Defining and Preserving the Middle Class

During the 1959-60 school year at Maryville High School I was working on college plans. The University of Tennessee, 15 miles away in Knoxville, tuition of around $250 per academic year, was the default choice. Vanderbilt University, tuition about $900 a year I believe, was 200 miles of two lane road away in Nashville, and that was where I wanted to go. Mother had told me that if I got a tuition scholarship I could go to Vandy. If not, UT would be the choice.

I remember Daddy completing a financial statement as part of the needs-based scholarship application process. His income from the family furniture business was a bit more than $5000 a year, a solid middle class income, I suppose, for the time. Of course there were lots of things we didn’t have. No color TV, no cable TV, no cell phones, no air conditioning in the house or in the car, a 1953 Ford station wagon, bought used, no second car, no expensive vacations, no restaurant meals except on vacation, no computers. My parents were necessarily frugal, typical for middle class families of the time. They were solid tithing members of First Baptist Church but didn’t play golf or have any club memberships. Well, Daddy was a VFW member.

I was working at the furniture store one day when Mother called, offering sympathy and saying a letter had come from Vandy granting admission but without financial aid. I rushed home and called the admissions director, “long distance” no less (an extravagance at the time), to ask what had happened. He said my application was incomplete because my parents had not sent the financial statement. I told him we had completed it and mailed it in. He said he would look again and, after a few minutes, came back to the phone to say he had found it and that I would be getting the scholarship after all. Well, a little follow-up certainly paid off in that case.

At Vandy I learned that there was a big spread in personal incomes even in the 1960’s, long before disgraced presidential candidate John Edwards began his populist rant about “two Americas” and President Obama began talking about spreading wealth around. One undergraduate during my time there was son of the founder of Holiday Inn, and one was a relative of Winston Churchill. I recall a conversation with a fraternity brother, son of a physician, who said that his dad made about $75,000 a year. That seemed to me to be an awful lot of money, representing almost fifteen years of hard work by my dad.

But my time for easy living was coming, I thought. After four years at Vandy and a year at the University of Tennessee, proudly holding BE and MS degrees in Chemical Engineering, I started work at Eastman Chemical Company in Kingsport, TN, at a salary of $770 per month, a little less than $10,000 a year, and figured I was starting out in the middle class, whatever that meant. Still no color TV or new car or central air, etc. But I was going to earn back in one year the approximately $10,000 all-in cost of a Vanderbilt education.

I’m just thinking about this history because of the current uproar about rumored disappearance of the middle class as the rich are supposedly getting richer and the poor getting poorer. I’m thinking about Vice President Biden’s claim a few days ago that he is a middle class guy with his income last year of $379,000. Well, if that is what it takes to be middle class, it is a small group for sure. I’m wondering just what the heck the middle class is anyway? We have a clear government-generated, ever-changing, definition of the Poverty Line, so why can’t we get one for upper and lower limits on incomes for the Middle Class?

Hoping to answer those questions, I dug out some historical income distribution data from the Census bureau. I shows how family incomes, in constant 2010 dollars, have changed over the past few decades, for the lowest, second lowest, middle, second highest, and highest quintiles of earners in the USA. The Y axis is an exponential scale so a straight line represents a constant percent growth rate.  Click on the chart for a high resolution view.

Note the long term trends of increasing real incomes for everybody but the bottom 20% until 2000. Since 2000, incomes have been static, probably the major reason for today’s class envy. These data do not include food stamps and housing subsidies (see note at bottom) so such payments, if included, would certainly result in a significant boost in the bottom quintile data.

I don’t see any evidence here of a vanishing middle class but do see good support for defining the Middle Class as families with incomes greater than the mean of the Lower Middle Quintile, $37,066, and less than the mean of the Higher Middle Quintile, $91,991. Such a definition would enable us to talk intelligently about the size and living standards of the Middle Class, determine who has a right to claim to be Middle Class, and also would assure that the Middle Class, like the Poor, would never disappear. If that were to be accomplished, we could quit worrying about Middle Class vanishing acts and start focusing on the national economy rather than class warfare.

And, as far as the cost and value of college educations go, I see that today the cost of four years at Vandy is about $250,000 and Chemical Engineers are starting out at about $60,000 a year, often with a load of student loan debt. Something is definitely gone out of whack there since my Vandy days, and I am guessing it has to do with ever increasing availability of government grants and loans pumping up demand and prices over the decades.


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Information about and source of data:

Census money income is defined as income received on a regular basis (exclusive of certain money receipts such as capital gains) before payments for personal income taxes, social security, union dues, medicare deductions, etc. Therefore, money income does not reflect the fact that some families receive part of their income in the form of noncash benefits, such as food stamps, health benefits, subsidized housing, and goods produced and consumed on the farm. In addition, money income does not reflect the fact that noncash benefits are also received by some nonfarm residents which may take the form of the use of business transportation and facilities, full or partial payments by business for retirement programs, medical and educational expenses, etc. Data users should consider these elements when comparing income levels. Moreover, users should be aware that for many different reasons there is a tendency in household surveys for respondents to underreport their income. Based on an analysis of independently derived income estimates, the Census Bureau determined that respondents report income earned from wages or salaries much better than other sources of income and that the reported wage and salary income is nearly equal to independent estimates of aggregate income.

http://www.census.gov/hhes/www/income/about/index.html