I thought I knew what middle class meant. I took it to mean most of working America - not people working as maids or gardeners or at fast-food restaurants, but just about everyone else: from plumbers to electricians, teachers to police officers, nurses to doctors, lawyers to entrepreneurs. And had you asked me how many Americans make up the middle class, I'd have guessed it was at least 50%. But according to Charles Hugh Smith, writing in the Of Two Minds blog, that's not so. The actual number of middle-class Americans has dwindled over the years. Today, he says, "middle class" describes only 10% of U.S. households - the 10% just below the richest 10%. "Households in the 'bottom 80%' are lacking essential attributes of a middle class lifestyle that were once affordable on a much more modest income," Smith says. Outside of income, he includes these criteria in his definition of "middle class": - Meaningful health insurance (not high-deductible, no-preventive-care "insurance")
- Significant equity (25% to 50%) in a home
- An income-to-expense ratio that allows one to save at least 6% of their income
- Significant retirement funds in 401(k)s, IRAs, etc.
- A family's ability to service debt and expenses over the medium term if one of the primary wage earners loses their job
- Reliable vehicles for each wage earner
- No reliance on the government to maintain one's lifestyle
- Ownership of non-paper, non-real-estate assets, such as family heirlooms, precious metals, tools, etc., that one can transfer to the next generation - that is to say, "generational wealth"
- The ability to invest in kids (education, clubs, training, etc.)
- Leisure time devoted to physical, spiritual and mental fitness.
I'm guessing he designed these criteria to get the 80% number he was looking for. I doubt there was ever 50% of the population that could pass his tough test. But the general point - that the middle class is considerably smaller than it was during my childhood - seems right to me. |
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