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Are people who make $200k middle-class? (theweek.com)
45 points by howard941 9 days ago | hide | past | web | favorite | 95 comments





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.


I think there is one line that matters in term of income though, and it is the threshold of "I no longer worry about most things". On one side you have the folks where a bad health emergency, a boiler that breaks, a forgotten debt or an issue with their car could be the end of the world. Then there's people who are sitting on the couch, notice the floor is dusty, cringe and call their maid service to come back to clean the spot they missed.

there's some overlap, but generally speaking the two groups see the world VERY differently. Your priorities change a lot when your day to day is about survival vs when it's about making sure you don't lose what you have.


>> Even movie stars have a union.

There are limits. Most all celebs and sports stars are not really employees. They setup personal services companies that contract with the "boss" and then pay themselves a salary from the services company. Even thought they have a clear "job" and theoretically are paid a wage, such persons care more about taxation of dividends and the costs of offshoring money. If they choose to pay taxes, they determine for themselves where and when that money is paid. So while a working union actor may have much in common with the factory worker, the celebrity stars who earn millions do not.

The breaking point between the two groups, imho, is the personal services contract. Those who work for the agreed standard or union wage are workers and arguably lower/middle class. Those who negotiate their own pay structures are not.


Fair enough I was being somewhat tongue-in-cheek. I think we are long past the days where actors would be under contract to only work with one studio.

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.... 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.


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.


I know you probably picked "$50 billion in stock" at random, but for the record there are only ~10 people in the US with that kind of money. If they're the only people you are counting as "rich" you have defined the term very very narrowly.

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.

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.


First, your premise is false: https://en.wikipedia.org/wiki/Distribution_of_wealth#In_the_.... 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.


> 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.


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.

> 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.

I'm not going to argue the broader point about who is really "rich" but is this really true? My understanding is that there are ways to use assets to meet your needs without realizing capital gains. An obvious one is to borrow money with the asset as collateral, but I think there are others as well.


It's kind of a sleight of hand to piggyback on the panic about income inequality but target your attack based on consumption. If consumption is what matters, we should also use it to measure the level of inequality. And when we do that, we find (as in your parent comment) that it's not nearly so dire. How much variation in outcome should we allow? Beating the median by a factor of 2 doesn't seem particularly crazy.

That's a contrived late-20th century distinction meant to make high-income professionals feel better about themselves. Historically in the U.S., doctors, lawyers, bankers, etc., were considered part of the upper class. But they (even bankers) receive labor income, not capital income.

>That's a contrived late-20th century distinction meant to make high-income professionals feel better about themselves.

I understand your angle and I didn't downvote your other comment in this thread but your perspective emphasizes the math of income brackets and percentiles. However, people don't use that criteria when self-identifying their income class.

A lot of white-collar professionals making $200k simple don't consider themselves "upper class". It's not a matter of denial. I would bet that if you surveyed software engineers earning $200k, most would not use the label "upper class" to describe themselves because to do so would be strangely pretentious.

If a tiny 1000 sq ft Palo Alto house costs $1.5 million, a $200k salary does not feel "rich & wealthy". Therefore, reminding them they are in the top 5% of the income percentile doesn't change the self-identification of "middle class". From their perspective, it feels like middle class.


> A lot of white-collar professionals making $200k simple don't consider themselves "upper class". It's not a matter of denial. I would bet that if you surveyed software engineers earning $200k, most would not use the label "upper class" to describe themselves because to do so would be strangely pretentious.

Yes, and that's a moral failing. Worse than being "pretentious" is failing to realize that you are blessed. Because that starts you down the road of thinking "since I'm middle class, other people should shoulder the burden of providing for the country's most vulnerable people, not me." That's the self-deception that results in even Bernie Sanders' "progressive" tax policy being identical to Donald Trump's until you get over $250,000.


It's really odd that you don't factor cost of living into your calculator especially since it's used in every other determination of wealth. If I make $250K US in India for example you're generally way better off than $250k US in the Bay area. The ability to move is arbitrage which a lot of people don't have.

