
Are people who make $200k middle-class? - howard941
https://theweek.com/articles/851634/are-people-who-make-200k-middle-class
======
imgabe
Lower-class / Middle-class / Upper-class defined as brackets of income seems
to be the wrong way to divide things.

There is an ownership class that receives preferential tax treatment and a
labor class that doesn't.

A small business owner might only net $80k/year, but their incentives in
regards to policy are more aligned with a billionaire startup founder than
with an $80k/year middle manager, because their income doesn't come in the
form of a W-2 job.

It doesn't really matter the _amount_ of income you're getting, it matters a
lot more in what form it comes. People who work for others and have a boss who
determines their livelihood have more in common with each other regardless of
how much they make than people who own businesses. Even movie stars have a
union.

~~~
rayiner
Capital gains accruing to people who live primarily off capital gains accounts
for too little of total income to be a sensible dividing line.

Total realized capital gains in 2017 was about $650 billion, about 30% of
which accrued to people who realized an average of less than $50,000 in
capital gains per year: [https://www.taxpolicycenter.org/model-
estimates/distribution...](https://www.taxpolicycenter.org/model-
estimates/distribution-individual-income-tax-long-term-capital-gains-and-
qualified-18). So you're talking about $460 billion in "ownership class"
income annually, or 3.5% of all U.S. income. That's actually a very high
estimate--because even within the top 1%, realized capital gains doesn't
account for even half of total income.

So under your theory, 96.5% of all personal income in the U.S. is earned by
the "lower class" or "middle class." It's a very weird definition.

~~~
imgabe
I think that makes sense since most wealth is increasingly concentrated among
a smaller and smaller proportion of people.

Yes, if you only look at _realized_ capital gains it is a small percentage.
Because even if you have $50 billion in stock, you really don't need to be
spending $1 billion / year or anything ludicrous. There is a limit to what one
person or one family can consume, and the levels of wealth people can achieve
are so incredibly far beyond that, that of course they don't need to realize a
lot of gains to get the lifestyle they want.

Several years ago my job took me to do some work at the home of someone in the
top 10 of the Forbes 400. I was chatting with one of his staff and this person
had homes all over the world, one of the largest yachts ever made, private
plane, etc. The annual cost for running everything was on the order of $50
million / year. Astronomical, yes, but as a percentage of their net worth
practically nothing.

~~~
rayiner
Paper net worth that isn't spent is fairly meaningless, though. We care about
defining upper class versus lower class because money dictates access to
scarce resources. For the most part, you can't buy access to scarce resources
(in your example, labor, yachts, private planes), without realizing capital
gains.

~~~
imgabe
The point is that wealth is distributed along a power law and people making
$200k/year from a W-2 job are not in the meaty part of the curve. You seem
really invested in shaming them and demanding they pay more in taxes when if
you're making that as a wage you're probably already paying close to 50% of
your income in Federal and State taxes. At the same time they don't qualify
for many of the deductions and subsidies that lower income people would so
they're already paying more for the same things. How much more do we need to
take from them?

