Middle Class – Does That Describe You?
I have observed that many high-income, high net-worth folks do not feel wealthy. They typically think of themselves as middle class. I have also noticed that many people who are middle class feel poor. This poses a question: “What is middle class anyway?” There is no single definition; however, some economists consider the bottom 20% of the population poor, the top 20% wealthy, and the other 60% middle class. A family of four is middle class if they have household income between $46,960 and $140,900, based on that definition.
Or assets between $0 (at least they are not in debt) and $401,000.
Different realities within the middle class:
These are big ranges with very different realities among people at the top and bottom of the “middle class” range (lower middle, middle, and upper middle). My question is: Why do people who have $1 million or more in assets and/or $200,000 in annual income still feel like they are middle class? I have a theory. Several studies have shown that the more time people spend on Facebook, and other forms of social media, the more depressed they become. This is because people always post pictures of themselves having fun and looking their best. It is only natural to compare yourself to others, and frequently, when people do that, they feel their lives are not quite as fabulous. This is the same phenomenon that people experience when they compare their financial situation to what they see around them. Our society has become obsessed with celebrities and displays of wealth. You might make $200,000-$400,000, but when you look at the guy driving a Bentley, you think, “I don’t have that kind of money.”
Perceptions driven by growing inequality:
Gallup did an annual survey for the past 15 years asking people whether they thought they were upper class, middle class, or working/lower class. The segment of the population that self-identifies as working and lower class has risen from 33% to 48%, and those identifying as middle class has fallen from 63% to 51%.
This shift in people’s perceptions is less about stagnant wages or a tough economy than it is about feelings of growing inequality. The wealth gap between the wealthy and poor is growing larger every year. Another part of the problem is also in how we define middle class. It seems like 50 years ago, you were middle class if you could afford a TV. Today, we take it for granted that even lower income people have multiple TVs with access to unlimited TV shows and movies for $10 a month. In other words, our expectations are higher, and not surprisingly, a lot of people are a bit disappointed.
Is this a problem? I would say that it is not a problem if wealthy people perceive themselves to be middle class. The bigger problem is middle class folks feeling that they are poor. “The lower you perceive yourself on the socioeconomic scale, the less likely you are to feel like you have control over the things that matter in your life,” states Paul Piff, a professor of psychology at UC-Irvine. Those who view themselves as poor are more likely to disengage socially and politically, although being poor might not affect their overall happiness.
Doing better than you think?
The bottom line is most people are doing better than they think, relative to the rest of society. Your neighbor is probably not doing much better than you (if at all), and he’s definitely not having as much fun as his Facebook photos suggest.