Don't get me wrong I actually mostly agree with your point, I say that as a guy literally dying of cancer, but lucky enough to be in the best place in the world to have a chance. It's just that cost of living should factor into any estimation of class status. If you throw that out literally every American has a moral failing, even those living below the poverty line, which isn't a sensible way to look at it. Class needs to be defined as the purchasing power relative to the area that the person is in. Taxation status/rates doesn't need to take that into account.


Best of luck with your cancer treatment. Enjoy the time you have left, and hope you get the lucky end of estimates for time left or survive completely. My father died (relatively young) from cancer recently even with the best treatment, so I’m crying as I type this but make sure you spend lots of time with family and close friends. You are likely loved more than you know.

It depends, there are doctors and lawyers and bankers who run their own practice or firm and are business owners and there are ones who work for others. "Making partner" is basically moving from the labor class to the ownership class.

There's a multiplier effect, but it's still all labor income (and taxed as such), not capital income. Approached from the other side--someone who cleans houses may hire some helpers (and get a share of the output of their labor). But few would consider an independent house cleaner to be upper class.

The distinction, historically, was not about capital versus labor. It was about white collar work that allowed a lifestyle where you could have most ordinary things without worrying about money.


“Class” by Paul Fussell, is a good (if arch) read on this angle.

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


> 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?


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.


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.


Not the gp, but I'd think: maybe, maybe not, simply because he did and they did not. Like, I have the skillset and connections required to build a reasonably successful company. I'd very likely be better off than I am right now if I did. I just don't feel like it. So at the end I'm nowhere close to where my friends who did are.

>"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


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.


>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.


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.

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

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

As someone who has been in that lower income bracket and is now comfortably upper-middle/lower-upper class, yeah its' definitely way easier now than when I was working a factory job. It's certainly not easy. I can't buy a Tesla and don't make 200K, but we're not worrying most months about putting food on the table like we were when we had nothing. I don't know that I would call anyone who still has to work to make ends meet rich, we'd lose everything with a few months of me being unemployed because we still haven't made enough to pay off our pre-existing debt. Is that still rich in your eyes? I've never made 200k myself, but I do pretty well for the area I'm in.

The family of four has a house in a reasonable school district with bedrooms for the two children it felt comfortable enough to have; the tech guy is living with three roommates so that he can afford that life in 10 years.

On the other hand, take 2/3rds of my rent payment from me and all my neighbors. Please, take it! We'll all get to live in the same apartments, but the money will benefit society instead of our landlord. The vast majority of my spending is not on what things really cost, but on out-competing others for space in San Francisco. If you hobble us all equally we are no worse off.


Your breakdown really is the best one I've seen, but I wonder if your lower class might be broken into two groups, stealing a bit from your middle class:

- poverty: living on welfare, food stamps, and federal subsidized housing

- lower class: hourly wages, working two jobs to make ends meet

- middle class: salaried workers

- upper class: live off of investment income


I like this definition, but I think our society cannot be meaningfully represented in 3 classes anymore. Someone might not be able to live off interest income alone, but they might own a small internet company which makes them a few million dollars a year. These people can walk into a shop and buy a Tesla with cash without even having to think about it twice, but they wouldn't be able to buy a £45 million penthouse apartment in Singapore like the Dyson guy did recently. I would certainly classify them as upper class, but then there is probably at least two more classes above them.

This is the best definition I've seen and I really buy into the logic.

Instead of defining middle-class on it's own, it makes much more sense to define it's boundaries (lower, upper) and middle is what the name implies, in between two classes.


I tend to think of the classes in terms of standard of living according to one's access to certain tiers of goods and services, but the resulting class divisions end up being pretty similar to yours.

---

Tier 1 (basic necessities) consists of goods and services that are essential for living in good health: food with adequate nutrition; shelter; access to health care; at least a basic education. That sort of thing.

Tier 2 (basic extras) envelops those things which are not strictly necessary, but are reasonable expectations for living a fulfilling life: family vacations (nothing exotic, maybe ~once a year); access to a college-level education; at least a modest budget for entertainment; owning one's primary residence; enough savings to provide continued access to this tier of items post-retirement.