Yes, if they are in any way reasonably responsible they can live comfortably
and have all their needs met. That's great. We should work on extending that
possibility to more people instead of taking it away from one group of wage
slaves and handing it to another. Meanwhile people making orders of magnitude
more money are paying 15%, 10% or 0% in taxes. That's the "upper class" for
all practical purposes.

~~~
rayiner
First, your premise is false:
[https://en.wikipedia.org/wiki/Distribution_of_wealth#In_the_...](https://en.wikipedia.org/wiki/Distribution_of_wealth#In_the_United_States).
As of 2007, the top 1% owned 35% of wealth, while the next 19% owned 50%. The
top 20% is a net worth of about $500,000 including home equity, which pretty
much any household making $200,000 will as they get older. Moreover, the
wealth of the top 20% is going to comprise to a much greater extent ownership
of scarce resources (housing in desirable areas, etc.) than the paper wealth
of the top 1%.

Second, what we care about at the end of the day is the distribution of access
to consumption. Income models that better than wealth. Mark Zuckerberg might
have an unrealized gain of $1 billion, but he can't out-compete someone else
for access to scarce resources unless he realizes that gain. Indeed,
Zuckerberg's wealth in particular is just a proxy for the right to receive a
portion of Facebook's profits _in the future_ based on the _future labor_ of
Facebook's employees. It doesn't represent anything tangible that exists right
now. It's realized capital gains, not unrealized paper wealth, that is the
proxy for goods and services that could be used to meet peoples' needs in the
present.

Third, the folks paying "15%, 10%, or 0% in taxes" represent an extremely
small portion of total income. Eliminating the preference for capital gains,
for example, would raise just a couple of hundred billion more in taxes
(compared to the almost $7 trillion we already raise). It's something that
makes a few people very rich, but they don't account for a very large portion
of overall income.

Fourth, and finally, someone making $200k/year isn't paying "close to 50%" of
income in taxes. In Maryland, it's just over 30%. We're one of the few
developed countries that taxes the top 5% so little.

~~~
imgabe
> Mark Zuckerberg might have an unrealized gain of $1 billion, but he can't
> out-compete someone else for access to scarce resources unless he realizes
> that gain.

When 99.99% of people don't even have 0.1% of Zuck's net worth he doesn't need
to realize anywhere close to $1 billion of gain to out-compete them. The
distribution is so lopsided that he could realize gains encompassing most
other people's entire net worth and it would be a rounding error in his
accounting. That's without even getting in to the fact that at that level your
brokerage will happily give you a low-interest loan to do things like buy a
house or whatever you want so realizing gains is not at all necessary to have
access to funds for consumption. "Realized capital gains" does not even begin
to tell the story of the disparity in access to consumption.

~~~
rayiner
The question is whether realizes gains reflects the consumptive access of
billionaires as a category than unrealized increases in paper wealth. While an
individual billionaire can in fact get a low interest loan against paper
wealth for purposes of consumption, that loan will have to be paid back with
cash. That cash has to either come from ordinary income, or through
realization of capital gains. Unless billionaires as a category as just not
paying off those personal loans, the consumption associated with those loans
should be reflected in their income and realized gains.

------
gringoDan
The problem in these types of discussions is the general conflation between
income and wealth.

In the US, most people are taught from a young age that they should strive for
high-income, high-status jobs (engineer, doctor, lawyer). Yet that was the
path to success 50 years ago, not today. As the article mentions, you can have
a huge income while still having lots of debt, being unable to afford a home,
etc. - especially if you live somewhere with a huge cost of living, like the
Bay Area.

When you are reliant on income, your money scales linearly with the effort
and/or time that you put into your labor. (Actually, sub-linearly - the
company you work for captures the majority of the value.)

Conversely, to become wealthy, you must build ownership in something. Then,
your money accumulates exponentially as a function of your labor input.

One of the most successful people I know worked manual labor jobs, bought a
small HVAC business, scaled it up, and now has contracts with most office
buildings in one of the largest cities in the US. He is richer than 99% of
FAANG engineers.

[https://twitter.com/naval/status/1002103360646823936](https://twitter.com/naval/status/1002103360646823936)

~~~
akavi
> you must build ownership in something

You can do this by buying index funds, too. That's sorta the whole idea.

> He is richer than 99% of FAANG engineers

Would he be richer than 99% of FAANG engineers who lived the same lifestyle he
did during those years and invested the savings in a standard diversified
portfolio?

~~~
dangus
Possibly, but remember, investing in a diversified portfolio doesn't have the
same risk profile as starting an HVAC business.

This is essentially an example of survivorship bias. How many people starting
HVAC businesses just go out of business within 5 years instead?

It's not much different than a FAANG engineer buying a bunch of Apple stock in
1998. They could have immense wealth or have gone bust if Apple had gone
bankrupt as was the most likely outcome at the time.

But with a diversified portfolio we know the outcome, about a 5-10% gain per
year over a long-ish period.

