The definition I have always used is credited here[0] as “Brooksmith’s Law of Class Distinction”, but I don’t know if this is where I heard it first.
“Name on building: upper class. Name on desk: middle class. Name on shirt: working class”
It’s not perfect, but the idea is that class as most people conceptualize it is determined by workplace and lifestyle affordances and isn’t a neat percentile cutoff but flexes and wanes in size.
But it captures the essence of the upper-middle split. The upper class earns income from assets. The middle and lower classes from employment.
This isn’t an economic conversation, but a political one. The upper classes are economically sovereign. The middle and lower classes are beholden to their employers, at least during the savings stage of their careers.
Put another way, a child born to an upper-middle class family gets a leg up in educational opportunities and connections. A child born to an upper-class family may never have to work at all. Their principal challenge is retaining familial relationships. Referring to the upper middle class as “upper class” papers over the exorbitant privilege the latter retains.
There's an essay on social class breakdowns in the US, which used the term "Working Rich" to describe people like doctors, lawyers, engineers. I thought that was a much more useful term than "middle" vs "upper" vs "upper-middle." Many such people are in the top 10% (depending on educational debt), but the label succinctly describes their relationship with money beyond simply deciding an arbitrary dollar amount.
The study defines upper class as the top 10% of net income (after tax and mandatory insurances, after transfers such as pension and child benefits, and including a rent imputation for home owners). The study [1] does not explicitly mention capital income (capital gains, interest, dividends), but I have no reason to believe that they were excluded (insofar as they are also liable to taxation at 25%).
Depending on the tax system, a wealthy person may have a lot of leeway in choosing the amount of investment income they’ll realize for tax purposes. So someone with $10 million in stock market investments may choose to withdraw none, or only a small part of the returns generated, placing them in the low income category.
Defining wealth in Germany, where even millionaires claim to be middle class
...
Sociologist Wolfgang Lauterbach says: “All in all, the German upper classes are characterized by relatively old money.”
That's the "traditional" class view here in the UK where pretty much everyone is middle class these days (real aristocratic members of the upper class being rather rare and hardly anyone claims to be working class) - even Eton educated David Cameron claimed to be middle class:
An example, near Frankfurt outside the centre the property price is around 5000€ per m^2. 100m^2 for a couple is considered quite confortable, costing around €400k. This means a 25 years mortgage at 1,5% interest rate (atm it could get even better) -> 1600€ monthly repayment, definitely affordable with 5160€.
Anyway, I'm not sure property price is a very good metric for this. Renting in Germany is still relatively cheaper than buying.
Is this a critique of the article's definition of upper class (which they define as top 10%tile, and you define as non-working class). Or are you saying even given their calculation, their result is wrong?
A statistical threshold. Europe has a landed aristocracy with political power, tax and social advantages and investments to last generations. The upper class lives off investment income. The middle class requires income to achieve its goals (if not survive).
The practical effect of this distinction is people over whom employers have power versus those over whom employment, if it exists, is electively pursues.
Yes, globally, but that’s a completely different story in Europe where this story is based in. The global upper class is not the same as upper class in germany or in italy or in finland.
"Class" in the European sense is not an income based thing. It falls apart a bit at the extremes (what is Jeff Bezos?) but it'd be incorrect to categorise e.g. a CEO as being upper-class despite them being in the 99th percentile by income in their country.
The term really describes nobility, inheritance, large land ownership. Existing in a different 'class'.
For the German bourgeoisie, it's education and cultivation. (Education and profession are probably more important class markers than actual income or wealth.) The genuine upper class may or may not care about either because their status is drawn from other things.
Treating pensions as capital is an interesting twist. Relatively accurate in one economical sense, but it's a bit of an edge case and not accurate in others.
Pensions are usually a part of the "social contract", and usually pensioners have only a few years of expected healthy life left. So in most cases, a pension is more akin to having decent savings than having enough capital to live off investment income perpetually. Also, crucially, pensions rarely pass on money to inheritors, and almost never enough that the inheritors can live indefinitely from the income.
