“Middle Class”: You keep using that word

24Oct12

Presidential elections bring out more discussions than usual about tax policy and class, and candidates talk about protecting/growing/expanding/supporting the middle class. Of course, when politicians talk about the middle class, they don’t want to leave anyone out, so they refer to it as broadly as they can, so you have absurdities like this:

Infographic showing that the upper end of neither President Obama's nor Governor Romney's 'middle class' is actually middle income.

Image by Mansur Gidfar for Upworthy.com

Now, my knowledge of statistics is rather shaky, but I’ve observed that when discussing income, most analysts look at quintiles: the five non-overlapping groups (as defined by their income) of people or households with each group containing 20% of the population or households. When talking about the middle class, the analyses I have seen look at the second, third, and fourth quintiles individually, and as a block. These three quintiles contain the middle 60% of the population, which is why they look at them individually as well as a block (though the third quintile is considerably less than a third of the population, the middle three together are almost two times a third of the population).

To talk about people with incomes of $100,000 as being middle class is incorrect in an income-based definition of class — they are upper-class (81st percentile placing them at the lower end of the uppermost quintile). To say that people earning $200,000 per year are middle class is laughable — they are firmly in the upper half of the uppermost quintile. To refer to those earning $250,000 per year as being middle class (as President Obama and Governor Romney have done) is offensive — in the 96th percentile, they are in the top quarter of the uppermost quartile. To be as far from the middle at the lower end of the scale, someone would have to earn $16,000; $8000; and $6000 per year respectively.

Why do they do it?

We know that politicians try to make the middle class as big as they can (especially at the upper end), but why? There are two reasons, one political and one cultural. I don’t mean political in quite the common sense, I mean having to do with the policy tools available. When we look at the middle class in a political context, we are almost always talking about ‘middle’-income earners. We do this because the most obvious point of contact that most people have with the government is through taxation, and income taxes are calculated based on income. Every politician wants to keep from raising taxes on the middle class.

This is where the cultural reason ties in: most people in America think they are or will be middle class. The wealthy (partly because they move to more and more exclusive neighborhoods) think that they are middle class, especially if they were raised in a middle class household. The poor think that (despite their experience) they will be able to move up into the middle class. In short, whether our income is $10,000 or $200,000 per year we imagine that we are, or will be, middle class.

Wait, there’s another way to define class?

Believe it or not, class is not traditionally a function of income, but of one’s role in the economy. Though his prescription for the gross inequality he saw was disastrous, Karl Marx was astute in his description of the situation he saw in early industrial England. People were linked by common interest (specifically, their relationship to the means of production), rather than necessarily by income. Prior to Marx, even the class-obsessed English were more likely to refer to the upper and lower ‘orders’ or ‘sorts’.

(It should, perhaps, be noted that almost all of the countries that had an internal workers’ revolution started from a feudal position, and were therefore essentially Leninist, rather than strictly Marxist. Not that Lord Acton was wrong about the corrupting influence of power. Cuba is an abuser of human rights, and the economic structures that Stalin and Mao came from had little — if anything — to do with their becoming mass murders.)

Marx’s three main classes were the landholding class (the aristocracy), the business owning class (the bourgeoisie — which owns the means of production), and the working class (the proletariat — which operated, but did not own, the means of production). Marx saw the common interests of those who could live off of their wealth, those who were profiting from a business (especially if they employed others and profited from others’ labor), and those who sold their work to others.

That three-way breakdown had its holes. Marx largely considered those who could not (or would not) find legitimate work (the lumpenproletariat) irrelevant. Both farmers and professionals were in ambiguous positions. Farmers owned both land and business, but earned their living from their labor, thus containing aspects of each class, but also having special interests beyond any of the three main classes (such as an interest in higher food prices). The professional class, even if working for another, fully owned the education and credentials which were their means of producing a living. They also had interests specific to their profession.

In some ways, that still holds true. Low capital gains tax gives greatest benefit to those who have the greater portion of their income from investments. Reduced regulations on business and hiring practices give most benefit to business owners. Mandatory employment benefits and a high minimum wage give the most direct benefit to those who work for others.

In this sense of class, there may well be middle class people earning $250,000 or $6,000 per year. I would venture that they are extremely rare, though — most business owners earning a total income of $6,000 per year would find another line of work, if possible; and someone earning $250,000 per year these days is much more likely to be a highly paid employee or have a substantial share of their income from investments, rather than direct ownership of a business.

My point is not that an economic-role definition of class is necessarily better than an income-based definition of class, but that for some purposes it is more useful. My parallel point is that when we talk about class in US politics, we use a narrow definition of a broad topic, and try to make a narrow band much wider than it really is.

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