, you’re looking at $30,000 per year tops. Subtract $15,000 for housing, $7,000 for cars (gas included), $5,000 for food and you are left with $3,000 for everything else.

My new income scale, commonly known as the Gadabout Income Distribution Scale (GIDS):

Poverty: $40,000 and below
Working Class: $40,000-$100,000
Middle Class: $100,000-$150,000
Upper Middle Class: $150,000-$250,000
Lower Rich Class: $250,000-$500,000
Middle Rich Class: $500,000-$750,000
Upper Rich Class: $750,000-$1,000,000
Lower Royalty Class: $1,000,000-$2,000,000
Middle Royalty Class: $2,000,000-$5,000,000
Upper Royalty Class: $5,000,000-and above

I think that if an individual is capable of working, then there is no apparent reason why they shouldn’t be able to avoid poverty and move up the scale. As for the middle class, I really don’t know, but it seems like there are plenty of BMW’s cruising the highways these days. Help me out here? How healthy is the middle class in America? I’d like to hear from you.


Elizabeth said...

That puts me below middle class, I can not wait until September when I can demand a raise for all of my hard work.... speaking of, how long before it is considered acceptable to ask for more money? I feel my situation differs that from the standard situation b/c after working at a new company for 4 months my co-worker took maternity leave and I was stranded and on my own.... and has continued for 2 months following. So I have worked at my company for about 7 months now and know that I am underpaid for my title in my industry.... and I know this b/c I have many friends in my insudstry with the same title at different companies....so should I wait a year or ask for a review or just demand it now?! can you shed some light on my situation?

Gadabout Jack said...

Dear Elizabeth,
I would say that the 1 year mark is a good time to address a pay raise. I am assuming that you will have some sort of an evaluation after 12 months, and usually salary is brought up. It may be a good idea to keep your options open, network a bit and keep the interview door open. Perhaps, if after a year you are not satisfied, then bail. But right now you are young and need to work your tail off. Good luck!

Anonymous said...

I can understand that you choose to define class levels by incomes alone, however I suspect that there are even more folks who would qualify for a higher class based on their "access" to wealth aside from income alone. Inheritance, small business equity, upperclass relatives, etc. all play a part here.

Gadabout Jack said...

You are correct! All of that stuff you mentioned is income, and I don't have any of it. Crap!

Anonymous said...

The rising or lowering of monetary definitions of class is irrelevant; it truly comes down to self responsibility. If you haven't read "The Wealthy Barber" I highly recommend it. It discusses fiscal responsibility and regardless of your income, can get anyone on the path of adequate living and setting your path straight for retirement. Additionally, I don't have simpathy for a VAST majority of those you live in or near that poverty line, or any level as far as it's concerned who find themselves in fiscal trouble. I grew up in poverty. My father raised a family of seven making $3.75/hr in 1976 with the help of my mother making roughly the same wages. Every morning you "grabbed the boot straps", pulled yourself up and drove on! As I grew a little older my siblings and I worked for our own "spending money" and realized what we could afford and what we needed to afford. At the ripe ages between 19-24, the world didn't find me driving a $20,000+ vehicle; it was a 1974 Chevy LUV that was purchased for the outlandish cost of $729. I don't see that happening too much these days. Gadabout--great article, loved it, keep it up.