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Many examinations of the middle class use a measure of income to identify the group of interest. In the US the usual income measure used is pre-tax cash income, the income concept used in the official poverty measure. This paper used a different measure to examine the population that is defined as middle class in the US. The resource measure in the SPM differs from official income measure in that it adds the value of noncash benefits and subtracts necessary expenses, such as taxes and medical out-of-pocket expenses. Examining income/resource to poverty threshold ratios also brings in other important differences including different equivalence scales and adjustments by housing tenure and geographic variation in housing costs. All of these adjustments contribute to a resource measure that better reflects the actual circumstances that families and individuals face in a more accurate way than does pretax cash income. Comparing these two measures sheds light on how our perception of who is in the middle class may be inadequate using typical measures.
Our analysis showed that there are likely more women, children, cohabiting couples, Asians, other races, non-Hispanics, native born citizens, those living outside metropolitan statistical areas, owners with a mortgage, renters, the uninsured, people with public health insurance, and people who worked less than full-time year-round in the middle class than are identified using a traditional income measure.
On the other hand, traditional income measures may include more nonelderly adults, elderly, people in married couple families, people in units with a male householder, whites, Hispanics, noncitizens, owners without a mortgage, people with private health insurance, people who worked full-time year-round, and people with no disability as being in the middle class compared with a resource measure that accounts for available resources after necessary expenses as measured by the SPM.
More in depth examination suggests that important elements that should be included in identifying the middle class would be cost of living differences, health care systems, housing tenure and mortgage finances, child care supports, and government tax and transfer policies. This paper demonstrated the importance of these elements in assessing the relative standing of families and individuals across income/resource distributions.
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WORKING PAPER
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