“Michelle Feliz, a single mother of two, saw her salary drop to $37,000 from $42,000 as a layoff forced her to switch careers. She is in an especially cruel predicament. Her pay is low enough that she can’t afford day care for her one-year-old son, or clothes for her teenage daughter, but it’s just high enough that she also didn’t qualify for food stamps.” (Huffington Post article extract)

Who is included in the middle class?

There is probably no simple, straightforward answer to the preceding question. The middle class is stratified (lower, middle, upper and as many other groups as the mind can invent in between); these groupings are also dependent on location. Income levels that define lower middle class in high cost locations may be equivalent to upper middle class in some very small towns with a lower cost of living.

One good way to know you’re in the middle class is that you are not sufficiently ‘poor’ for government programs, subsidies, grants and rebates  (where they exist) nor are you rich enough to benefit from the privileges of the wealthy few. There are politicians and/or political parties and platforms that are vocal about the  needs of the poor – conversely, there are also political parties that are obsessed with the needs of the wealthy few (tax cuts for high incomes, capital gains, dividends, government subsidies, tax loopholes and so on). If you examine both ends of the spectrum and your income is such that neither of the aforementioned political parties/platforms/politicians are advocating your cause, you’re likely in the middle class. You must fend for yourself, no one (in the government) will fend for you – this is not to say that you should wish you were rather poor (the poverty bar is set so low that ‘wretched’ seems a better description of the lifestyle you would have to live to qualify).

However, regardless of income level, some challenges are common to middle class folks and we will strive to highlight those below

  1. Middle Class folks tend to have jobs – so the ‘no work, no pay’ rule would probably apply across the board. The compensation may be in the form of partnership share of profits (think of lawyers, accountants) self-employment income, salary, wages, commissions or other similar income type – the common thread is that cash flow is completely dependent on labour. A dentist who owns her practice may still be middle class if her income is going to fall dramatically when she stops working – if she can retire (or otherwise stop working , maybe because of health or disability constraints) and maintain a steady (residual) cash flow, she may not necessarily be middle class.
  2. Middle Class folks need job security – because they would otherwise have no income (cash flow) security.
  3. Middle Class folks tend to have very limited control (if any) on the nature and form of their income or cash flow. It is usually of the sort that is taxed at the highest rates and dependent on factors beyond the individual’s control for continuation and/or sustainability of earnings. In other words, middle class folks are generally vulnerable to unemployment in one form or the other. They may have high 6 – 7 figure annual (US dollar 0r  equivalent) incomes but are still vulnerable to unemployment and/or disability (short- or long-term).
  4. Middle Class folks tend to have one main income stream (inflow) but lots of expenses (outflows) – that is why they are typically referred to in the media as the ‘engine of the economy’. The wealthy elite depend on the emotional needs of the middle class to sell their ‘stuff’ – when you read in the news that consumer spending is down, it should actually read middle class spending is down. The poor don’t have enough, so they must by default spend all they have plus whatever they can borrow (usually on very usurious terms – think payday loans at effective rates ranging from 500% – 9,000% per annum). The rich on the other hand, have more than enough, so their discretionary spending does not fluctuate wildly – they can afford to buy all they want or need with much more to spare. The middle class however is always having to make hard choices because their expenses tend to rise faster than income  and inflation (the rich have the tools to make their incomes rise faster than inflation or their expenses) and so, they have to prioritize their spending every day.