How Much Money Do You Need to Make it to the Middle Class?

How Much Money Do You Need to Make it to the Middle Class? Flotsam /

Being part of the American middle class might involve more than making a certain amount of income each year.

The middle class ain’t what it used to be.

Much was made of a landmark 2015 Pew Research study that showed the share of Americans in middle-income households declining from 61% in 1971 to just 50% in 2015.

Raw population numbers make the picture look grimmer still — 120.8 million American adults lived in middle-income households in 2015, but 121.3 million American adults lived in what might be considered “lower-income” or “upper-income” households that year.

Despite those numbers, 70% of survey respondents in a 2017 Northwestern Mutual poll self-identified as middle class.

The numbers were somewhat skewed by couples — 85% of non-single men and 74% of non-single women identified themselves as middle class — but even sad-sack single earners claimed membership in the middle class at rates that exceeded Pew’s findings.

Some 57% of single men and 59% of single women thought they were middle class. Clearly, a lot of Americans have some delusions about their economic standing.

Or do they?

What exactly is “middle-income”?

The Pew study defines “middle-income,” which is often used interchangeably with the term “middle class,” as a household income ranging from two-thirds to twice the national median annual household income. At the time of the study, that meant a household income range of $42,000 to $126,000 for a three-person household. The Census Bureau’s most recently-available income data, from 2016, showed median annual household income of $57,617 per year.

There are, of course, several problems with assessing all households on the same metric.

For one thing, $57,617 goes a lot farther if there’s only one person in the house than it does if it’s got to support a family of six. There were 2.53 people per U.S. household in 2016, so the effective median household income per person is roughly $22,774.

A one-person household would be sitting right in the middle of the “median income” scale if it earned that much, while a family of six would need $136,644 to fall right in the middle of a size-adjusted median. But you could ask a single person earning $22,774 per year and a 6-person family pulling in $136,644 per year if they felt like they were part of the middle class and get negative answers both times.

Location, location, location

For another thing, feeling like you’re part of the middle class often depends just as much on where you live as it does on how much you make. A household in Silicon Valley making $57,617 a year might be living out of their car. On the other hand, if that same household moves to Montana, they might find themselves living comfortably in the wide-open spaces and enjoying the low costs of living.

Seven states (and one municipality) surpassed median household incomes of $70,000 in 2016 to become the highest-earning states in the U.S.:

  • Maryland — $78,945
  • New Jersey — $76,126
  • Alaska — $76,440
  • Washington, D.C. — $75,506
  • Massachusetts — $75,297
  • Hawaii — $74,511
  • Connecticut — $73,433
  • New Hampshire — $70, 936

Ten states fell below $50,000 in median household income in 2016:

  • South Carolina — $49,501
  • Oklahoma — $49,176
  • Tennessee — $48,547
  • New Mexico — $46,748
  • Kentucky — $46,659
  • Alabama — $46,257
  • Louisiana — $45,146
  • Arkansas — $44,334
  • West Virginia — $43,385
  • Mississippi — $41,754

It sure looks like it’s better to live in Maryland than it is to live in Mississippi, doesn’t it? But although these rankings show what the median income is by household on a state-by-state basis, it again fails to show the entire picture.

That’s because the cost of living can vary quite widely from state to state, and especially between more rural regions and the urban areas that house seven out of ten Americans.

The Housing Cost Variable

The most widely variable element of living costs is housing — it costs more than four times as much to house a household in Hawaii as it does to house it in Mississippi. Hawaii is an outlier in nearly every other aspect of living costs due to its remoteness, but there’s fairly little variance between the other 49 states in terms of prices at the supermarket or the bill for a visit to the doctor’s office.

Would you feel like your family was middle class if it earned $52,104 per year in Maryland? How about if you were making $157,890? Those are the lower and upper boundaries of Maryland’s middle class, according to Pew Research’s definition.

What if you were making $27,558 in Mississippi, or $83,508? A five-person household in Mississippi would be considered to be making sub-poverty wages at the lower bound of the “middle class,” but it would also cost you almost 40% of your pre-tax wages to pay for the average rent in the Washington D.C. suburb of Silver Spring, Maryland if you were scraping by at the bottom of the middle class.

Context matters

There’s a lot more to being “middle class” than just earning a certain amount of money every year.

Among many other considerations, you have to look at your household earnings in the context of where you live, how many people are in your household, what kind of expenses you have, and how much you want to save for retirement.

There are some extreme arguments that posit $300,000 as a reasonable household income for a middle-class lifestyle in certain urban coastal areas like New York City or San Francisco. You could probably get by with much less, but it might not be a particularly fulfilling existence if you want to splurge a lot, which the linked article seems to encourage.

Would you feel middle-class if you only took one week of vacation a year instead of two or three? Would you downgrade your socioeconomic rank if you only went out to dinner once a month instead of once a week?

There are ample data points to determine what defines “middle class” by income and location, but for many Americans, being middle class is a subjective feeling rather than an objective fact. Owning a Mercedes might make a household feel like they’ve made it, but if they can’t pay for repairs when it breaks down, their position is far more precarious than might be indicated by a single piece of data.

Do you feel middle class? You can find out if you qualify with Pew Research’s calculator widget, which can tell you where you might rank on the income scale by state, metropolitan area, income level, and household size. Check it out here.

Alex Planes

Alex Planes is a seasoned writer with over 3,000 published articles on money and personal finance. His work has been featured or syndicated by The Motley Fool, Business Insider, Fox Business, and USA Today, among others.