Decoding California's Economic Landscape: Defining Poverty, Middle Class, and Wealth

In a shifting economic landscape, California's middle class is facing notable challenges, with a recent report highlighting a decline of 7% in their numbers over the course of the 21st century. As the state's wealthy and low-income households see growth, the criteria for categorizing individuals as poor, middle class, or rich in the Golden State come into sharp focus.

Economic Classifications in California

Drawing from the Pew Research Center's definitions, the "middle class" label is bestowed upon households earning between two-thirds and double the median income. Lower-middle-class households fall below two-thirds of the median, while upper-middle-class households exceed double the median income. California's median household income, as per the U.S. Census Bureau, stands at $91,905, setting the stage for income thresholds in the state.

By Pew's standards, Californian households must earn between $61,270 and $183,810 to secure a place in the middle class. Those below $61,269 are categorized as lower-middle class, whereas incomes surpassing $183,811 elevate individuals to the upper-middle class bracket. Notably, households dipping below 100% of the federal poverty line shift from the lower-middle class to the poor category, while those in the top 10% of earners transition from the upper-middle class to wealth.

Net Worth Benchmarks in California

Estimates from SoFi indicate that California's median net worth hovers around $203,000, setting the stage for defining middle-class status based on net worth figures. Applying Pew's income-based framework, Californians aiming for middle-class status would need a net worth ranging from $135,333 to $406,000.

Understanding Poverty and Net Worth

Finance expert Geoff Schmidt identifies households in the 20th net worth percentile as poor, placing the 50th percentile — a pivotal marker on the middle-class net worth spectrum — at $270,000. In California, the 20th percentile equates to a net worth of $10,000, underscoring the nuanced dynamics of wealth distribution and economic realities across the diverse regions of the state.