Saturday, 14 May 2011

What is the new 'Middle Class'?

The post-budget articles in the newspapers are making me sick. Making out families on $150,000 a year as though they're on struggle street is pretty dirty, when folk in that situation are better off than most of us.

Matt Cowgill has written an excellent piece trying to find out what the middle class (middle meaning median, not average) actually is. It's been picked up by ABC's The Drum as well.

I've looked at how big the supposed 'working families' demographic is before, but let's explore what this 'middle class', that Government budget savings will affect, is really like.

My source - "Household Wealth and Wealth Distribution, Australia, 2005-06" from the Australian Bureau of Statistics (I know it's a little old but it's the latest issue of the product).

I'll be looking at the top 20% of households by gross income. These are households making more than $100,000 a year -  including plenty of families making substantially less than those examined in the papers.

Share of Wealth and Income
Now this top 20% of households controls 45% of the income in Australia and 60% of the wealth. This is nearly double the income and triple the wealth of the next highest 20% and 10 times the income and 60 times the wealth of the lowest 20% of households. This may sound bad but it's better than the US where the top 20% controls 61% of the income and a whopping 85% of the wealth (and the top 1% of households 34% of the wealth).

The median income of this group is $130K a year, more than double the median income for all households and nearly 10 times that of the lowest group.

The median net worth of this group is $635K, double the median for all households and three times that of the lowest group.

Income Source
This group is fairly similar to the next highest 20% in that they both get their primary income from wages and salaries, although there appears to be a very small number that claim their primary source of income is government pensions and allowances - perhaps The Australian found them. However about a quarter of this group gets 1-20% of their income from pensions and allowances. Unfortunately the stats don't break down further but I'll assume the contribution will mostly be closer to 1% than 20%.

Tenure Type
Most of this group, 57%, has a mortgage the highest proportion of any income group. Makes sense - mortgages are expensive so the highest income bracket will be able to have more of them.

Family Type
Nearly half of this group (and more than twice the average) have kids under 15, the highest proportion for all income groups. Makes sense - kids are expensive so the highest income bracket will be able to have more of them.

Also less than 4% of this group are lone person households, close to seven times less than the average. To get into this income bracket you need a combined income. This is also borne out in the stats - these households have an average of 2.3 employed persons and one child under 15 (again, almost twice the average).

Three quarters of these households live in capital cities which is higher than the average (about 63%).

So this group of top 20% in household earnings does fit the postcard. They're likely to have a mortgage and kids with both parents in work, get the majority of their income from work and live in a capital city. But this is a group that as a whole controls a majority of the household wealth and close to a majority of the household income.

This group does get some government benefits, less than that of the next highest income bracket, but their biggest advantage is that they earn more and possess more. If this group actually depends on government assistance then the rest of us are screwed.

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