It depends on what country you live in, in the UK at least you have a small state pension and private pensions can be saved on top. These can optionally be used to buy an annuity.
'A few years' seems an understatement for what is reasonably expected to be 20+ years, I'm not sure what difference the healthy modifier brings.
But yes, an annuity wouldn't generally allow you to pass on family wealth. That isn't the dividing line that was being discussed though.
This [1] suggests that $1,180,000 would put you in the top 10% in the US, which if you're living off (and in) it won't stretch that far.
If top 10% of income earners, that's quite a movable feast. If I have $1,000,000 in shares earning 10% and taking all as income, am I rich, if I've got $10,000,000 in less risky investments, and after reinvesting to account for inflation, earning 1% the same amount of rich? One advantage of taking an income from assets is that you can choose how and when.
I suspect the latter approach notionally invested in some prudent fashion would give a figure comparable to a wage, I misses out on some big differences though, no having to work, worry about getting sick, having the money there if you need is a major psychological boost, and if you want to buy a house, you can, plus you can pass on assets, which you can't do with a job.
It costs pretty much the same to live in a tin shack with no running water or electricity and eat rice and beans for every meal everywhere. This whole "cost of living" thing is a rationalization to make westerners feel better.
> It costs pretty much the same to live in a tin shack with no running water or electricity and eat rice and beans for every meal everywhere.
No it doesn't. First of all, the price of land can vary wildly. One square meter in the middle of Amsterdam will be a bit more than a square meter in Bumfuck, Alabama. IF you can buy land at all, in some places you can only lease it (you could own a home, but not the ground it sits on). Then there's all kinds of taxes you'd have to pay, just for owning that piece of land.
A 19.5ft by 8ft parking spot in London was on the market a few years back for £350,000, and you won't even be allowed to build a shed on it, just park your car.
An empty lot without even a tin shack can cost more than a mansion, depending on location.
You are comparing living in the one of the most expensive cities in the world to someone living in Zimbabwe as if they are remotely the same thing. Only 40% of Zimbabwean people have access to toilets, what do you think that number is in London?
> You are comparing living in the one of the most expensive cities in the world to someone living in Zimbabwe as if they are remotely the same thing.
Yes, that was my point, they aren't the same thing at all. It's complete bullshit to say that it costs pretty much the same to live in a tin shack everywhere, as it clearly doesn't.
I'm not aware of anywhere in the UK that will allow you to buy land and build a tin shack on it. Does an entire country count? Hell, most Western European countries will probably have something to say about it if the authorities find out you're living without water and waste.
Your minimum is probably a well, septic tank, permits and so on, this is if you even get planning permission. It's almost certainly going to be cheaper to buy an old terraced house in a post industrial town.
I’m pretty sure a bag of rice is way more cheaper in the countries where it is produced versus the countries where it’s exported. In some countries it’s more expensive to be poor than in others.
$8.43 gets you 20 pounds of rice in the west, 42 cents a pound. How much cheaper could it be?
Put it this way, India is a relatively wealthy nation and a large proportion of middle class Indians don't have flush toilets. How can you compare that to a middle class European with a straight face?
It's not that the cost of living is lower it's that standards of living are.
> defined in relative terms -- as the top 10% by (net) income.
A ridiculously stupid definition only some economists can come up with.
A family with a huge mansion and its own multi-billion trust (living expenses paid by the trust) is not upper class, a graduate who owns nothing but debt and has just landed a well-paid job is, according to this definition.
Not quite. The study includes a rent imputation on owned property in income, and I saw no indication that Kapitalerträge (interest, dividends, capital gains) are excluded from the income. Furthermore, university in Germany is basically free and there is government support for poor students (BAföG) [1], so graduate debt is not that much of an issue.
> I saw no indication that Kapitalerträge (interest, dividends, capital gains) are excluded from the income.
A trust (Stiftung) owns itself. Its capital gains are not the beneficiaries' capital gains. It may also own the mansion in my example, so good luck taking imputed rents into account.
> Furthermore, university in Germany is basically free and there is government support for poor students (BAföG) [1], so graduate debt is not that much of an issue.
