- The Washington Times - Saturday, November 29, 2003

Richard Norwood, a 55-year-old Department of Veterans Affairs official, makes roughly $100,000 annually. He and his wife, a retired accountant, own their home in Poolesville, where they have lived since 1977.

Heather Crunk, 27, makes $35,000 a year at a video-production house in Alexandria. She is single, rents an apartment in Old Town and is paying off her student loan and the loan on her 2000 Ford Escort.

Mr. Norwood and Miss Crunk consider themselves middle class. Neither is correct, unofficially.

There is no real definition of the middle class in the United States, assert economists and sociologists, who say “middle class” always has been more of a state of mind than an actual economic status. Even the U.S. Census Bureau has no official definition, although the middle 20 percent of the country earns between $40,000 and $95,000 a year, according to statistics.

Some Americans are worried about losing their middle-class status, especially after enduring several years of a struggling economy.

“I may not be middle class anymore, but I am faking it. I am going to fake it until I make it,” said Niki Faldemolaei, a Bethesda resident who was laid off in July last year from her job in the marketing department of a publishing-industry trade group.

Before losing her job, Ms. Faldemolaei earned about $115,000 annually. She has started her own marketing business, but isn’t making as much money as she did before. She still drives a Lexus and lives in “a fairly upscale” neighborhood, and she is learning to invest better, something she didn’t do before.

“There’s been major pain. I’ve not taken vacations. I’ve been late on some bills and had to deal with the finance charges and the late fees. It’s no fun,” Ms. Faldemolaei said.

One way economists define the middle class is to divide American families into five equally sized groups, with 20 percent of families in each group. The lowest fifth includes families who earn less than $24,000 a year, and the top fifth covers families who earn more than $165,000 annually.

In the middle are families whose income ranges from about $40,000 to about $95,000 annually, according to 2002 census data released this year.

“There are working families who can pay their bills, but they have to really think about such minimal expenditures as picking up a pizza after work, going to the movies, making a long-distance telephone call. They may have some investments, but they depend on each paycheck for their well-being,” said Jared Bernstein, an economist for the Economic Policy Institute, a think tank in the District.

Almost 50 percent of Americans whose annual family income is $20,000 to $40,000 call themselves “working class” or “middle class,” according to the National Opinion Research Center, a research arm of the University of Chicago.

Almost 38 percent of individuals with family incomes of $40,000 to $60,000 and 16.8 percent with family incomes more than $110,000 annually also put themselves in either the working- or middle-class categories.

Anirban Basu, chairman and chief executive officer of Optimal Solutions Group, a Baltimore economic-research firm, said defining the middle class is tough.

“There are subjective things you can look at. You can say the middle class shops at the Gap and Banana Republic or that they drive Honda Accords. It can be a difficult thing to gauge,” he said.

The median household income in the country in 2001 was $42,228, 2.2 percent less than its 2000 level of $43,162, according to the most recent census data.

Median household income data provide a rough idea of what is middle class, but the figures can be misleading, Mr. Basu said.

“Based on those numbers, the statistical middle class can’t afford the middle-class lifestyle. I think that’s why there is so much confusion about what it is and why so many people have trouble identifying themselves as anything but middle class,” he said.

Geographic differences

Financial advisers and economists say the “buying power” of people’s incomes depends on where they live. The Washington area generally has one of the highest cost-of-living standards in the nation.

For example, suppose an individual lives and works in Kansas City, Kan., and earns $100,000 annually. He or she then decides to move to the District.

The cost of living in the District is 23.2 percent higher than in Kansas City, according to Salary.com, a Web site that tracks employment trends across the nation. The individual would have to earn a salary of $123,176 to maintain that standard of living.

Employers in the District typically pay 4 percent more than employers in Kansas City, according to Salary.com. If the Kansas resident takes the same kind of job with the same kind of employer in the District, he or she is likely to earn $104,019.

Suppose the Kansas individual has moved to the District but is earning just $100,000 annually when the employer transfers him to Seattle.

The cost of living in Seattle is 2.7 percent higher than that in the District, according to Salary.com. An individual who lives in the District and moves to Seattle would have to earn $102,743 to maintain that standard of living.

Employers in Seattle typically pay 0.3 percent more than employers in the District, according to the Web site. Someone who takes the same kind of job with the same kind of employer in Seattle probably would earn $100,282.

The most recent quarterly survey by Accra, a nonprofit group that provides research for chambers of commerce and economic-development agencies, found that the Washington area is the fifth-most expensive in the nation, behind metropolitan New York, and the Los Angeles, San Francisco Bay and San Diego areas in California.

The cost-of-living index for the Washington area is 137.7, meaning that the region is 37.7 percent more expensive than the national average.

Housing costs are 97.9 percent higher in the Washington area than the national average, according to Accra. Health care costs are 26.8 percent higher, followed by the costs of transportation (19.2 percent higher), utilities (13.8 percent) and groceries (7.4 percent).

Two stories

Mr. Norwood, the Poolesville federal government employee who earns about $100,000, said rising costs in the Washington area make him wonder where he fits into the class system.

“Our household income is in the neighborhood of $135,000. There was a time I would have considered that upper-middle class. Now, I’m not so sure,” he said.

Mr. Norwood plans to retire from the government in January. He and his wife have saved for their retirement and plan to travel to places such as Raleigh, N.C., and perhaps Copenhagen.

Miss Crunk, the Alexandria video producer who earns $35,000 annually, said she is just beginning to think about planning for her financial future.

Miss Crunk earned $45,000 to $49,000 when she worked in the communications department at a local real estate firm. She said she was caught off guard when she was laid off and needed about six months to get back on her feet.

Like Mr. Norwood, Miss Crunk considers herself middle class. She also said she is reminded of the expense of living in the Washington area every time she pays her rent.

“I’ve chosen to live in Old Town on King Street, so my rent is a little bit higher than if I had chosen to live in the ‘burbs,” she said.


‘Boy, you’re rich’

If six-figure salaries like Mr. Norwood’s are used to measure classes in the Washington area, then the apex may be the D.C. government, which employs more workers making $100,000-plus salaries than some larger cities.

But a $100,000 salary doesn’t take Washingtonians very far because of the higher cost of living, said Fairfax financial adviser Ric Edelman, author of “Ordinary People, Extraordinary Wealth” and other books on personal finance.

“You walk up to someone in this area who makes $100,000 a year and you say, ‘Boy, you’re rich,’ that’s going to make them mad,” Mr. Edelman said.

The District last year paid 813 of its employees more than $100,000, including many who collected two or three times their base pay, according to city records obtained by The Washington Times in July.

Among D.C. employees, 469 had six-figure salaries, but the remaining 344 made $100,000 by either racking up overtime or collecting years of back wages after the city unlawfully fired them.

A couple with a combined household income of $200,000 or more may face tougher challenges than a single person, Mr. Edelman said. Often, these couples live in expensive homes that require big mortgage payments and entail maintenance costs and high property taxes.

Working couples with six-figure salaries typically have two cars, which they must pay to maintain, insure, fuel and park, he said.

Many people who earn $100,000 don’t live within their means, Mr. Edelman said.

“Because they earn so much, they feel they should live in a big house and wear nice clothes and take extravagant vacations. The problem is, they are not living within their means. They are not saving for their children’s college or their own retirement. It makes you wonder how someone who is earning $60,000 a year lives,” he said.

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