In order to understand the middle class, we first have to draw a line in the economic sand. Many in our society would like to believe that we live in a classless system but this isn’t true especially when we look at the financial data. This classless belief has been shattered with the current structure of the banking bailouts that have favored the top 1 percent in our country. I wanted to update some of the data that I had posted back in December of 2008. There is something fascinating about looking at aggregate income data because it tells us a lot about our financial condition. Yet whenever we hear debates about the middle class, rarely does anyone talk about the specific income cutoff.

Let us first examine the top 35 percent of households:

Source: Census

If a household brings in $65,000 or more they have made it into the top 35 percent of affluent households. Now this may not seem like much to a large number of middle class Americans given the rising cost of goods over the last few decades. To make it into the top 1 percent a household would need to make more than $250,000 per year. To be in the top 0.1% a household would need to make more than $1.6 million. This data distribution was from 2007. I managed to find more recent Census data from 2008 and put together an updated chart to shed a different perspective of the middle class. The below chart is more realistic because it goes from 0 to $200,000 and since most people fall along this spectrum the information might be more useful and applicable:

38 percent of U.S. households make $49,999 or less. When we talk about the 40 million Americans receiving food assistance this is where we are looking. If we look at household incomes of less than $74,999 we cover 58 percent of all U.S. households. The actual median household income in 2008 is $63,000 according to the American Community Survey done by the Census. We’ll have more updated information in September of this year with data for 2009.

The above chart helps highlight the cutoff points for middle class Americans. In recent debates, we have seen that those who make $100,000 or more have somehow made this seem like the de facto income in America. Even at this level, only 20 percent of U.S. households make $100,000 or more. This is high relative to what many Americans are working with. Yet I think many in the media since they fall in this range seem to project their own income situation onto the public discourse. If they would only look at the above data they would find out that middle class Americans have to get by with much less in today’s market.

A household that makes more than $200,000 is in the top 5 percent of our country. Yet even that isn’t enough to put them in the top 1 percent that control 42 percent of all financial wealth. But even within the top 1.5 percent income variation is enormous:



Source: Wikipedia

“As of 2005 there are approximately 146,000 (0.1%) households with incomes exceeding $1,500,000, while the top 0.01% or 11,000 households had incomes exceeding $5,500,000. The 400 highest tax payers in the nation had gross annual household incomes exceeding $87,000,000. Household incomes for this group have risen more dramatically than for any other. As a result the gap between those who make less than one and half million dollars annually (99.9% of households) and those who make more (0.1%) has been steadily increasing, prompting The New York Times to proclaim that the “Richest Are Leaving Even the Rich Far Behind.” Indeed the income disparities within the top 1.5% are quite drastic. While households in the top 1.5% of households had incomes exceeding $250,000, 443% above the national median, their incomes were still 2200% lower than those of the top .01% of households. One can therefore conclude that almost any household, even those with incomes of $250,000 annually are poor when compared to the top .1%, who in turn are poor compared to the top 0.000267%, the top 400 taxpaying households.”

I guess many things are relative when it comes to income. True wealth is actually measured by net worth. In 2009 the number of millionaire households jumped to 7.8 million but this is down from the peak of 9.2 million in 2007. This recession has destroyed a lot of wealth and the middle class have seen a longer journey ahead if they ever wish to reach financial security. But this isn’t a new trend and this recession has only brought the issue of economic class to the forefront.

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