The US Census Bureau defines lower class as the lowest 20% of incomes.
Pew defines it as the lowest 2/3 of the median.
If the highest income is $100, 20% is $20.
At 2/3 the median, if the median is $30, lower-class is $20.
Is there a reason they’re tying income classes to people within those classes, and not what it costs to survive within the economy?
That’s what I’m asking. 20% of $100 is $20. They’re both bad incomes to have.
The distribution will also give you a specific dollar value corresponding to that percentile, and then you can use the cost of living statistics to interpret it. If you say that 20% of households earn less than 35 k$ is that 35 big or small? The income distribution alone won’t tell you that. In relation to the rest of the population, it’s small, but what can you actually buy with that? Interpretation requires digging into the cost of living statistics. Once you combine the two, you’ll be able to tell that the lowest 20% are struggling.
Percentile based classification is good because it is simple and it won’t do the interpreting for you. If you can afford to eat, but you’re not eating meat every week, is that really poverty or not? If you can travel, but you’re not doing that driving a Ferrari or sitting on a private jet, are you really rich at that point? These are the kinds of questions the percentile approach avoids.
BTW the 2/3 median approach is really weird. The number of people it involves changes every year, but at least it’s tied to a median which actually tells you something. Using the highest income as a benchmark makes even less sense, because that number changes radically every year based on what a few billionaires are doing. It won’t tell you anything about the rest of the population. Using a wild number like that as a basis of any kind is pretty much useless. Besides, the highest income of the population is really far from the rest, because the distribution has an extremely long tail.
When they say “the lowest 20% of incomes”, that’s referring to, if you were to plot the incomes of every American on a graph and then drop some dividers down every 20%, the people in the bottom one of those bins. It’s not relative to the highest income dollar amount. The wealth inequality in this country is so bad that probably 75-85% of the population is making under 20% of the highest income by pure dollar amount.
You can track things relating to those groups, though. Like if we consider the 20th percentile and below to be the very poorest in society, no matter how rich or poor society happens to be on average or what the wealth distribution is like - we can see how the very poorest fare in terms of education, health outcomes, etc over time.
Or like, looking at the median value - sure the amount of money the median-income worker has will change, but the median-income worker could afford a standard of living much closer to someone at the 90th percentile in 1960 than today’s median-income worker can.
Looking at things like this allows you to draw different comparisons.