The Imaginary Middle Class

One of the constant refrains of politicians is that “We have to help the middle class.” They intend for this to refer to the average voter, but this concept is actually illusory.

The majority of people will incorrectly say they belong to the middle class.

What does ‘middle’ mean? It is generally used to describe something that is equally distant from two extremes or limits. In many cases, asking where the middle is will be roughly equivalent to asking for an average. Take height, for example. A person of average height will be roughly in the middle of the very tall and very short fully grown people in the world. But imagine if a select number of people were 25 feet tall. Would the person of average height now be correctly described as “in the middle?” No, they would clearly belong more to the group of people in a decidedly lower range of heights.

Now, what does the picture of wealth in this country look like? Is it more similar to the first or second height example? If you know anything about wealth distribution (and many Americans do not), you’ll recognize the landscape looks more like the second. This means that people who think of themselves as having an average income are actually not anywhere near the middle. There are a few people around there, sure, but this idea that most Americans are middle class simply ignores the disparity that exists. The overwhelming majority of us share more in common with the so-called lower class than with the true upper class. I would even guess that the Vice Presidents of most major companies are closer by far to people on welfare than the true upper class.

Why do people think they belong to a middle class?

Studies have shown a remarkably poor estimation of how wealth is distributed in this country, as shown in the following figure from this article:

Actual wealth distribution plotted against the estimated and ideal distributions.[i]

In short, your thoughts about where you actually stand in the world are probably wrong. And the more discrete your measurements, the more stark this picture becomes. The grey bar represents the wealth controlled by the top 20% of the country. But even if we took the top 1%, that bar would be around 40%. I’m not sure if people realize just how astounding that is, so I’ll repeat it. Nearly half of the total wealth in this country belongs to 1% of its citizens.

So, let me ask you. Are you in the middle? No, you’re probably over there on the far left. Hell, your bar might be so small that it doesn’t even show. You are not in the middle of anything where wealth is concerned, and conservative plans that claim to help the middle class ironically do just the opposite—they ensure almost no one appropriately meets that description.

Maybe you don’t believe me and you think that your measly bar on the left will grow to control more wealth if the truly wealthy stimulate the economy. You might be interested to know that in the 1970s, the top 1% controlled a smaller portion of the total wealth (around 20%). So what happened? Among other things, here’s what happened after that, according to the study:

Here are some dramatic facts that sum up how the wealth distribution became even more concentrated between 1983 and 2004, in good part due to the tax cuts for the wealthy and the defeat of labor unions: Of all the new financial wealth created by the American economy in that 21-year-period, fully 42% of it went to the top 1%. A whopping 94% went to the top 20%, which of course means that the bottom 80% received only 6% of all the new financial wealth generated in the United States during the ’80s, ’90s, and early 2000s (Wolff, 2007).

Concentrating wealth into the hands of the already wealthy did nothing to “grow the middle class.” It did exactly what you would expect it to do; it made them even wealthier and all the people who thought of themselves as middle class moved further away from the true middle.

Conclusion

You are not in the middle class. Your neighbor is not in the middle class. Your teachers and friends are not in the middle class. Multi-millionaires are middle class. You are an insignificant blip on the radar of the wealthy, and proposals to concentrate wealth even further will only ensure you stay that way.


[i] Note: In the “Actual” line, the bottom two quintiles are not visible because the lowest quintile owns just 0.1% of all wealth, and the second-lowest quintile owns 0.2%. Source: Norton & Ariely, 2010.
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