Date: April 10, 2015

Categories: Podcasts

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Session 16 – The REAL Middle Class – Podcast


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Show Notes:


Session 16: The REAL Middle Class

 

This is Scott McDonald and welcome to the Perfect Place to Put a Practice Podcast.

In this session, we are going to talk about money.  Well, more specifically, how are you going to find people of a particular income sector who can meet your needs as a professional with a practice.  We are often asked by our Clients, “Where are the really rich people living?”  or “How can I get a practice that is mostly middle-class?”  These are great questions but they don’t have easy answers.  That is why I we want to talk about the stratification of the American population broken out by income. 

 

In the classic sense, we define the “middle class” as those who reside in the third quintile of the country’s economic range.  For those who might need a math refresher course, the country is divided into five levels of income.  The third quintile is the population that has as many people living above them in terms of income as those who are below them.  Unfortunately, all these definitions are a moving target because personal wealth is not stable.  Between 1996 and 2010, the median American household income dropped by 1.5%.  In some states like California, it dropped closer to 7%.  And, of course, not all income strata dropped by the same percentage.  In order to give ourselves some metric from which we can measure, at this moment the Median Income for the U.S. is $50,054.  That means that there as many people earning less than that as they are more.  This third quintile ranges from $32,500 to $60,000.  Obviously I don’t know what you are thinking about these numbers but many doctors express surprise with these numbers.  That is because most of their friends and colleagues earn significantly more than this amount.   Almost by definition, these doctors fall within the “upper class.”  By the way, this is not the same as the classic “1%.”  While there are doctors who fit into this category, they are a minority of the upper class.  The actual figure for 1% is over $250,000 per year. The top five percent come in at $150,000.  Most demographers place them into two categories: They are the Old Money and the New Money.  The Old Money have had high income for at least two generations and don’t have to work.  The New Money have usually enjoyed affluence for only one or two generations.  The Big Difference is that they have had to work hard for their money.  In our experience, this is the situation in which most doctors find themselves.

 

It is interesting to note that those households with old money and the households with new money don’t often socialize.  That is because they have different self-and-other perceptions and values.  It is worth noting that these two high income household types may spend their money differently but neither spends a great percentage of their incomes.  It is the lower socioeconomic groups that spend a much higher percentage of their monthly revenue. 

 

Between the Upper Class (first quintile) and the Middle Class (third quintile) there is an upper-middle class.  This group tends to be well-educated, hold post-secondary degrees and have high-paying, white collar positions.  They tend to be male dominated and have incomes of $100,000 or more.  When people speak about how America is changing, this group actually changes less than almost any of the others.  As an example, there has been a steady decline in Americans getting married.  Well, that is not really true of this group.  They are getting married at a slightly higher rate than ever before.  They prefer to live in suburbs in single-family dwelling units.  They own cars and take vacations.   And they are desperate to pass along their value system to their children. And, yes, they do have children.

 

Back to the Middle Class.  Education is a key factor in defining or categorizing them.  They usually have some college education but often lack the degrees necessary to advance into higher-earning positions.  As you can tell, being in the middle means that some will rise to more affluence or may decline into the lower income strata.

 

The lower classes are certainly not monolithic.  This large group is divided by demographers into two classes of their own. There ae the satisfied middle and the struggling middle.  Despite their somewhat modest income, they find satisfaction in their lives.  Most are either on the young side or the old side.  The middle aged are fewer in this income cohort.  The struggling middle are sometimes referred to as the “working poor” or “working class.”  As expected, they tend to include more women and minorities.  Because of this, they appear to have more in common with the lower-classes.   Generally, we categorize this population as the “blue collar” but that is not really a term that has meaning.  Those who work in the skilled trades often find themselves in the second quintile in terms of earning potential. These would be plumbers, carpenters, and auto mechanics.  They have significant training but do not have college degrees.  In a sense, they are a class apart because they tend not to associate socially with their income level colleagues and even live in communities and neighborhoods in other parts of town.  At some time, I will provide a podcast on the blue collar population.

 

Those at the bottom of the middle class are sometimes called the “anxious middle” because they feel vulnerable.  If they lose their job, they are in trouble.  Many have hung on to their union affiliation as a hedge against disaster.  But as labor unions have declined, so as the size of this group.  Traditionally, they have been the factory workers.  They have training but no college.  Police officers and truck drivers were considered part of this group but, in fact, both of the incomes of these professions have increased putting them in a higher social class.  When people in the U.S. are polled regarding their outlook on the economy, this is the population that seems to have the worst perspective.  They are downright gloomy.

 

 

 

One might assume that any of the 15% of Americans who live below the poverty line are poor. It is defined any a family of four living with an income of between $18,000 and $23,050 per year.  But because so many live in urban areas with high cost of living AND because they receive public assistance benefits that are often worth much more than the lower-middle class, it Is difficult to categorize them as having lifestyles that are decidedly different from their more affluent counterparts.  After all, flat-screen TVs and other expensive appliances are found in their homes.   It is also true that medical and dental benefits are available to them that more affluent households don’t have. This should make some doctors reconsider them as a target market.  Of the population that appears to have taken the greatest hit economically, demographers and economists are in pretty strong agreement: the middle of the middle class has suffered most.

 

Doctor Demographics and Scott McDonald & Association has the ability to determine the viability of any practice in any location.  You should be aware that we take into account the relative cost of living that will influence the socioeconomic strata in these areas.  Therefore, a household in one location may have the same income as another in a different part of the U.S.  One will be a more desirable target market than another.  And you are going to need that information as it changes radically.

 

For more information, visit our web site at DoctorDemographics.com.  This Scott McDonald and thanks for listening.

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