Tier 3 (luxuries) are those things in excess of what an 'average' person would reasonably feel entitled to. In essence, they are the rewards for above-average financial success: more exotic vacations more often; luxury cars in the sub-exotic range; a home with custom fit and finish; 'basic' part-time hired help (lawn care, tutors, perhaps a nanny).

Tier 4 (super-luxuries) are those things which an 'average' would see as unattainable, even in their best years: a sprawling mansion or luxury penthouse in the city; exotic cars; private or chartered jet service; full-time, on-site hired help (private chef, valet, that sort of thing).

So how do these fit into the class structure? I tend to model it like this:

Lower class people can only attain the basic necessities (tier 1) by working multiple jobs or excessive hours, and/or with social or government assistance. When spending responsibly, items in tier 2 are unattainable.

Lower-middle class people can provide tier 1 items without assistance, but their access to tier 2 is limited or nonexistent. For example, maybe they can enjoy a family vacation every few years, but they are probably relegated to renting a home, and their retirement prospects are meager.

Middle class people can, with responsible budgeting, provide everything in tier 1 and most of tier 2 without going into excessive debt. With responsible budgeting, they can continue to maintain this lifestyle through retirement.

Upper-middle class people work for their salary or own small businesses. They never have to worry about tiers 1 and 2; those are covered. Their budget focuses on which tier 3 items they can reasonably afford. Assuming responsible financial planning, they can more or less maintain this standard of living through retirement (some modest concessions may be in order). When spending responsibly, the upper-middle class have little or no debt beyond a mortgage and student loans.

There are a few ways to fall into the 'upper' class. If you're far from retirement age and don't have to work, yet your amassed wealth and investment income are sufficient to maintain an upper-middle class lifestyle, then I'd put you in the upper class bucket. If you have access to tier 4, you are upper-class regardless of whether you choose to work. If your concept of a 'budget' revolves around how much money you give away, or which foreign jurisdiction makes the best tax haven, you're probably in this group.

---

Note that not having to work for a living is itself a luxury. In general, if you have the means to maintain the standard of living a certain class without working (and being far from a typical retirement age), then I would put you in the next higher class. For example, if you're 45 years old and could maintain a comfortable middle-class lifestyle without working, I'd say that makes you upper-middle class.


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.


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.


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.


There's no correct answer to this. The answer clearly depends on where people live.

One could turn it around say that no middle-class people live in, say, Medina, WA (where BillG lives). Cost-of-living determines which class or classes get to live there, not the other way around. At the extreme, in a hypothetical neighborhood of $10MM NYC penthouses are you going to say $1MM/year is "middle-class"? If so, we simply aren't going to come anywhere close to agreement.

Any statistical analysis can have nonsense results if you choose a ridiculously biased sample.

The US census has various methods for establishing a sensible subdivision of space for deriving statistics like this, including metropolitan areas, micropolitan areas, and combined statistical areas [1]

The examples of Medina WA and penthouses in NYC don't fit any of those.

1. https://www.census.gov/programs-surveys/economic-census/guid...


Do you think voters really care about that? To a huge number of them, $100K+ per year is a fantastic sum of money, and dammit, you need to pay your fair share. You're "rich", after all! Or at least, rich _from where they're standing_.

Trying to make arguments about cost of living aren't going to help one bit when it comes time for a politician's promises to be paid for.


And it also depends on the tax rate. Making $/€100k gross, pre tax, means something different in San Francisco vs say Barcelona.

It also depends on their lifestyle (how wisely they manage their income).

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

...but if you make 200k in Detroit you're above middle class... so again, like OP said, this is all relative to where you live.

What are you?

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.


> Taxes on $200k are gonna be less than $25k.

No, no they're not. I make less than $200k, and I paid an effective tax of ~25% last year. (CA's state income taxes are pretty high.) Extrapolating to $200k, I'd pay ~$50k in tax.

> food might be as high as $1000

Way too low. Finding lunch in SF is easily $10/meal, especially with the extra surcharges a lot of restaurants (and I mean that in the "fast lunch eatery" sense, not the "host-seats-you-at-nice-table" type, though those too) are now charging. I'm doing ~$4k/yr on food for two, and we rarely eat out.

