The Economy of the USA

     Yet another important feature of the upper class is that of inherited privilege. While most Americans, including those in the upper-middle class need to actively maintain their status, upper class persons do not need to work in order to maintain their status. Status tends to be passed on from generation to generation without each generation having to re-certify its status. Overall, the upper class is the financially best compensated and one of the most influential socio-economic classes in American society. 

Corporate elite 

     The high salaries and, especially, the potential wealth through stock options, has supported the term corporate elite. Top executives, including Chief Executive Officers, are among the financially best compensated occupations in the United States. The median annual earnings for a CEO in the United States were $140,350 (exceeding the income of more than 90% of U.S. households). The Wall Street Journal reports the median compensation for CEOs of 350 major corporations was $6,000,000 in 2005 with most the money coming from stock options. In New York City in 2005, the median income (including bonuses) of a corporate "chief operating officer" (the #2 job) was $377,000. The total compensation for a "top IT officer" in charge of information technology in New York City was $218,000. Thus even below the CEO level of top corporations, financial compensation will usually be sufficient to propel a households with a mere one income earner in the top 1%. In 2005 only 1.5% of American households had incomes above $250,000 with many reaching this level only through having two income earners.

     Many politically powerful people make money before coming to office, but in general the political power elite have official incomes in the $150,000 to $185,000 range; members of Congress are paid $165,000, and are effectively required to have a residence in their district as well as one in Washington.

Upper middle

     This class consists of highly educated salaried professionals whose work is largely self-directed. Many have graduate degrees with educational attainment serving as the main distinguishing feature of this class. Household incomes commonly may exceed $100,000 (€75,403 or £67,462), with some smaller one-income earners household having incomes in the high 5-figure range. Salaries are commonly in the high five-figure range. Members of this class commonly hold advanced academic degrees and are often involved with professional organizations. Due to the nature of professional and managerial occupations, the upper middle class tends to have great influence over the course of society. Occupations which are essential to the forming of public opinion such as journalists, authors, commentators, professors, scientists, and advertisers are largely upper middle class. The very well-educated, are seen as trend setters with movements such as the anti-smoking movement, pro-fitness movement, organic food movement, and environmentalism being largely indigenous to this particular socio-economic grouping. Education serves as perhaps the most important value and also the most dominant entry barrier of the upper middle class.

     Sociologists such as Dennis Gilbert, Willam Thompson, and Joseph Hickey estimate the upper middle class to constitute roughly 15% of the population (or roughly three in every twenty persons). The main hallmark and most distinguishing feature of this class is its high educational attainment. Using the 15% figure model may conclude that the American upper middle class consist of professionals making more than $67,500 (€44,468 or £34,029) who often, but not always, reside in households with a six-figure income.  

Middle class 

     The middle class is perhaps the mostly vaguely defined of the social classes. The term can be used either to describe a relative elite of professionals and managers – also called the upper middle class – or it can be used to describe those in-between the extremes of wealth, disregarding considerable differences in income, culture, educational attainment, influence, and occupation. As with all social classes in the U.S., there are no definite answers as to what is and what is not middle class. Sociologists such as Dennis Gilbert, James Henslin, William Thompson, and Joseph Hickey have brought forth class models in which the middle class is divided into two sections that combined constitute 47% to 49% of the population. The upper middle or professional class constitutes the upper end of the middle class which consists of highly educated, well-paid professionals with considerable work autonomy. The lower end of the middle class – called either lower middle class or just middle class – consists of semi-professionals, craftsmen ,office staff, and sales employees who often have college degrees and are very loosely supervised.

     Although income thresholds cannot be determined since social classes lack distinct boundaries and tend to overlap, sociologists and economist have put forward certain income figures they find indicative of middle class households. Sociologist Leonard Beeghley identifies a husband making roughly $57,000 and a wife making roughly $40,000 with a household income of roughly $97,000 as a typical middle class family. Sociologists William Thompson and Joseph Hickey identify household incomes between $35,000 and $75,000 as typical for the lower middle and $100,000 or more as typical for the upper middle class. Though it needs to be noted that household income distribution neither reflects standard of living nor class status with complete accuracy.  

