Who in the world is middle class?

By Karen Aho

In India, a scooter company aims ads at a schoolteacher who earns $2,500 a year and lives in a tiny brick house with no running water. Why? Because that teacher, according to marketers, is middle class.

In the United States, meanwhile, a family that earns $200,000 a year and has a 2,000-square-foot home, two cars, three computers and an Xbox game console so the kids don't have to play outside barely blinks before labeling itself middle class.

And yet, experts say, neither is incorrect:

• The Indian teacher, despite his relative poverty, earns an extra sliver of income that will allow him to buy something he doesn't absolutely need. He has escaped poverty.

• The American family, although extremely wealthy by world standards, lives with some degree of financial stress. Both parents work hard but worry about retirement, education and health care costs, and are acutely aware of the fact that they share a country with some who have far more. They feel middle class.

"Everybody sort of defines themselves as middle class" in America, says Steven R. Pressman, a professor of economics and finance at Monmouth University in West Long Branch, N.J. "Self-perception is a funny thing."

The edges of middle-class status may be hard to pin down, but the importance of those who perceive themselves to be middle class is impossible to deny. Unlike the poor, they can buy extras. Unlike the rich, they have to spend much of their income on essentials. They're motivated to move up and to protect what they have.

"If we value democracy and we don't value people at war in the streets, the middle class is important," Pressman says. "Small business, general innovation . . . things that are going to improve our standard of living -- those are going to come from the middle class."

What is middle class?

The only universally accepted definition of middle class is the oldest: neither rich nor poor. And the middle class has always been considered vital to a country's stability and growth.

As far back as 350 B.C., Aristotle said no democracy could last without middle-class rule; the rich and the poor simply distrust each other too intensely to let the other have the reins.

Americans may not know exactly where they fall on the U.S. income scale ($200,000 is actually in the top 5%) or where government statisticians have chosen to draw the line (above $100,000 is sometimes considered "upper class"), but they do understand the idea of the middle class, and that's as accepted a definition as any other.

More than income, the middle class is an expression of where one's occupation, education, wealth and even attitude fit in relation to those of others. Most prefer to identify as at least somewhat typical -- or near the norm -- in all circumstances, and "middle class" has the added benefit of suggesting both opportunity and self-reliance. It's very American.

Yet the concept knows no borders.

Middle class, defined as "the resources to cover all of your needs and some of your wants, plus the ability to save for the future, works for every nation and culture," MSN Money personal-finance columnist Liz Pulliam Weston says.

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Indeed, the business world salivates over a rapidly expanding global middle class that is beginning to indulge its wants and wield its political power in both India and China. At the same time, economists worry about a shrinking middle class in Western nations, including the United States.

That's because membership in the middle class isn't solely about income and spending. Health, education, political freedom, security -- the things that allow a poor college graduate in this country to continue to identify as middle class while living in his parents' garage -- are directly linked to the strength of the middle class.

The U.N. Human Development Report uses these same indicators to rank nearly 200 countries every year. In the 2008 report, the ranking was led by Iceland, Norway and Canada -- countries, not coincidentally, with large middle-class populations. The U.S. ranked 15th.

An emerging global middle class: $6 to $10 a day

In 2008, the median household income in the U.S. was $50,303, an amount that might put a family of four in debt in Denver but eight times a middle-class income in China, where people are suddenly buying things.

Multinational companies are champing at the bit to reach this rush of new consumers in the developing world. That cheap labor the companies had hired is now rising out of poverty with a few dollars -- or cents -- that are burning holes in their pockets.

This is the emerging global middle class, expected to more than double to a billion-plus by 2020. The chief executive of Coca-Cola has said it's like a city the size of New York City springing up every three months.

Continued: What is 'middle class'?

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