Are you in the middle class?

The middle class isn’t fixed. It’s a moving target that appears to be getting smaller and smaller.



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Commerce, Toronto, Ontario, CanadaI get a lot of letters every month. Most are from people who are trying to get out of debt, but more and more are from people who want to have some sense of how they’re doing. Of late, people have been asking me what constitutes “middle class?” I’m not surprised at the confusion around this term because the reality is the middle class is huge and the disparity from top to bottom might take your breath away.

[02/24/2014: Middle-class dreams a myth: Government report]

Economists don’t really agree on what constitutes a middle class income. We know the upper class is the top 20% of income earners and the lower class are the bottom 20%. Everyone else falls in the middle. Since the median income for Canadian families (in 2010) was just less than $70,000, then making somewhere between $60,000 and $85,000 will plop you in the middle quintile of Canadian families.
The middle class isn’t a constant though, which is why there’s so much confusion. Back in the early ‘70s, about 60% of all the income earned in Canada went to the middle of the pack. By 2006, that had dropped 7%, which is why we have the term “shrinking middle class.” Yes, it really is shrinking.

The other big change is that it now takes two people busting their butts to keep a family in the middle class. Back in the ‘70s, more people sat in the middle class in a single income family. Back then the ratio was 30:70 for double incomes versus single incomes. Today, the numbers are reversed because it takes two workers in a family to pay the mortgage, buy the food, and keep things on an even keep.

Wondering what it takes to go from middle class to upper class? If your family earns between $85K and $125K you’re almost there: you’re in the upper middle class. To make the leap you’ve got to be earning more than $125K a year.

If you reach the upper tier things look good for the long term. From 1979 to 2008, those earning the top 1% in family income saw their share of total income jump to 18% from just 8%. Yup, Richie Rich grabbed 10% more of the money. Is there any wonder there are movements afoot and dissatisfaction brewing?

One truth holds whether you make under $40,000 or more than $125,000 a year: how you use your money to achieve your goals is what really counts. There are a lot of fat cats driving around in snappy cars who are sitting on a keg-full of debt. And it’s only a matter of time before that keg blows. It’ll be interesting to see how the middle class shakes out then.

10 comments on “Are you in the middle class?

  1. My family makes $140K (before tax), we both have to work, we're paying mortgage on a 3-bedroom home (can't afford anything larger), paying for two cars (need them both), and are saving a little for retirement and emergencies.

    I realize we're a lot better off than most, but why don't I feel like I'm upper class? I always thought of upper class as when your money starts working for you and not the other way around. i.e. you could quit your job and still live out the rest of your life in comfort. That certainly isn't my situation.


    • No, upper class was normally being able to acquire land/property and actually own it, instead of renting it or paying in crops etc.

      It's only recently in Canada that this "everyone owns a house" crap started.

      The fact you are in the process of owning a 3 bedroom home, 2 vehicles and having some savings means you would normally be considered upper middle class at minimum, but with ultra-low interest rates and crazy debt loads, it's hard to tell who really is wealthy (not ultra rich) but wealthy, and who is pretending anymore.


  2. I find the stats hard to believe considering the 'wealth' i see in Toronto. You think there are many many multi millionaires in the city with all the fancy cars and fancier houses and over the top clothing. I often joke that other people's wallet is worth more than the amount of money in my wallet!

    But I guess the stat also matches up to BCG estimate that Canada had 373,000 millionaires in 2012 comprising 2.8 out of every 100 households. And also matches up to Wealthinsight shows 118,000 millionaires in Toronto.

    unless of course all these stats are coming from the same source.


  3. Gustav has a great point, to get a true value of who is living the 'good life' and who is struggling we should be coupling income with cost of living data to get a "score" for people. Come to think of it, we should add personal debt into it as well. I live on the east coast, single, I am young at 29 years old, I make the income of a middle class family, but I have no students loans, no CC debt, I own my vehicle outright and have a small mortgage. Even though I am not making over 125K/yr I probably am able to have a better quality of life (from a house/car/debt standpoint) than some who makes an upper class salary but lives in places like Toronto or Vancouver or in general is weighed down with a heavy debt load.


    • I think you're right. Despite having a family income a fair bit over the $125k/year magic number, we own a house in Vancouver, have two young kids, and support one of our parents. While we don't live paycheque to paycheque, I certainly don't feel anything at all like "upper class". I really think looking at income alone isn't sufficient. If someone earned $100k a year and had a million dollar net worth, I'd consider them upper class for sure. A person with student loans, a 95% ltv mortgage, and a $125k a year salary, absolutely not.

      And with todays house prices in Vancouver and Toronto, I'd say $250k a year would be more along the lines of what sort of income one would need to feel upper class, if income was the only metric you looked at.


  4. My family income is $135K annually, we own our home plus a rental property. We have one car (don't need 2) and have pensions and RRSP investments. The rental acquisition is new and we borrowed against our home equity to get the down payment together. We also own 2 small businesses on the side, as well as holding down 2 full time jobs. We like to think we are making our money work for us. This is all about retiring and selling our homes when we do. It is a bit of a gamble but so is putting money in RRSPs, which have not made ANYTHING in 4 years. I refuse to sit around and wonder "why not me?" – I realize that "investment advisors" aren't giving us good advice. I am learning by listening to people who are putting their money where their mouths are. Like my mortgage broker, realtor, accountant, and other people who are doing what I am doing.


  5. As believable as these numbers are, I still find them shocking. My partner and I make approximately $200k before tax (before any bonuses), no children, no debt other than a car we’re financing for approximately 6% of our after tax income each month and a mortgage on a condo worth $340k. Even though we are able to save and enjoy our lives I always feel thoroughly middle class when I see real estate prices averaging $700k for a semi-detached in Toronto, which we feel we can’t afford. I think, “who is buying these houses? Everyone must be so much wealthier than us.”

    I think vanman is right–you have to look at assets and not just income. We have very little assets as we’ve both just finished school within the last 4 years, whereas these people buying those expensive houses probably have way more assets accumulated over a much longer time.


    • spreckles you sound privileged and a bit whiny. Basically, after 4 years in the work force your income is in the top tier, you are building equity, saving, and enjoying life. You should be grateful for how good you have it and stop comparing yourself to people who might be better off, or might just have crazy debt loads. Gratitude is worth more to your well being than a $700K house.


  6. Pingback: Middle Class Strength? | David Peralty's Ramblings

  7. My definition of being wealthy is when you don’t have to work for your basic necessities (food, clothing, shelter) and you only work because you enjoy it. Wealth gives you that freedom. Its not a number but a state of mind.


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