Loading the player...

Many people aren't sure which income class that they specifically fall under. Although the vast majority will fall under the middle income class, many studies and scholars actually break up the middle class into three different categories, and some even say there are four. To make things even more complicated, earlier this month the Census Bureau stated that the median American household income is now at its lowest point since 1996, falling 1.5% from 2010 to $50,054. So, where do you and your household fit in? This article will attempt to explain what constitutes each income class, and what the government is doing to address the declining U.S median.

The Median

The median income amount is the amount that divides the U.S. incomes in half, with the median income being $50,054. Approximately half of Americans will fall below this household income amount, and the other half will fall above. Although this may help you learn which half you and your family fall under, figuring out which specific class your household exactly falls under isn't so simple.

The Income Classes
The Upper Class

At the top of the income classes is the upper class, also known as the 1% or as the 5% because this class makes up about 1-to-5% of the entire American population. However, some sources state that as much as 15% of the American population could fall into the upper class. These households make approximately $150,000+ a year (the 5%), or over $250,000 a year (the 1%), and can be divided into two different categories: those with old money or those with new money. Households with old money are those that have had wealth in their family for at least two generations (sometimes many more), and haven't had to necessarily work for an income. On the other hand, households with new money consist of households who have had wealth in their family for only one or two generations, and instead of inheriting their riches they worked hard to earn their wealth.

The Middle Classes

Next come the middle classes, which make up the vast majority of the American population.At the top of the middle class is the upper middle class, also known as the top of the class. Members of this class tend to be well educated, hold post-secondary degrees and have high-paying, white-collar positions. This class is male-dominated, and has an income of $100,000 or more annually. That's enough to stay at the top one-third of U.S. incomes.

In the middle of the middle classes is the lower middle class. This class usually has households with people who have a college education, but these people don't have the degrees necessary to advance into higher-earning positions. This class contains lower-level, white-collar workers who generally earn between $32,500 and $60,000.

The lower middle class can be split into two different categories: the satisfied middle and the struggling middle. The satisfied middle can still find satisfaction and positivity in their lives, despite their modest incomes, and include a disproportionate amount of young and old, but no middle-aged adults. The struggling middle, however, contains households that actually earn "a lower median family income than Americans who put themselves on the lowest rungs of the social ladder," and have a disproportionate amount of women and minorities, enabling them to have a lot in common with the lower class.

At the bottom of the middle classes is the working class, also known as the blue-collar class or as the anxious middle. This class is the most dissatisfied and downbeat of the middle classes, and doesn't have as much education, meaning that they may have gone to college, but have more technical or vocational training. They are also usually paid by the hour, and have a variety of jobs, including: police officer, truck driver and factory worker. Salaries in this class fall between lower middle class and the poverty level, with a range of $23,050 to $32,500.

The Poverty Level

The bottom of the classes falls into the poverty level, and includes any American household that falls under the poverty line, meaning that they don't earn enough money to meet their basic essentials of life, such as food, clothing and shelter. The Census Bureau estimates that about 15% of the U.S. population (approximately 42 million people) live below the poverty line, and fall into this class today. The current poverty level is estimated to be any household of a family of four earning between $18,000 and $23,050 per year. However, this figure has often been a hot topic of discussion, because many poor people also live in urban areas that have a high cost of living, meaning that they need to earn more if they want to survive.

Wealth Distribution

As you can see, the U.S. population consists of a variety of different income classes, which is quite normal for any nation, but that doesn't change the fact that the American income median is at its lowest since 1996, and that there is something definitely wrong with that.

The middle-class incomes have stayed neutral or have been declining while the wealthier classes have been getting richer. In fact, in 1988, the average American taxpayer was earning around $33,400. In 2008, that average had fallen to $33,000. The richest 1% of Americans, on the other hand, saw their incomes rise about 33% in the same time period.

Does the Government Care?

Many American citizens might think that the government doesn't care about those who fall below or who are dangerously close to the poverty line, but in reality, government programs such as Social Security, food stamps and EITC actually reduce American poverty by around 10.9%. Therefore, the U.S. government is actually helping to reduce poverty levels in America. However, that still doesn't excuse the fact that the median income has been declining, especially when the American economy should be rising and bringing that median income level with it.

The Bottom Line

There are lots of different income classes in America, and although it may be hard to know exactly which class you and your household fall under, we hope this article will help you find where you fit in a bit better. We know that no one wants to fall under the poverty line, and many who do may think that the U.S government doesn't care about them, but they actually have many programs that decrease the amount of people at poverty levels. However, the U.S economy should be improving, and with it, the median income levels, but recent news has shown that the exact opposite is happening. Therefore, one thing we can be sure of is that current U.S. President Barack Obama can expect Republicans to use this information to support the idea that he has not been doing enough to make the American economy better.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.