~~~
akavi
You're right, my point is that a saving-focused FAANG engineer (SFFE) likely
has a better risk-adjusted path to wealth as a "worker" than the "ownership"
path described by 'gringoDan.

An SFFE who was similarly "lucky" with a high variance approach (in their
case, by eg, investing in AAPL at the right time) like the anecdotal HVAC
businessman would be much wealthier.

------
jasode
_> "Are people who make $200k middle-class?'_

We have to distinguish what exactly we're asking.

Do economists and social pundits classify $200k income as "middle class"?
Clearly some don't. Some sort of meta survey would have to answer who
considers them "upper class".

However, do workers in America earning $200k as a salary from a job _self
identify_ themselves as "middle class"? Yes, they absolutely do.

This is how many people (in America) self-identify their class:

\- lower class: living on welfare, food stamps, and federal subsidized
housing; or including those struggling without any government assistance but
working 2+ jobs to make ends meet

\- middle class: workers with jobs in between lower class and upper class

\- upper class: able to live off interest income of investments

~~~
harryh
A family of 4 making 60k a year that has to carefully budget all expenditures
should VERY CLEARLY not be lumped together with a single dude in his 20s
pulling in 200k a year at a tech job.

That guy might not have quite the fancy apartment he wants but can pretty much
pay for anything else he wants (a tesla, fancy vacations, every electronic
gadget he wants).

This whole thread is full of rich tech people trying to lump themselves in
with people in far different economic circumstances because they are
uncomfortable with the fact they they are rich.

It's gross.

~~~
jasode
_> they are uncomfortable with the fact they they are rich._

The issue you're overlooking is that many $200k earners _truly don 't believe_
they are rich. It's not that they "secretly" think they're wealthy upper class
and just want to lie to you.

It's not unusual for an employee earning $200k as salary from FAANG to _feel_
like it's a middle class living. However, if that same person earns $200k/year
purely as _capital gains interest income_ from US Treasury Bills and therefore
_never has to work at a job for the rest of his life_ , that's the magic
threshold to feel "rich". I.e. "FU money" means "rich".

(Yes, you can certainly disagree with those boundaries but I'm just trying to
explain how people think.)

It's the necessity of _working at a job_ that makes them feel like they are in
the "middle class". It doesn't matter if it's a white-collar office job
instead of a blue-collar factory gig. They can't be "uncomfortable with being
rich" if they don't think they're rich in the first place.

I don't see how we can have productive discussions on social progress if we
poison the well by slapping labels on $200k workers that they themselves don't
actually believe.

~~~
tptacek
I don't understand this argument. I agree that they don't believe they're
rich, and they're not intentionally deceiving themselves. But they are also
wrong.

