Joe the Plumber and the Middle-Class Squeeze

Joe Wurzelbacher is getting his 15 minutes of fame–raising questions about what it means to be middle class. Better known as Joe the Plumber, he stepped into the limelight earlier this month when he asked Sen. Barack Obama, the Democratic contender for the White House, about his tax plan. According to a New York Times story, Wurzelbacher asked Obama if he believed in the American dream, and voiced concern about having to pay higher taxes as a small-business owner. “I’m getting ready to buy a company that makes $250,000 to $280,000 a year,” he told Obama. “Your new tax plan is going to tax me more, isn’t it?" Obama gave a lengthy response, toward the end saying, “I think that when you spread the wealth around, it’s good for everybody.”

In the time since, the episode has made the rounds on the Internet, TV, in print and perhaps most notably, during the final presidential debate at Hofstra University. Sen. John McCain raised the issue of Joe the Plumber, and both he and Obama went on to explain why their tax plans would be more beneficial for America. According to a New York Times breakdown of the candidates’ tax plans, Obama would repeal the Bush tax cuts for households earning more than $250,000, extend middle-class cuts, like the $1,000 child tax credit and the marriage penalty relief, and triple the earned income tax credit for workers earning minimum wage. McCain would make permanent nearly all of Bush’s tax cuts, increase $3,500 personal exemption for dependents by $500 a year, until it reaches $7,000 in 2016, and offer the option to pay taxes under a simplified code with only two tax rates.

So what do the plans mean for middle-class workers like Wurzelbacher? Tax analysts in a NYT article said neither Wurzelbacher’s personal taxes nor those of his business would be likely to rise under Obama’s tax plan. However, a NYT graphic in the same story illustrates that the tax bill of a plumber in a situation similar to Wurzelbacher’s would be slightly less under McCain’s plan–$20,468–compared to $21,068 under the Obama plan, assuming no retirement contributions.

Defining the Middle Class

Despite campaign rhetoric and political squabbling, Joe the Plumber is raising bigger questions: How do we define middle class? The middle class is obviously squeezed, but why?

There’s no standard definition for middle class, according to FactCheck.org, but in opinion polls, a vast majority of Americans say they’re “middle class” or “upper-middle class,” or “working class;” very few consider themselves “lower class” or “upper class.”

“The middle class in America is much wider and deeper than most people suspect,” says Al Lee, PayScale’s director of quantitative analysis. “The interesting thing is that a wide range of challenging and respected professions offer middle-class compensation.”

Here are several tables reflecting PayScale data on the pay earned in typical middle-class jobs, as well as jobs where most employees make more than $250,000/year:

Typical Middle-Class Jobs in Battleground States, and What They Pay

If you define middle class as those workers making less than $250,000 annually, the following are jobs that some may be surprised to find fall into the middle class bucket, on average.

National Pay Averages of Surprising Middle-Class Jobs

*at a company with approximately 500 employees

So, who are the people who make up the upper class — those earning $250,000 or more annually? Here is just a sampling:

National Pay Averages of Jobs Typically Earning Over $250,000/Year

* at a company with approximately 500 employees
++ at 50 or more partners in firm

The Middle-Class Squeeze

Joe the Plumber seems like the average middle-class American–working to provide for his family and pay the bills, concerned about his future finances and whether they’ll improve.

His concerns about the American dream and his finances are reflecting the middle-class squeeze, which is about more than taxes. People are feeling squeezed because the traditional cornerstones of middle-class life are crumbling, says a report by American Human Development: wages in the middle have stagnated or fallen, while those at the top are soaring; job security has disappeared, the real-estate market has tanked, and public education is expensive. It’s not excessive consumption by the middle class that’s causing the problems, but the increasing costs of necessities (housing, food, energy, health care) coupled with stagnant wages, the report explains.

For example, median household income, which is $48,200, is down about $1,175 since 2000, while mortgage payments are up $1,730, gas bills are up $2,195, and utilities and food are up $330. To get by, more Americans–particularly women–are working, they’re working longer hours, and they’re accruing massive debt to finance their increasingly expensive existences. Millions are also doing without healthcare, skipping doctor visits and tapping into their retirement plans.

Easing the squeeze won’t come easily. The more public debate we have about the issues causing middle-class angst, the better–whether it’s in the context of Joe the Plumber, or not.

• Defining the middle class (CNN)
• Real Deal on ‘Joe the Plumber’ Reveals New Slant (The New York Times)
• Class Matters (The New York Times)
• America’s Squeezed Middle Class (The Salary Reporter)

Background information on and definitions for terms in the data tables

Table 1 shows typical jobs most people consider middle class, which extremely rarely earn more than $250,000/year. Table 2 includes jobs often thought to be highly paid, but only top earners (about 10 percent) earn more than $250,000/year. Table 3 covers jobs where the typical employee (50 percent or more)  earns more than $250,000/year, though some still earn less. The pay for jobs in tables 2 and 3 does not vary much by location; they are national jobs, so we report national medians.

Average Pay is the median total cash compensation, including salary, bonus, commissions, overtime, etc. It does not include equity (stock) compensation. The median indicates that 50 percent of employees in this job earn less, and 50 percent earn more. Top Earners’ Pay refers to the 90th percentile: only 10 percent of employees in this job earn more than this amount, and 90 percent earn less. All pay is for experienced employees, with 15+ years in the field/career. Figures in table 1 are rounded to the nearest $100, and figures in tables 2 and 3 rounded to the nearest $1,000.