The other day I was having a debate with one of my blog readers about the definition of Middle Class. We were both trying to sort out what the income requirement was to be “middle class” in the Bay Area or any region of the country. I came up with a pretty simple equation…
Middle Class, to me, equals being able to afford a modest house for a family (3br, 2ba) in a reasonably good neighborhood within one hour of where you work (i.e. a suburb of a major city.) Based on various estimates you should spend about 25% of your AFTER TAX income on your monthly home payment. Thus, in order to determine what it takes to be middle class in any region, we can look at what homes cost in that region, and base our definition on that.
Bay Area = $1.5M, $5500 / mo mortgage = Middle Class = $22k after tax for couple ($450k required salary to be middle class in the Bay Area)
[edited to add — there are SOME homes for the $800k-$1M range in the east bay in reasonable neighborhoods. Thus, you can say that it takes more like $350k to be middle class, but it’s still higher than NYC.]
This may sound high – $450k to be middle class means that both members of the couple must earn $225k, or one must earn $300k and the other $150k , or any other combination to get you to $450k. You can make the case that there are some homes available for a little less than $1.5M, so perhaps you can get away with making $400k joint to be middle class – but that is the bare minimum. Lower middle class = renting a house or owning a condo, or owning a home in a more crime-ridden part of town.
Let’s compare the Bay Area to the Tri-State Area, where a similar home would go for $500k-$800k in New Jersey or Westchester, requiring a mortgage of $3000 a month for a very nice home. This then requires an after-tax income of $12k-$15k, or an annual joint income of about $250k. Thus, $250k in NY is middle class. In the Bay Area, you need to make almost DOUBLE that to be middle class. It’s practically impossible to be middle class in the Bay Area unless you have two executives or engineers in your household.
Here are a few other regions. Try it yourself for where you live and comment below to share what a middle class income would be in your region:
What Income It Takes to Be Middle Class:
San Francisco, California — $450,000
New York, NY — $250,000
Seattle, WA — $220,000
Portland, Oregon — $190,000
Denver, Colorado — $150,000
Austin, Texas — $120,000
Do you agree or disagree with this way of determining what “middle class” costs in different parts of the country?