White House defines "middle class"

[firecat]

This is a perennial topic on the Innertubez and I am happy to see someone in the current US Presidential administration offering a definition:

http://www.whitehouse.gov/blog_post/smc_your_comments/

I think it’s important for us to use a broad definition of "middle class" that encompasses the various levels of middle class. The Census Bureau tells us that the median household income—the income of the household smack in the middle of the income scale—is about $50,000, so that’s certainly got to be considered a middle-class income. But a more comprehensive definition must go a lot further. My boss, the Vice President, often describes the "middle class" as any family that can’t afford to miss more than two or three paychecks without financial difficulty. Given job market turmoil, that’s an awfully timely way to think about the question. It used to be that the middle class was able to achieve the American dream of owning a decent home in a safe neighborhood with a good public school, having access to affordable health care, saving for college and retirement, and enjoying the occasional meal out, movie, and vacation. The problem is that many middle class families are no longer able to achieve this dream. The task force will focus on making the American dream accessible again to the middle class.
—Jared Bernstein, and I am the Executive Director of the task force and Chief Economist and Economic Policy Advisor to the Vice President

I like this definition because it gets at the concept from two different positions, one of which includes capital (savings). Definitions that include only yearly income mislabel some people, in my opinion.

It's incomplete because it doesn't define financial difficulty. If it's true that there is a class of people who have very little savings but a pretty luxurious lifestyle, for them financial difficulty might mean "Can't make the payment on the leased Jaguar," and that's a different sort of financial difficulty than some people face.

Then again it's probably smart that the definition doesn't get into specifics on that, because "what standard of living is reasonable to expect" is a divisive topic.

Comments

[snippy]

My issue is that middle class" as any family that can’t afford to miss more than two or three paychecks without financial difficulty is also a judgment of personal budgeting, biased toward people who don't wisely budget their money and their spending.

[jenk]

"what standard of living is reasonable to expect" is a divisive topic.

Oooooh yeah.

[jenk]

Yeah, me too. Unless you define "financial difficulty" as having to use one's emergency savings.

[snippy]

And you know, I'm one of the people who has been unwise for most of my adult life. It's only been a couple of years that sinanju and I have been working on reducing spending and debt so eventually we can save instead. So even though this definition of middle class works in my favor, I'm against it.

[firecat]

That's kind of where I was going with the leased Jaguar.

There's not enough focus on educating people about how to budget, IMO. A bunch of economic choices are a lot more complicated than they once were.

[jenk]

That's kind of where I was going with the leased Jaguar.

I thought so. It's also why I thought your ""what standard of living is reasonable to expect" is a divisive topic" qualifies as a serious understatement ;)

[leback.livejournal.com]

I like your analysis of the definition. The lack of definition of "financial difficulty" was troubling to me too, though I think you make a good point about why it's politically problematic to delve too deeply into that.

If one does want to define it more carefully, I think part of the problem is that people's established financial expectations structure not only the degree of luxury we expect, but the kinds of financial risks we've imposed on *ourselves*. If the Jaguar is a car the family drives only for enjoyment, not being able to make the payment on the Jaguar may feel like difficulty without actually making them worse off than most other people. On the other hand, if it's the car they use to get around on a day-to-day basis, losing it may make it hard for them to look for new jobs, to get their kids to school, to get medical care, even to buy food. They could have avoided landing in such dire straits by buying a cheaper car without taking on any debt instead of leasing the Jaguar, or by leasing a cheaper car and keeping some money in the bank so that they could continue to afford the payments during a rough patch. So even if we had a definition for financial difficulty that would describe this family's situation after losing the Jaguar, it might be problematic to call them middle class.

I'm following your example in the above paragraph, but the first way I thought about this was with regard to my house. Alexei and I could be placed in more dire straits by a few missed paychecks now than we would have a few months ago, because now instead of a pile of cash that could have paid our rent through a long period of unemployment, we have very little cash and steeper mortgage-payment obligations than our old rent. So we'd be at much greater risk of losing our home, and given the current market, possibly walking away with very little cash to pay future rent or other expenses, even supposing someone would lease us an apartment while we had no income. Possible homelessness (or really, in our case, possibly being driven to rely on the generosity of friends and family to keep a roof over our heads) seems like it would constitute "financial difficulty" under most reasonable definitions, but it doesn't make sense to me to say that we're middle class now when we weren't six months ago, when the change is entirely due to choices that we made in full awareness of their implications.