This doesn't change the point that someone who just started a well-paying job and owns nothing but debt is considered "upper class" by this so-called study.
He'd be considered top income decile if he is in the top income decile by this study, indeed. The article linked about the study does refer to Oberschicht, but explains that it here refers to the top income decile in the very first paragraph.
I wish this discussion could move on from this unfortunate, but minor semantic point to the substance, namely that 5160 EUR/month of net income for a couple take you into the top decile in Germany.
> I wish this discussion could move on from this unfortunate, but minor semantic point to the substance
It may be a minor semantic point to you, but it's half of what makes the headline a low-effort clickbait as typical for the "Zeit" since it goes against all common sense and why people take offense. The other half is the obvious flaw in the study, also typical for low-quality research that results in such left-populist articles, of asking people sensitive questions about their income (and perhaps wealth) and expecting valid responses.
I wish we would move on to debating why this kind of trashy content gets so much attention and why certain people just crave for it to be published.
Some people in the US are investing 400+k in education. Spending that on buying and renting property can also create an income stream, but they both take work.
Please note that in Germany and many other European countries, the net income is usually after taxes and mandatory insurances like health insurance, pension insurance, unemployment insurance or long term care insurance.
For a married couple without children, 5160 EUR net income per month then equates an income of over 100,000 EUR per year.
Well paid but not upper class. Give Germany has a bona fide upper class, this is a meaningful point to snuffle about. The couple with €5,160/mo. in net income is still, in all likelihood, beholden to their employer.
> The study defines upper class as top 10% of net income
And the comments in this thread are disagreeing with that terminology. (The term of art has been “high earners” when I’ve seen income statistics in America.)
The study itself actually distinguishes upper class (Oberschicht) from the top income decile (which is what the research is about). At any rate, that's really a semantic issue and should not distract from the substance.
I don't know if it is a cultural difference, but here in euw, in my country in particular, we usually use a similar definition for upper class and we call the class of the actually rich just like it, "the rich".
For reference, 120k€ (before taxes) could be a couple of software engineers with normal mid-level or low senior-level salaries (at least for Berlin, don’t know about other places).
If the couple is married and only one of them is earning money, 5160 EUR net income per month may be generated by less than 100k EUR total income per year (its roughly 98k).
This is mainly because your non-earning spouse can be included in your health care insurance for free, and because of the Ehegattensplitting [0]
Read it. They're using the wrong expression. 'Oberschicht' might be accurate in some statistical way, but it really means 'upper middle class' in this case. The measure is flawed though because it is based on monthly (presumably earned) income without taking into account net worth. Someone could own millions in property or other investments in Germany and have a relatively low net income, yet have the option of cashing out for a vast amount of money.
Given that you spend the recommended one third of your net income (€5160) on housing, this means that in 45 years (~roughly a worklife) you can spend €919.512 on a house/flat (ignoring renovations, assuming 0 interest financing). In Munich, this is what a flat like that can look like: https://www.immobilienscout24.de/Suche/S-T/Wohnung-Kauf/Baye...
Also, this is _net_ income. In Germany that means healthcare is covered and you don't have to pay off large student debt.
To reach this net income, both partners have to make about 54.000 a year pre-tax.
Most important point: the data is based on surveys, which means the super-rich don't really show up.
If your are talking about the first one in the list - that is a very good location in Germanys most expensive city. Your link is a new building, so it immediately looks quite a bit fancier. The Munich place would probably get a new kitchen by whomever spends 800k on it.
I think you have to click through a couple of places to get a better feeling.
It's also insanely different between countryside and cities.
Back home where my parents live, you could build a really, really nice house for that money. That's probably triple of what my friends back there spend on their homes, and those are really nice already.
Of note is that "upper class" in this context is questionably defined as being in the top 10 percent of earners. I think this is misleading because I don't see someone making 3.5k as a single or 5.1k as a couple necessarily enjoying an upper class lifestyle. It's enough for a mortgage in a middle-class neighborhood and maybe a lease on one nice car (or two middle-tier cars).
I have no idea what percent of the population is actually upper class, but they usually outright own multiple houses and luxury cars, and most importantly, a significant stack of wealth that is not necessarily bound in everyday living.