~~~
viklove
If I have to work a job to keep a roof over my head, I'm definitely not rich.

~~~
tptacek
That's something an investment banker can say as well.

------
nonce42
I've spent many years in the US at many income levels, and my conclusion is
that the middle class in the US is genuinely very large and includes people
making hundreds of thousands of dollars. When someone making $200k says
they're still middle class, that's not some rich person nonsense but an
accurate description of their life. They're upper-middle class, but still
middle class.

If you're a software engineer making $200,000 and talking with a teacher
making $39,000, you're making more money but fundamentally you have most
things in common. You're living similar lives, it would make sense to be
neighbors, friends, date, etc. (Part of this is social class, but not
entirely.)

Now consider encountering a hedge fund manager who flies everywhere in a
private plane. If you met this person at a party, you'd probably wonder why
they were there talking to you. You'd have essentially nothing in common with
them. This person is fundamentally in a different class. I'm not sure where
upper class starts, but based on personal experience it takes much more than
$10 million.

------
tossAfterUsing
The article would have you believe that class is a result of wages. It's
not... it's the outcome of social structures. There's a corellation between
money and class... but money is not the only factor.

> None of this is to say the Times' "middle class" are the real victims; the
> 95 percent of Americans below them are doing even worse.

No, please... tell me who the _real_ victims are. </snide>

Not to get too far off the rails here, but i think this article is too wrapped
up in conversations about Lower/Middle/Upper wage-bands. That's a distraction
from the more serious conversation we could be having about Class, which is
distinct from wage-earning.

Class is about control:

Ruling Class --> Management Class --> Working Class

If the terms of your lifestyle are dictated to you by a boss, you are working
class.

If you can't stop working forever, today, you are working class.

If you're not powerful, you are working class.

There's a very slim chance that anybody reading this isn't working class...

When we think about other people "below" us, we're not recognizing that these
are our brothers and sisters in a continuing struggle for freedom from
oppressive social structures.

Wages come from bosses. If you have a wage, you're probably working class.

We would all do well to remember that most of us are on the same page.

We shouldn't let the Managing Class tell us we're different from each other,
because we get different wages.

------
underbluewaters
I can see where people are coming from considering themselves middle class
making 200k household income. In order to to have the things my parents had
growing up in California today (own a decent home, saving for retirement and
2x college funds, go on vacation every couple years), 200k is a reasonable
goal. That wouldn't make my household anywhere near median income, but it
would meet a the American cultural ideal that many people are working towards.

Incredibly, my Dad was able to provide these things being the sole earner in
the family as a construction foreman.

------
ckastner
There's no correct answer to this. The answer clearly depends on _where_
people live.

~~~
thatfrenchguy
No, it’s not. If you make 200k in the Bay Area you’re not middle class.

~~~
PhasmaFelis
Even in the Bay Area you can get a decent apartment or home mortgage for
$40-70k a year. Taxes on $200k are gonna be less than $25k. Parking and gas
are a few hundred at most, food might be as high as $1000 if you've got a big
family or eat out a lot. Let's guess high and say another few thousand for
utilities, phones, etc. Let's also say you've got some family health crises
your insurance won't cover that run to $10k out of pocket.

That leaves you at least $90,000 free and clear. If you can't live comfortably
and save for retirement with ninety grand a year, you either have some
outstanding expenses (severe medical disability, etc.), or you're making some
very bad decisions.

~~~
cannonedhamster
I literally just looked at home prices in the bay area. I found a literal
handful of homes/apartments available in that price range. One was a 300 sq
foot apartment, most of the rest were unbuilt lots. I'm not sure if you're
talking about auctions or foreclosures, etc. Can you elaborate on that? I
can't even get a home in my much lower cost area for that price. I can tell
you $1k/month for a family of three in my area is typical grocery expenses
before eating out. We can certainly cut back but bargain basement is about
$800/month unless we're eating nothing but ramen and cereal.

~~~
PhasmaFelis
I'm talking about the yearly rental rate/mortgage payment. This is my main
source: [https://smartasset.com/mortgage/what-is-the-cost-of-
living-i...](https://smartasset.com/mortgage/what-is-the-cost-of-living-in-
san-francisco)

It's possible I lowballed some things, but see my other comment.
[https://news.ycombinator.com/item?id=20415130](https://news.ycombinator.com/item?id=20415130)

~~~
hellisothers
Taxes and insurance on that 1.3m house are going to be another $2800/mo I say
from experience. Living here is much more expensive than you’re guessing, cost
of living needs to be factored in.

------
_red
The unspoken tragedy of this is how the IRS limits for "wealthy" were
developed in 1913 when $250K as upper-limit was equivalent of several million
dollars now.

They seem to have zero interest in re-calibrating those high brackets into
something more meaningful to account for the 100 years of continually
inflation.

~~~
Bartweiss
It certainly doesn't help matters that housing prices have massively outpaced
inflation for many years. Cost of living still mattered when the brackets were
set, of course, but there weren't the common and enormous differentials that
we see now.

At $250k it's perhaps less relevant, but it's basically impossible to assess
how "high income" $50k/year is when rent is anywhere from <15% to >50% of that
value.

------
base698
To me the distinction between middle class and upper class is if you can pay a
group of people a salary and still accumulate wealth yourself. Also, are you
free yourself and do you have to work?

The line between middle and upper middle has more to do with disposable income
and which consumer habits they hold.

