What Is Upper, Middle, & Lower Class in 2024?
Over the last several years, incomes in the United States have advanced significantly.
Of course, you may not have noticed since the price of nearly everything seems to have grown at least a little faster, if not much more quickly.
When there are periods of economic turbulence, it’s only natural to wonder how such volatility has impacted you personally compared to others.
To provide a sort of personal economic barometer, today, we’re going to look at how financial classes have shifted in recent years, (i.e. low, middle, and upper class) both by income and net worth, then I’ll share some trends over the last 50 years that I think you’ll find encouraging.
Defining Classes
When I first started looking into this topic it occurred to me that I have never really taken much time to think about the terms “lower class”, “middle class”, and “upper class”.
I guess as far as that’s concerned, I always just thought of them as “poor”, “normal”, and “rich”.
As you might have guessed, there isn’t really a “standard” definition, and even the specific descriptions I found change with the ebbs and flows of inflation.
Pew research seems to have the most broadly accepted classification of middle class which they define as the range between two-thirds to two times median household income.
As of June 2024, according to the Census Bureau’s Current Population Survey, median household income is $80,610. Using Pew’s definition, “middle class” would be defined as those whose household income falls between $53,735 and $161,220.
If your income falls below this threshold, by their definition, you would be considered lower class and if your income is above the range then you are considered upper class.
Now I’m sure Pew thought long and hard about their definition and I’m sure there’s a great explanation for how they arrived at the formula they did, but it seems unnecessarily complex to me.
Furthermore, it doesn’t provide any guidance for other commonly referenced classes like “lower-middle” and “upper-middle” class.
In the interest of simplicity, I’ve decided to use a more sensible and simple set of ranges to define economic classes which are:
In full disclosure, given that average incomes heavily skew toward the upper class, percentiles will not reflect proportionally to actual income or net worth.
This will basically show where a given economic condition compares to the general population.
So, if you’re “middle class”, 40% of Americans will be in the economic class below you and 40% will be in the economic class above you.
If you’re upper class, you’ll be in the 80th percentile of all Americans for whichever measure we’re discussing, net worth or income.
With the boundaries in place, let’s start by looking at economic classes by income.
Economic Class By Income
So, here is a table illustrating economic class by income, given the 20% ranges I explained above.
As a reminder, this is based on median household income in the United States in 2024. These are not individual salaries.
There’s not really much here that surprised me to be honest.
I did expect a higher salary threshold than $149k to be in the 80th percentile, but if you think about how our tax system incentivizes wealth over income it kind of makes sense (which we’ll discuss more in a bit).
Initially it bothered me a bit to see that 20% of American households have incomes below $28,000 per year. After all, that’s less money than two people working 40 hours a week at the legal minimum wage.
The average annual cost of childcare per household is between $10,000 and $12,000.
The average annual cost of rent is $20,868.
Perhaps most disappointing is average annual mortgage payments are $31,404, meaning it’s basically impossible for these people to ever afford to own their own home.
And then I thought about it more…
There are a lot of people in the United States who intentionally keep their annual incomes low for the sake of keeping their tax liability low as well.
Retirees, wealthy people, and business owners (who also happen to be wealthy) come to mind.
Remember, there’s a difference between being wealthy and having a big salary.
It doesn’t take much of an imagination to visualize people with incomes over $500,000 per year with virtually no savings.
Where do you think the phrase, “all hat, no cattle” came from?
Likewise, we can just as easily assume that there are many among us with very little income but loads of cash and assets that they use to fund their day-to-day lifestyles.
I’m not suggesting that there aren’t a lot of people out there who are having a very difficult time economically, but I also don’t think it’s correct for us to assume that the bottom 20% are all destitute.
Of course, if my theory is correct, then that means the highest ranges of net worth should be much higher than those of incomes, right?
Well, let’s see…
Economic Class By Net Worth
And, just as we suspected, net worth’s cover a broader range, but the highest end of the range is much, much higher than the highest incomes.
Let’s talk about this first.