Do you not find it concerning that someone at the 90th income percentile in one of the richest countries in the world, in stuck in a socio-economic system where they have to be in significant debt to be able to obtain two fundamental human rights - shelter and transport?
Either something is wrong with the social system which is making individuals to spend so much. Or something is wrong with the economic system, which is not providing enough income. Or something else wrong?
In short, yes, I do find it concerning. Germany at least has a social safety net (as opposed to, say, the US), but making use of it is often dehumanizing and complex by design. Of course owning a nice house and an upscale car is a few rungs removed from having basic shelter and transport.
One of the middle class problems I do see is that owning your daily stuff (like a house and a car) - and hence gaining some measure of independence - is increasingly difficult, even for relatively high earners. I think another poster here got it right when they said that being upper class ultimately means being a rentier instead of a rentee.
> they have to be in significant debt to be able to obtain two fundamental human rights - shelter and transport
The fallacy in this argument is assuming that if you cannot buy your own house and car, there is literally no other way to obtain shelter and transport.
I live in a big German city, though not quite in the city center. (My commute into the city center is 20 minutes by tram.) My monthly expenses for shelter and transport (not counting long-distance trips) come out to 500 € in total. With other non-negotiable expenses (food and insurances), this goes up to about 750 €. Rounding up a bit because there are always unexpected bills, a salary of 1000 € is the minimum that I need to live comfortably, if slightly frugally.
Statistically 90-th percentile is more interesting.
Practically calling 90-th percentile the "upper class" is whitewashing the extreme difference between the lifestyle historically associated with the upper class and the middle class.
It strikes me that people like to deny the fact that the upper class is actually a very small group indeed. It's not about just having a slightly bigger house or car or whatever, the entire lifestyle is fundamentally different.
"Upper class" means those who are rentiers, as opposed to those who have to sell their labor or body to others.
Some CEO's are quite rich but still not "upper class", because at the end of the day they're still employers who sell their time to the highest bidder.
I'm reading a book called Capital in the Twenty-First Century right now, which is all about this stuff. I'm only about halfway through right now, but here are some points from the book I find interesting (all of them iirc since I don't have access to the book right now):
* the author chooses not to use the terms lower, middle, and upper class because doing so just leads to arguments about where to draw the lines. Interesting that so many comments on this thread are just people arguing about what "upper class" means because it's a personal term. He instead splits the distributions of income into three parts, the bottom 50%, the 40% above that, and the top 10% and simply refers to them by centile and decile. The "top decile" has an unambiguous meaning, whereas "upper class" could mean anything.
* there are three distributions: income from labour, income from capital, and combined total income. The people at the top of one distribution aren't necessarily the ones at the top of the other. The book analyzes inequality across different countries across the past two hundred years or so, super interesting stuff
* only when you get into the top 0.1% are you earning more income from capital than income from labour
* inequality of income from labour is far lower than inequality of income from capital and always has been in every society in every period
* inequality from income from labour is _easier_ to morally justify than inequality from capital, but still not necessarily just in any absolute sense
* the bottom 50% owns only about 5% of the total capital
Exactly. The substantive contribution is to peg a number to the top income decile. It doesn't matter what you call it (and the study itself is careful about that, distinguishing Oberschicht from top income decile).
I submitted the article because I found the provided data interesting, I didn’t expect the discussion to focus on the definition of “upper class”... I just translated the original title, that was maybe a mistake
Most people don't realize how well-off they are since in most cases, their income move at a similar pace to their expenses. A person making $500k may feel poor and complain to their peers simply on the basis that they are living in an area that is more expensive, eating an assortment of foods at a higher premium, buying a car 15x the average used car, etc.
The real problem is that in East Germany with more than €2839/month you belong to the upper class. In West Germany you need €3431/month showing that people from East Germany on average only have 80% of the income in the West even 30 years after reunification.
I'm not even going to look but just guess that 60K EUR/year isn't even enough to buy a house near Frankfurt or another decent sized city.
They might be in a high percentile. That only means that most people are very poor.