Maybe one could dodge this particular problem by saying that the middle class includes everyone who has the realistic option, while maintaining a reasonable standard of living, to structure their finances so that they could avoid financial difficulties in the event of the loss of a few paychecks? That framing would seem to distinguish Alexei's and my possibly not having *taken* that option from many people's not having had it available to them, which makes me much more comfortable.

[firecat]

middle class includes everyone who has the realistic option, while maintaining a reasonable standard of living, to structure their finances so that they could avoid financial difficulties in the event of the loss of a few paychecks?

I like that.

I think another reason for the "financial difficulty" definition is that we are coming out of an era dominated by people who tended to think that people's misfortune was usually directly caused by their individual behavior and if they were in difficulty they should be punished for it by not being helped out of their difficulty.

But (a) such punishment does not improve an already staggering economy.

And (b) it is looking like Obama's administration has read Don't Think of an Elephant and is trying to reframe the political debate using the metaphors discussed there.

[starcat-jewel.livejournal.com]

In view of this article (http://www.nytimes.com/2009/02/08/fashion/08halfmill.html), I would say that the definition has to include something about the percentage of one's income that goes to luxuries. "Financial hardship" does NOT mean "being unable to live effortlessly in the style to which most of us would love to become accustomed"!

[firecat]

That was also where I was going with the leased jaguar. :-)

I actually do believe it could be hard to live on $500K a year in NYC. But if anyone has the education and ability to save and invest, it's top bankers who have been making millions a year up until now. I think they should be able to dip into their savings to help them through, without its putting them into financial difficulty.

And if they don't have savings, well, what I've been saying about education in how to budget applies many times over.

[leback.livejournal.com]

Ooh, yeah, that's a really good point. Thanks for the insight!

[innerdoggie.livejournal.com]

Yeah, I felt that way, too.

Some people simply don't get paid enough to save anything, but I think if you can afford something more than the basics, you can save. If you decide to upgrade your lifestyle instead of saving anything, then that doesn't make you "poorer" than somebody with the same income who decided to save.

[abostick59.livejournal.com]

I'm having trouble with the idea that one's social class is defined alone by one's relationship to money. Is a factory worker who left school after tenth grade but who has been saving assiduously for retirement "middle class"? Really? Are you sure?

[stefanie-bean.livejournal.com]

That's a good point. There are other issues of class beyond money. Someone working in a white-collar "administrative" job might earn 50% less than someone doing a blue-collar job. But most people would probably consider the administrative worker "middle class" while the higher-earning blue-collar person would be considered "working class" or even "lower class."

[firecat]

I kinda think Bernstein is trying to define economic class more than social class, and I can see an argument for the factory worker counting as middle class in an economic sense. Of course social class is a lot more complex than that, and I actually hope the government is not trying to define social class.

[johnpalmer.livejournal.com]

There was a time when a factory worker who is assiduously saving for retirement was likely to be middle-class, with union scale wages and a decent pension on top of the retirement savings.

[abostick59.livejournal.com]

I don't understand the concept of "economic class."

Is the powerful CEO's ne'er-do-well kid brother who was cut out of the trust fun because the parents had had quite enough and has been living hand-to-mouth ever since is of a different "economic class" than the CEO, even though the ne'er-do-well can flawlessly negotiate the social intricacies of dining at the country club?

In the TV show The Wire, Stringer Bell and Avon Barksdale are together making piles of money selling drugs -- enough that their partnership is buying up lots of Baltimore real estate. They deal with this in very different ways: Stringer is very explicitly trying to get out of the ghetto (attending college, managing a legitimate storefront business), while Avon is staying close to his roots. Would you say that they are the same economic class because their wealth is shared?

[abostick59.livejournal.com]

Yabbut what beer did he drink? Which fork did he use first? What movies did he like to watch? What books did he read? When he wore a tuxedo, did he hand-tie his bow tie or use a clip-on?

When presented with the shibboleths of class, how did he react?

[firecat]

You're asking a lot of interesting questions and I get the impression there is an opinion behind them although you're not stating the opinion.

I think part of the opinion might be that someone who has grown up in the upper class has options that will allow them to get money even if they don't have money right at the moment.

And another part might be that how you choose to spend and manage your money says something about what class you belong to.

I agree with that.

I don't know whether you're addressing the issue of what the government's definition of middle class is, and if you believe the government should have a different definition than what's quoted in my original post.

It's clear that Bernstein has a particular notion of class in mind when he says

the American dream of owning a decent home in a safe neighborhood with a good public school, having access to affordable health care, saving for college and retirement, and enjoying the occasional meal out, movie, and vacation.