One of the challenging aspects of presenting data about incomes and net worth’s in the Unites States is the fact that high earners and wealthy people severely skew the data, making the use of averages relatively useless.
For example, in the Unites States, median net worth was at $192,900 in July 2024 according to the Federal Reserve.
Meanwhile, average net worth in the Unites States sits at $1,060,000, which is 5.5 times higher than the median net worth.
In other words, there’s an American out there right smack dab in the middle of the net worth pack. His net worth is $192,900 and half of all Americans are less wealthy than him and half are wealthier.
However, this same guy has less than one-fifth of the net worth of the average American.
Basically, this imbalance exists because the wealthiest Americans have a whole lot of wealth. A staggering 30.9% of wealth in the United States his held by the top 1% of households.
And, to be clear, I’m not here to judge or throw stones. I’m just pointing out the impact it has as we evaluate the data.
The Relationship Between Income & Net Worth
Another aspect of this data I wanted to point out is the way higher incomes seem to correlate to exponentially higher net worths.
When I talk about topics like budget and forecasting retirement, I tend to focus mostly on spending instead of income because I personally feel like most of us have more immediate control over how we spend money than how much we take in.
However, you can’t deny that those with higher incomes have a much easier time building wealth than those who don’t.
This graph ends at upper-middle class because there is no upper limit for upper class, meaning it would run to infinity, but my guess is the curve only gets steeper as income increases.
So, if you’re trying to come up with a way to save and invest more, income is a great place to start.
Granted, finding more income isn’t normally very easy, but that doesn’t mean it isn’t worth it.
Let me encourage you to come up with some ways to generate more income if you want it and start putting a plan into action.
It’s important to highlight this correlation, even if it is common sense, because it allows us to properly target the right issue and not a symptom of it.
It will also inform our next topic.
Economic Class Trends
I want to shift gears for a second and talk more about wealth distribution since this sort of topic naturally lends itself to developing opinions about that.
It’s true that the gap between the haves and have nots in America is growing. Net worth for the wealthiest Americans is growing at a faster rate than it is for lower classes.
However, that alone doesn’t necessarily mean that the poorest Americans are worse off than they have been in the past.
While I was researching economic classes for this post, I came across an article by Pew Research that illustrated changes in income by economic class since 1970.
Yes, there was data like this that confirmed how a greater percentage of wealth has shifted toward the upper class.
In this graph, you can see how household income has basically shifted from middle class Americans toward Upper Classes.
But there’s also data like this that also confirms the growing income gap, but also shows that all Americans are better off today than they were in 1970.
In this chart, it’s clear that upper class Americans have enjoyed much faster income growth than those in lower classes.
But, keeping in mind all of these numbers are inflation-adjusted, this table also shows that all economic classes are better off than they were 50 years ago.
In summary, there is more wealth for all Americans than in the past, but it is not being distributed very evenly. In fact, I think it’s fair to characterize this discrepancy as highly disproportionate.
Our economy is more productive and efficient than ever, but not everyone is enjoying that progress the same way.
Now, I’m no politician. I enjoy a political discussion slightly less than I do a root canal, but I think it’s worth acknowledging that lower class Americans are missing out.
To me, a key way to help them catch up is to encourage ownership of assets.
The spending habits of lower income individuals tend to gravitate toward cyclical exhaustion of income on consumable items, leaving little or nothing for investment.
A completely logical solution would be to create a system for investing and taxation that is simple to understand and rewards such behavior.
Instead, we have one of the most complex and lengthy tax codes on earth.
Frankly, I don’t have the appetite to address that in this post, but maybe one day I’ll have enough time to solve the world’s economic headaches.
In the meantime, I guess MartinMoney.com will have to do.
Wrap Up
In closing, they say that comparison is the thief of joy, and for good reason.
All of the information we’ve just covered only serves as baseline for comparing yourself against others, but that information alone isn’t going to make you any wealthier.
If you’ve made it this far into the post, then I’m glad you found it interesting, but your time will be better spent focusing on your own income, spending, saving, and investing.
Search our website and YouTube channel for more information about these topics and many more.
Thank you again for your interest. God bless and take care!
