A Consumption-Based Definition of the Middle Class

Research on the middle class has typically defined middle class membership in terms of income. In this paper, we develop a consumption-based measure of the middle class that closely follows economic theory of constrained optimization. Overall, we find that only 55% of those considered middle-class by income are also classified as middle-class by consumption, with the remaining 45% divided between the consumption working class (34%) and the consumption upper class (11%). Put differently, a sizable share of Americans—16% of the overall population—are characterized as middle-class but consume like they are working-class, with little capacity to save. We find substantial differences in the demographic makeup of the consumption-based middle class compared to the income-based middle class. Notably, fewer Black and Hispanic Americans are included in a consumption-based measure of the middle class, reinforcing distinctions between income and wealth drawn by prior literature.