Traditional middle class 

     Those households more or less at the center of society may be referred to as being part of the American middle or middle-middle class in vernacular language use. In the academic models featured in this article, however, the middle class does not constitute a strong majority of the population. Those in the middle of the socio-economic strata—the proverbial Average Joe—are commonly in the area where the working and lower middle class overlap. The most prominent academic models split the middle class into two sections. Yet, it remains common for the term middle class to be applied for anyone in between either extreme of the socio-economic strata. The middle class is then often sub-divided into an upper-middle, middle-middle, and lower-middle class. In colloquial descriptions of the class system the middle-middle class may described as consisting of those in the middle of the social strata. Politicians and television personalities such as Lou Dobbs can be seen using the term middle class in this manner, especially when discussing the middle class squeeze. The wide discrepancy between the academic models and public opinions that lump highly educated professionals together in the same class with secretaries, may lead to the conclusion that public opinion on the subject has become largely ambiguous.  

Lower middle class 

     The lower middle class is, as the name implies, generally defined as those less privileged than the middle class. People in this class commonly work in supporting occupations. Although they seldom hold advanced academic degrees, a college degree (usually a bachelor's degree) is almost always required for entry into the lower middle class.

     Sociologists Dennis Gilbert, William Thompson, and Joseph Hickey, however, only divide the middle class into two groups. In their class modes the middle class only consists of an upper and lower middle class. The upper middle class, as described above, constitutes roughly 15% of the population with highly educated white collar professionals who commonly have salaries in the high 5-figure range and household incomes in the low six figure range. Semi-professionals with Bachelor's degrees and some college degrees constitute the lower middle class. Their class models show the lower middle class positioned slightly above the middle of the socio-economic strata. Those in blue and pink collar as well as clerical occupations are referred to as working class in these class models.  

Lower class 

     The term lower class is commonly applied to those at the bottom of the social hierarchy. Definitions of this term vary greatly. While Lloyd Warner found the vast majority of the American population to be in either the upper-lower class or lower-lower class in 1949, modern-day experts such as Michael Zweig, an economist for SUNY–Stony Brook, argue that the working class constitutes most of the population. Dennis Gilbert places 13% of households among the "working poor" with 12% being in the "underclass". Thompson & Hickey place roughly 17% to 20% of households in the lower classes. The lower classes constituting roughly a fifth to a quarter of American society consists mainly of low-rung retail and service workers as well as the frequently unemployed and those not able to work. Overall, 13% of the population fall below the poverty threshold. Hunger and food insecurity were present in the lives of 3.9% of American households, while roughly twenty-five million Americans (ca. 9%) participated in the food stamp program.  

Poverty in the United States (5) 

     The most common measure of poverty in the United States is the "poverty threshold" set by the U.S. government. This measure recognizes poverty as a lack of those goods and services commonly taken for granted by members of mainstream society. The official threshold is adjusted for inflation using the consumer price index. Poverty in the United States is cyclical in nature with roughly 13 to 17% living below the federal poverty line at any given point in time, and roughly 40% falling below the poverty line at some point within a 10 year time span. Most Americans (58.5%) will spend at least one year below the poverty line at some point between ages 25 and 75. There remains some controversy over whether the official poverty threshold over- or understates poverty.

     Relative poverty describes how income relates to the median income, and does not imply that the person is lacking anything. In general the United States has some of the highest relative poverty rates among industrialized countries, reflecting both the high median income and high degree of inequality. In terms of pre-transfer absolute poverty rates, in 2000 the United States ranked tenth among sixteen developed countries, though it should be noted that 2000 was a 'trough' year and subsequently absolute poverty rates have increased. The US does worse in post-transfer absolute poverty rates. According to a 2008 report released by the Carsey Institute at the University of New Hampshire, on average, rates of poverty are persistently higher in rural and inner city parts of the country as compared to suburban areas.

     Measures of poverty can be either absolute or relative. There are two basic versions of the federal poverty measure: the poverty thresholds (which are the primary version) and the poverty guidelines. The Census Bureau issues the poverty thresholds, which are generally used for statistical purposes—for example, to estimate the number of people in poverty nationwide each year and classify them by type of residence, race, and other social, economic, and demographic characteristics. The Department of Health and Human Services issues the poverty guidelines for administrative purposes—for instance, to determine whether a person or family is eligible for assistance through various federal programs.

