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Good Question: Who Is In The Middle Class?

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(credit: CBS) Jason DeRusha
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MINNEAPOLIS (WCCO) — When President Barack Obama unveiled his plan to extend the payroll tax deduction, he pronounced it “a make or break moment for the middle class.” But how do we define “middle class?”

According to a New York Times poll, 92 percent of Americans consider themselves working class or middle class.

Another public opinion poll reported that 19 percent of people making more than $110,000 consider themselves “middle class.”

“The middle is a household that makes about $50,000 a year,” said Fabrizio Perri, Ph.D., a professor in the University of Minnesota economics department.

According to 2010 data from the U.S. Census bureau, the mid-point is $49,445 – half of working American households make more, half make less.

So, to get to an idea of “middle class,” let’s eliminate the richest 20 percent, households making more than $100,065. And eliminate the poorest 20 percen, those households making less than $20,000.

That leaves middle class households earning between $20,000 and $100,000 a year.

The middle class over the past 5 years has held fairly steady in terms of its median income, according to Perri. But the three groups have been improving over the past three decades at different rates.

The bottom 20 percent saw its income rise less than 20 percent. The middle, saw income climb about 40%. But the top 20 percent grew at a rate of 65 percent.

“This is the defining issue of our time,” said Obama.

His Department of Commerce prepared a report on the Middle Class in America.

The Commerce Department defines the middle class by their aspirations, writing, “income levels alone do not define the middle class.”

“Middle class families and those aspiring to be part of the middle class want economic stability, a home and a secure retirement. They want to protect their children’s health and send them to college. They also want to own cars and take family vacations,” according to the report.

But housing, college and health care costs are all rising faster than middle class income. And the types of jobs typically associated with the middle class are harder to come by, according to Perri.

“Middle class, 30 years ago used to be a worker who was not very skilled, but had a very-stable job, relatively high paying job, and those jobs have been vanishing,” said Perri.

The median income is for all households, when you look at individual circumstances, you get a different picture of that mid-point. For the 58 million family households with a married couple, the U.S. Census Bureau puts the median at $72,751. For the 40 million “nonfamily” households, the median is $29,730.

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