I think your point is sound, but I think you're going to have closer to $60-$65k/yr. You also need to account for PMI & taxes on any home purchase. (The PMI will likely depend on how much you've got. Most people who are looking to buy homes probably won't have enough as they're too young, IMO, but then, they're also probably not experienced enough to pull $200k, unless maybe they're in a nice spot at a FAANG, but not everyone is.) You do mention this, but 401(k) savings is going to further reduce that, you probably want to put some in an investment too, and I think you'll find that $60k disappears rather quickly.


Yeah, I may have missed some things and lowballed some others. Let's add an extra 50 grand to the yearly expenses to cover anything I may have missed. I would still say that $40k/year free and clear after all bills and major expenses are paid is not "lower class" by any reasonable definition, as thatfrenchguy implied.

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.

I interpreted the $40-$70k/yr ($3.3-$5.8/mo) figure as the cost of the mortgage, not the home. This should correspond to a roughly $1M loan, which, with a downpayment of around $200-$300k (the cost of a house elsewhere…) gets close to $1.3M, which pretty nearly the median list for much of the Bay Area (corresponding to ~1200 sqft in SF).

On the lower end ($40k/yr or $3.3k/mo), you should be able to find a studio in SF for that or for a bit more, a 1 bedroom (median 1 bed is ~$3.6k/mo in SF). (I'm not saying that's good, just that it shouldn't be as bad as you think.)


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...

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


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.

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.


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.


weird how tax cuts always seem to be indexed to inflation while tax rates aren't

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.


> ... 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?


Owners.

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 :)


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.

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.


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.

I agree with that.

You can’t make these changes in a vacuum. A massive disruption to the status quo like you’re suggesting won’t suddenly make us Germany or Sweden. Millions of people would undoubtedly suffer, our economy could tank, and there might be huge second order effects. Always be wary of systemic changes, you can’t transplant Germany’s laws and get Germany.

Make that $40,000 per person in the household, not $120,000 per household. Family size differs greatly. If the value isn't per-person, then you make people grow up in poverty and you drive the average family size down well below the replacement size.

Just because I made 200k one year does not mean I will make the same amount next year or have earned as much a year before. Tax brackets non withstanding, it is completely illogical to group individuals into classes based in current income alone. One could be a recent refugee starting from nothing or a recent college grad with enormous student debt

This is absolutely true, especially in software where you’re more of an athlete, look at the ageism in our industry. We aren’t like doctors/lawyers making $XXXk in perpetuity and seniority guaranteeing job stability.

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.


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.


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.

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.

$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...

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.


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.

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.

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.


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

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.

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?


Is that meaningfully different than being a "pensioner"?

I haven't found it useful to think of those categories as strictly binary. You can be a capitalist and a worker, as far as I can tell. They're more like roles than essential qualities.

In the Marx era “owning capital” was a means to create products that you could sell to make money.

In 2019, where if you have a credit card to create an account on AWS, you can create a product that has a near zero marginal cost.


I think that a difference might be that when your capital allows you to create a physical product then there is a very good chance that the product has value. On the other hand, if you use AWS to create a product then it most likely that the product does not have value (since most web startups fail).

Most startups selling physical goods fail. Hardware is much harder to manufacture at scale. The logistics involved is crazy. Even the vaunted Tesla is a money pit.

That's a fair point. I think the distinction that I was trying to draw was between a company that primarily derives its value from the physical manufacturing of goods versus deriving its value from something intangible such as design, intellectual property, technological prowess, etc. In Tesla's case I don't think the company ever intended to derive their value simply from their ability to manufacture a car; rather it derives from their ability to develop novel car technology.

That being said, it does strike me that in the Marx era it was most likely easier to be successful as a regional provider of some commodity while globalization means that even a manufacturer is effectively competing against the entire world.


Yes, that's exactly the point. You _can_ create a product at near-zero marginal cost.

If you do, and it sells, you're an owner / producer. If you don't, you're a worker / consumer.


This is the only definition that matters.

Really? A guy working at McDonalds for 10 bucks an hour is no different from a software engineer pulling down hundreds of dollars an hour?

Please.


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.


:-/ 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.)




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