~~~
JTon
> ... if you can pay a group of people a salary and still accumulate wealth
> yourself.

Are you referring to business owners? Or paying for full time help around the
house?

~~~
base698
Owners.

------
beebmam
Class is about wealth, not income. Some people have extremely high expenses,
for whatever reason: senior care, dependents, disability costs, locked into a
shitty mortgage, absurd regional housing prices.

I encourage everyone to stop looking at income as a class-definer :)

~~~
cannonedhamster
You forgot healthcare costs. Many businesses either don't offer or have
really, really bad healthcare options. Why it's still considered something
tied to businesses and not the individual I don't know.

------
rayiner
No. One of the biggest and most destructive myths in America is that upper
class folks are actually middle class. A $200,000 income puts you in the top
10% in every metro area int he country, and in the top 5% most places. That's
upper class, not middle class.

This myth is particularly pernicious in the area of taxes. The top 25% minus
the top 1% earns half of all income. These people need to be taxed like upper
income people, not middle class people. Confiscatory taxes on the "top 1%" (or
people making $10,000,000 per year, or wherever the line keeps getting moved
to) can't raise sufficient revenue to fund a modern welfare state.

In the U.K. and Germany, the 40%+ tax bracket (both countries have a top
bracket of 42-45%) kicks in around $60-70,000 of individual income, or about
double the median income. In Sweden and Denmark, the top tax brackets kick in
around 1.5x the median income. The second highest tax bracket doesn't kick in
until 6-7x the median income.

In Sweden, about 15% of people pay the highest marginal tax rate. If that was
the case in the U.S., the top tax bracket would kick in above $120,000
household income. That makes total sense. These people are very well off and
should be subsidizing the rest of the country.

~~~
harimau777
I think its important to consider that in the Nordic Model, people making more
than $200k still benefit from social programs such as health care where in the
US generally only the poor benefit from government assistance programs. I
would be much more willing to have much higher taxes if I believed that I
would benefit from the programs that they pay for.

~~~
rayiner
I agree with that.

------
motohagiography
It's not how much you make, it's how you make it:

\- dependency: allowances, public welfare, UI, grants, bursaries, inheritances
and trust funds, scholarships etc.

\- labour: paid for fungible work. (piece work, hours of labour)

\- time: paid for individual time spent. (salary)

\- knowledge: paid for things that can be taken and reused e.g. analysis,
opinion, assessment, advice, teaching.

\- performance: paid for outcome only you can deliver. e.g. litigation,
sports, music, prizes, bonuses, gambling.

\- risk: paid for taking/holding risk, priced-in compensation for perceived
potential loss. e.g. leverage, brokerage, insurance, liquidity.

\- capital: charging rents on a capital asset. e.g. real estate, dividends,
loan interest, franchise fees, IP licensing.

\- power: taxation, tributes, bribes, etc.

We can dress up the amounts people make and make up vanity excuses, but these
are what you get compensated for, and there is definitely a hierarchy.
Everyone likes to think they are middle class, but what really defines social
position is how and for what you are compensated.

------
KaiserPro
In the US? maybe.

But then race is a large factor, as well as money.

