A Consumption-Based Definition of the Middle Class

Published in: Social Indicators Research, Volume 164, pages 1249–1270 (2022). doi: 10.1007/s11205-022-02977-8

Posted on RAND.org on January 11, 2023

by Melissa Haller, Jeffrey B. Wenger, Melanie A. Zaber, George Zuo

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.

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