     Since the 1960s, the United States Government has defined poverty in absolute terms. When the Johnson administration declared "war on poverty" in 1964, it chose an absolute measure. The "absolute poverty line" is the threshold below which families or individuals are considered to be lacking the resources to meet the basic needs for healthy living; having insufficient income to provide the food, shelter and clothing needed to preserve health.

     The "Orshansky Poverty Thresholds" form the basis for the current measure of poverty in the U.S. Mollie Orshansky was an economist working for the Social Security Administration (SSA). Her work appeared at an opportune moment. Orshansky's article was published later in the same year that Johnson declared war on poverty. Since her measure was absolute (i.e., did not depend on other events), it made it possible to objectively answer whether the U.S. government was "winning" this war. The newly formed United States Office of Economic Opportunity adopted the lower of the Orshansky poverty thresholds for statistical, planning, and budgetary purposes in May 1965.

     The Bureau of the Budget (now the Office of Management and Budget) adopted Orshansky's definition for statistical use in all Executive departments in 1965. The measure gave a range of income cutoffs, or thresholds, adjusted for factors such as family size, sex of the family head, number of children under 18 years old, and farm or non-farm residence. The economy food plan (the least costly of four nutritionally adequate food plans designed by the Department of Agriculture) was at the core of this definition of poverty.

     The Department of Agriculture found that families of three or more persons spent about one third of their after-tax income on food. For these families, poverty thresholds were set at three times the cost of the economy food plan. Different procedures were used for calculating poverty thresholds for two-person households and persons living alone. Annual updates of the SSA poverty thresholds were based on price changes in the economy food plan.

     Two changes were made to the poverty definition in 1969. Thresholds for non-farm families were tied to annual changes in the Consumer Price Index (CPI) rather than changes in the cost of the economy food plan. Farm thresholds were raised from 70 to 85% of the non-farm levels.

     In 1981, further changes were made to the poverty definition. Separate thresholds for "farm" and "female-householder" families were eliminated. The largest family size category became "nine persons or more."

Apart from these changes, the U.S. government's approach to measuring poverty has remained static for the past forty years. 

Factors of poverty 

     There are numerous factors related to poverty in the United States. The social factor is one f them. Some poverty in the United States is the result of social institutions which contribute to and sustain poverty. Poverty is also the product of deindustrialization. As the U.S. shifts from a manufacturing, industrial society to a service-oriented, high-tech society, many of the blue-collar jobs that required little education but paid well are disappearing or being outsourced. Rural areas, such as Appalachia, suffer losses of mining jobs, and same applies for Central Valley, California in lost agriculture jobs. But there are a lot of other factors:

Tax levels Cross-country data shows an inverse correlation between tax levels as a share of GDP and child poverty.

     Limited job opportunities appear to exist for significant subgroups of some races and ethnic groups. This is reflected by the low-income nature of large sections of the economy, as divided along racial/ethnic lines: 21% of all children in the United States live in poverty, but 46% of African American children and 40% of Latino children live in poverty.

The Heritage Foundation speculates that illegal immigration increases job competition among low wage earners, both native and foreign born. Additionally many first generation immigrants, namely those without a high school diploma, are also living in poverty themselves.

     In 1991, 8.3% of children in two-parent families were likely to live in poverty; 19.6% of children lived with father in single parent family; and 47.1% in single parent family headed by mother.

     Much of the debate about poverty focuses on statistical measures of poverty and the clash between advocates and opponents of welfare programs and government regulation of the free market. Since measures can be either absolute or relative, it is possible that advocates for the different sides of this debate are basing their arguments on different ways of measuring poverty. It is often claimed that poverty is understated, yet there are some who also believe it is overstated; thus the accuracy of the current poverty threshold guidelines is subject to debate and considerable concern.

     In 2007, 46% of poor households in the US owned their own homes, 30% had two or more cars, and 63% received cable or satellite TV. 
 

