I recently had a discussion with a neighbor and friend of mine regarding the status and condition of our neighborhood. We have several vacant homes for sale on our block and their condition is less than eye pleasing. A couple of those homes have been on the market for more than two years and their yards and exteriors reflect exactly that level of neglect. During this discussion he wondered why, in this era of foreclosed and short sale homes, more “middle-class-families” do not take advantage of the housing situation and try to live the American dream of home ownership? I paused for a minute and not wanting to get into a political debate about economic policy and bank bailouts, I instead turned the conversation into a discussion about the definition of “middle-class.”
My neighbor is slightly older than I am, so subjectively we can differ on varying points, but we can both agree that mathematics and income numbers are finite data points. I was curious about whom he thought qualified to be considered “middle-class” and he responded with, “Anyone with steady full-time employment, making minimum wage, and who pays their taxes!” I took the bait and quickly agreed with that assessment, so that we could have a baseline “middle-class” person for which to refer back to.
I have had several minimum wage jobs in my career history, and can personally say that during that time in my life, I did not feel “middle-class.” In order to better appreciate our new “middle-class” friend, we named him Malcolm*, since he was in the “middle.” To begin our statistical discussion, I thought it fitting to find out his yearly salary, so we could estimate how soon he would be moving into our neighborhood. Since my neighbor and I live in the state of California, we shall use these income, tax, and expenditure numbers for the sake of consistency. Malcolm makes an hourly rate of $9.92 an hour so I will be using the city of San Francisco’s minimum wage, as it is the highest in all the state. [http://sfgsa.org] Using this wage, Malcolm makes $79 a day, $396 a week, and $20,592 a year, compare this to the rate mandated by the state in which a full time minimum wage worker in California working 40 hrs a week at $8.00 an hour, 52 weeks a year will earn $64 a day, $320 a week, and $16,640 a year [http://www.minimum-wage.org] That extra $1.92 really makes a big difference.
*In the interest of fairness I will err on the side of Malcolm, having him make the most and spend the least.
Okay so let’s find Malcolm his dream home and since he is making the big bucks, he shall move in next door to me so I can borrow his lawnmower when the dandelions in my yard begin to cast a shadow. The average price of a home in my neighborhood is $500,000 so using a handy mortgage calculator from bankrate.com his monthly mortgage payment (at a fixed 30 year APR of 3%) comes out to, $2,108. Taking into consideration Malcolm’s monthly take home salary of $1,584, Malcolm, even using all his income on his mortgage payment will never move in next to me. I suggest to my neighbor that perhaps he can rent ‘ole Malcolm a room. “Wait a second,” my neighbor counters, “I said a ‘middle-class-family’ that’s a husband and wife!” Fair enough I answer, let’s double his income since his wife also works in San Francisco. (They met during a BART protest!) Now Mr. and Mrs. Malcolm have a combined monthly income of $3,168 and after paying their mortgage they are left with $1060 of disposable income my neighbor proclaims. “Awesome, they have arrived” I shout, “now let’s total up the rest of the costs associated with that purchase, oh and how are they getting to work? What type of medical, house, and car insurance do they have?” My neighbor looks at his watch and announces he has to go inside and get dinner ready. We agree to carry on this debate another day, perhaps a sunny afternoon after mowing our lawns this weekend. “It’s a deal” I say, watching him amble back inside his home, scratching his head as he kicks a dandelion.
This type of discussion happens every day, but not normally by two neighbors with no vested interest in the fictitious Malcolm and his lovely wife. No, this debate rages on in the very households of the minimum wage army we all meet daily on our way to work, at the grocery store, and our workplace if we are fortunate to have a job. The average cost of food, clothing, and medical coverage are an often overlooked expense in the debate of the “middle-class” focusing almost entirely on income and rarely on expenditures. I invite you to speak with your neighbors, co-workers, friends, and family to get a better understanding about whom and what qualifies someone to be considered “middle-class.”
The U.S. federal government considers anyone making less than $10,890 in poverty, a dangerously close number for my fictitious non-neighbor Malcolm. Some recent surveys here in the U.S. indicate that 70% of our fellow Americans consider themselves in the “middle-class.” So if 70% of us are just like “Malcolm,” then it’s no wonder we are in the financial situation we all find ourselves in.
December 6, 2011 //
Housing prices across the United States continue to plummet and it is estimated that over 11 million
September 27, 2011 //
Freddie Mac and Fannie Mae are two government controlled agencies that hold approximately $11 trilli
July 19, 2011 //
As a former real estate agent with friends who find themselves unable to pay on their mortgages, I a
July 15, 2011 //
Finding relevant resources are a key component of researching, gathering information, and making the
May 31, 2011 //
Is it conceivable for your average white collar Dollar Shark to purchase a home? Is there still mone
May 13, 2011 //
Does refinancing your mortgage in the current market hold value? With interest rates going down,
May 9, 2011 //
Homeowners have suffered through one of the biggest housing bubbles and bursts our country has ever