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[IWS] CRS: THE DISTRIBUTION OF HOUSEHOLD INCOME AND THE MIDDLE CLASS [10 March 2014]

IWS Documented News Service

_______________________________

Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

________________________________________________________________________

 

Congressional Research Service (CRS)

 

The Distribution of Household Income and the Middle Class

Craig K. Elwell, Specialist in Macroeconomic Policy

March 10, 2014

http://www.fas.org/sgp/crs/misc/RS20811.pdf

[full-text, 10 pages]

 

Summary

Although not itself a subject of legislation, the shape of the income distribution enters Congress’s

decision-making process concerning such policy issues as taxes, means-tested benefits, and social

insurance programs. Congress also considers legislation specifically in the name of those in the

middle class, which is variously defined as some income level or income range within the

distribution of U.S. households with income. After briefly analyzing the distribution of household

money income in 2012, the report attempts to put the term “middle class” into greater

perspective.

 

The first key point of the report is that, although there are a variety of ways to describe the

income distribution, all show that income is concentrated among high-income households. Of the

122,459,000 households with income in 2012, 2.3% had incomes of at least $250,000. (The

Census Bureau does not disaggregate income within the $250,000-or-more income class.) In

addition, a large share of total money income accrues to those at the upper end of the distribution.

In 2012, the top 5% of U.S. households with income accounted for 22.3% of total income, and the

top 20% of households (which includes the top 5%) had 51.0% of all money income. A broader

definition of household income, incorporating capital gains, the value of non-cash benefits (e.g.,

Food Stamps, Medicare and Medicaid, and employer paid health insurance), and subtracting

estimates of federal taxes, tends to make the income distribution slightly more equal.

 

The second major point is that there is no official government definition of who belongs to the

middle class, and the term means different things to different people. The middle class may refer

to a group with a common point of view or to those having similar incomes, for example.

Third, absolute income appears to partly determine who belongs to the middle class. By

combining money income data from the latest Annual Social and Economic Supplement to the

Current Population Survey with results from surveys that asked people to identify their social

class, the middle class may refer to households with income levels in 2012 that ranged from

$39,736 (the bottom of the middle quintile, 20%, of households) and extended into the top

quintile (households with income of $104,087 or more)—perhaps including households with

incomes somewhat over $200,000.

 

Last, relative income may also be a defining characteristic of the middle class. In other words, the

middle class appears to identify itself relative to the income of a reference group (e.g., their

neighbors or coworkers). According to studies of self-reported well-being, those who constitute

the middle class seemingly are of like minds with regard to their economic situation. Specifically,

having incomes far above those at the lower end of the income distribution generally correlates

with satisfaction to the middle class, but when those at the upper end of the distribution fare much

better than they do, the level of middle-class satisfaction is generally lessened.

 

Contents

The Distribution of Household Income ........................................................................................... 1

The Middle Class ............................................................................................................................. 4

Absolute Income ........................................................................................................................ 4

Relative Income ......................................................................................................................... 6

 

Tables

Table 1. Distribution of Household Money Income by Selected Income Class, 2012 .................... 2

Table 2. Census Bureau Estimate: Distribution of Household Money Income by Quintile, 2012 ............................................................. 3

Table 3. CBO Estimate: Distribution of Before and After-Tax Household Income by Quintile, 2010 ........................................................................ 4

 

Contacts

Author Contact Information............................................................................................................. 7

Acknowledgments ........................................................................................................................... 7

 

 

________________________________________________________________________

This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.

 

 




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