Understating poverty 

     Many sociologists and government officials have argued that poverty in the United States is understated, meaning that there are more households living in actual poverty than there are households below the poverty threshold. A recent NPR report states that as much as 30% of Americans have trouble making ends meet and other advocates have made supporting claims that the rate of actual poverty in the US is far higher than that calculated by using the poverty threshold. While the poverty threshold is updated for inflation every year, the basket of goods used to determine what constitutes being deprived of a socially acceptable miniumum standard of living has not been updated since 1955. As a result, the current poverty line only takes goods into account that were common more than 50 years ago, updating their cost using the Consumer Price Index. Mollie Orshansky, who devised the original goods basket and methodology to measure poverty, used by the U.S. government, in 1963-65, updated the goods basket in 2000, finding that the actual poverty threshold, i.e. the point where a person is excluded from the nation's prevailing consumption patterns, is at roughly 170% of the official poverty threshold. According to John Schwarzt, a political scientist at the University of Arizona: The official poverty line today is essentially what it takes in today's dollars, adjusted for inflation, to purchase the same poverty-line level of living that was appropriate to a half century ago, in 1955, for that year furnished the basic data for the formula for the very first poverty measure. Updated thereafter only for inflation, the poverty line lost all connection over time with current consumption patterns of the average family. Quite a few families then didn't have their own private telephone, or a car, or even a mixer in their kitchen... The official poverty line has thus been allowed to fall substantially below a socially decent minimum, even though its intention was to measure such a minimum.

     The issue of understating poverty is especially pressing in states with both a high cost of living and a high poverty rate such as California where the median home price in May 2006 was determined to be $564,430. With half of all homes being priced above the half million dollar mark and prices in urban areas such as San Francisco, San Jose or Los Angeles being higher than the state average, it is almost impossible for not just the poor but also lower middle class worker to afford decent housing, and no possibility of home ownership. In the Monterey area, where the low-pay industry of agriculture is the largest sector in the economy and the majority of the population lacks a college education the median home price was determined to be $723,790, requiring an upper middle class income which only roughly 20% of all households in the county boast. Such fluctuations in local markets are however not considered in the Federal poverty threshold and thus leave many who live in poverty-like conditions out of the total number of households classified as poor. 
 
 

Overstating poverty 

     The federal poverty line also excludes income other than cash income, especially welfare benefits. Thus, if food stamps and public housing were successfully raising the standard of living for poverty stricken individuals, then the poverty line figures would not shift since they do not consider the income equivalents of such entitlements.

     A 1993 study of low income single mothers titled Making Ends Meet, by Kathryn Edin, a sociologist at the University of Pennsylvania, showed that the mothers spent more than their reported incomes because they could not "make ends meet" without such expenditures. According to Edin, they made up the difference through contributions from family members, absent boyfriends, off-the-book jobs, and church charity.

     According to Edin: "No one avoided the unnecessary expenditures, such as the occasional trip to the Dairy Queen, or a pair of stylish new sneakers for the son who might otherwise sell drugs to get them, or the Cable TV subscription for the kids home alone and you are afraid they will be out on the street if they are not watching TV."

     Moreover, Swedish right-wing think tank Timbro points out that lower-income household in the U.S. tend to own more appliances and larger houses than many middle-income Western Europeans.  

Business oligarch 

     Business oligarch is a near-synonym of the term "business magnate", with a divergence in that business oligarchs represent informal power over a certain region or country because of their increased wealth. The choice of the word oligarch, which theoretically means "one of the few rulers", denotes the significant influence such wealthy individuals may have on the life of a nation.

The term was poorly used during the commercialization of United States of America in late 19th and early 20th centuries to describe those who applied their own rules to a region where the common law representatives were scarce (such as in some Western cities or in Alaska). Over time, the term went out of use.

Today, this term generally denotes the fast-increased wealth of some businessmen of the former Soviet republics (mostly Russia and Ukraine). In these countries, it is very common to apply the word oligarch to any business tycoon, regardless of whether or not he or she has real political power. For example, during the 1990s, small groups of individuals who acquired tremendous wealth in Russia called themselves oligarchs soon after they started to express significant political influence or even control mass media and entering politics. 
 
 
 

American oligarchs (late 19th/early 20th century) 

     In the late 19th century and early 20th century, a business oligarchy emerged in the United States.

     During this period of economic boom for the US economy, a few businessmen often depicted as magnates or even robber barons built industrial empires and took control of vast portions of the country's economy.