In the UK money rarely buys you class. You are born into your class, and
unless you have elocution lessons, or go to a grammar school (or a sink school
for the opposite direction) then you stay like that.

~~~
plutonorm
Yup. It's sickening. What's worse people seem to be comfortable with the
status quo. If everyone was of my mindset there'd have been a revolution by
now. But people seem to adjust there view point to give themselves a more
comfortable life. Better to not think about the inequality of the world or to
rationalise it as 'right' than to live your life bitter. Or guilty if you
happen to fall in the upper classes.

------
sct202
$200k for a single wage earner is definitely a lot (also for a lot of higher
income people, aren't wage earners), but $200k for a household is like in the
~92th percentile. [https://personalfinancedata.com/income-percentile-
calculator...](https://personalfinancedata.com/income-percentile-
calculator/?min_age=18&max_age=100&income=200000#results)

There are a lot of definitions floating around for the middle class, but a
family in the 92th percentile is probably more similar to a family at the 50th
percentile than a family in the 97th+ percentile.

------
rags2riches
The strict focus on income and wealth when discussing class is peculiar to my
European perspective. To me, there are large overlaps of working class and
middle class, as well as of middle class and upper class, if one is only
concerned about income and wealth. Culture and values are part of class and I
can't understand the discussion where it is completely left out. Passing as
something else than what you were brought up as is very hard. People trying to
pass is an eternal source of drama and worry. Spending beyond your means in
order to pass is a common reason for financial ruin.

------
Mc_Big_G
If you live in the bay area, first you'd need to save $200k for a downpayment
on a house. That would probably take 3-5 years at that salary if you can be
frugal. After purchasing a house, your mortgage is going to be something like
$5k - $6k per month. You will still need to be very frugal and will not have
anything left to save or invest. You will not be living "the high life" as
someone from the mid-west would assume with that salary, but you would own a
home that will probably appreciate.

------
icedchai
It depends. Class is not about income. It’s about net worth, IMHO. If you
_need_ to keep working to maintain your lifestyle, you’re middle class.

------
RickJWagner
I subscribe to the ideas offered by Buffet, Bogle, Dalio, and pretty much the
entire Bogleheads community.

To wit: No matter how little is earned, saving and investing a percentage will
result in relative wealth over time.

I have seen it work for people. I have not seen it fail. I believe it.

------
exabrial
In San Francisco, yes... In Topeka, Kansas you have a ranch and 50 acres.

------
scilro
In terms of economic class demarcations, I find the Marxists' definitions much
easier to follow and reason about. If you own capital, you're a capitalist. If
you work for a wage/salary, you're a worker. You might be an extraordinarily
affluent worker but your relationship to capital is the same. Also, some might
be part-time capitalists and part-time workers.

~~~
akavi
Most engineers in tech will have the majority of their net worth growth come
from returns to capital and imputed rent as they approach retirement age.

Does that mean they shift from "worker" to "capitalist" over the course of
their life? I'd say there's some value in having a term distinguishing those
who will predictably be in that state from those who will not be, no?

~~~
saalweachter
Is that meaningfully different than being a "pensioner"?

------
Isamu
That is why we use the term “middle-income”, because it is defined in
relatively straightforward ways.

The whole reason for this discussion is the lack of sharp categories when
talking about class.

------
serioussecurity
:-/ I make $300k / yr.

I live in a 10 x 18 room, in an apartment with 3 room mates that has an
acceptable kitchen and a cramped living room.

I save > 50% of my income, which is nice.

But I also spend ~ 80k / yr on medical expenses.

I guess I'm upper class if "hoping to retire to a remote part of the world at
around 35, and live off ~20k / yr til I die" is a reasonable hope. But also
that's just ... ill.

I hate the "upper / lower / middle class" model because I don't think it
really is a meaningful way of slicing society anymore? It's a very post-WW2
idea of how our society is organized and what's desirable.

I'd tend to start slicing along a set of lines like: \-- urban / rural \--
race \-- age \-- degree of community support / culture \-- type of labor
(knowledge, service, manual, ...)

I'm working on building long term community structures (one of my low-key
goals is to buy and convert a church into a community space). Because the "I'm
X class!!!" is dumb; it treats people as totally not dependent on their
community. Unless you're willing to pay for community builders to do their
work, you're not going to have any real community.

(btw, this is why I can't stand people skeptical of affordable housing and the
like: why do you think it's pleasant to live in neighborhoods with a robust
variety of people? because often people that aren't working all the time can
do things like maintain a community garden. Which is only possible if they can
live in your community.)

