DEFINITION of 'Middle Class'

The middle class is a description given to individuals and households who fall between the working class and the upper class within a societal hierarchy. In Western cultures, persons in the middle class tend to have a higher proportion of college degrees than those in the working class, have more income available for consumption and may own property. Those in the middle class often are employed as professionals, managers and civil servants.

BREAKING DOWN 'Middle Class'

The word "middle" may be misleading in that it suggests that those in the middle class have earnings within the middle of the population's income distribution, which may not be the case.

Karl Marx referred to the middle class as part of the bourgeoisie when he described capitalism. The term itself has shifted in meaning over time, having once referred to persons who had the means to rival nobles.

What Constitutes the Middle Class

The birth of the middle class, in some respects, has been linked to federal funding and support through programs such as the G.I. Bill, which offered funds for education and the start of businesses created by veterans who were discharged. The combination of incentives and salary increases helped elevate working class citizens into the newly forming middle class.

The income parameters that define the middle class continue to change and not solely based on the rate of inflation. Regional disparities in income and the cost of living mean that salary-based measures of the middle class can vary greatly. Different income barometers describe the middle class as having income from $50,000 to $150,000 or, in some instances, $42,000 to $125,000. Other measures of middle class set the upper income mark at $250,000.

The concept of middle-class society may include a presumption of earning a salary that supports owning a resident in a suburban or comparable neighborhood in rural or urban settings, along with discretionary income that allows for access to entertainment and other flexible expenses such as travel or dining out. While it is assumed that middle-class households generate sufficient income for retirement savings along with standard expenses, an increasing segment of this portion of the American population is also living paycheck to paycheck.

An ideal commonly held among the middle class is that it is possible to increase their income to higher economic strata through career advancement and salary upgrades. The pace of such upward mobility aspirations, however, have changed over the decades with the costs of goods and services, in some cases outpacing the growth of salaries.

RELATED TERMS
  1. Upper Class

    Upper class is a socioeconomic term used to describe individuals ...
  2. Share Class

    Share class refers to different types of shares a company issues ...
  3. Working Class

    Working class describes persons in jobs that provide low pay, ...
  4. Class B Shares

    Class B Shares are a classification of common stock that may ...
  5. Class A Shares

    Class A shares refer to a classification of common stock that ...
  6. Middle Rate

    The middle rate is the price half way between a bid and offer ...
Related Articles
  1. Investing

    China's Middle Class: An Inside Look

    Discover the catalysts for China's improving middle class population, from global demands of its consumer goods to unoccupied real estate.
  2. Insights

    Slip Slidin' Away: America's Shrinking Middle Class

    A new study from the Pew Research Center provides evidence that the American middle class is shrinking.
  3. Retirement

    Which Fund Share Class is Best for Retirement?

    Mutual funds are a popular financial vehicle. Here's how to choose the best share class for retirement among a fund's many options.
  4. Insights

    Is the U.S. Economy Really Improving?

    The U.S. economy might be improving for some, but not for the majority. Here's why.
  5. Insights

    The Decline of the Middle Class: An Inside Look

    Find out what is behind the decline of the middle class in America and how the hourglass economy may effect consumption.
  6. Investing

    The Economics of Mexico's Middle Class

    Lean about Mexico’s expanding middle class society and the causes for its change from electronics to the manufacturing industry.
  7. Investing

    3 Benefits of Looking at Asset Classes Beyond Your Portfolio

    Discover three of the primary advantages for investors that can be obtained by diversifying their investment portfolio with different asset classes.
  8. Financial Advisor

    3 Differences Between Average Joe and Mr. High Net Worth

    Take a look at how income levels and financial circumstances dictate decisions for today's eclectic group of market advisors and investors.
  9. Investing

    Financial Capitalism Opens Doors To Personal Fortune

    The Industrial Revolution introduced a new age of investing and financial self sufficiency.
  10. Investing

    Mitigate Your Equity Risk

    Learn whether holding a few different stocks is enough to mitigate equity risk.
RELATED FAQS
  1. Which country has the richest middle class?

    For decades, the United States boasted had the richest middle class. However, as of 2015, Canada has the wealthiest middle ... Read Answer >>
  2. What is the difference between Class A shares and other common shares of company's ...

    Discover how a company can break down its common stock into multiple classes and how these classes differ from one another ... Read Answer >>
  3. Why would a company have multiple share classes, and what are super voting shares?

    Before investing in a company with multiple share classes, be sure to learn the difference between them. Read Answer >>
  4. Do convertible bonds have voting rights?

    Convertible bonds usually have no voting rights until they are converted. Even after conversion, they may not be granted ... Read Answer >>
Trading Center