In Pursuit Of Homo Economicus

I was having a conversation today when the subject of the middle class came up, and specifically, who considers themselves middle class. The more I think about it, the more it concerns me. At some point "middle class" got conflated with "not wealthy," which applies to anyone earning in the 80th-97th percentile, or "not financially secure," which would be the case when you've got more money going out than coming in, regardless of how much is coming in. At least in my mind, it always was a matter of "at or near the middle of the income distribution".

My concern about this is that when people don't realize how good they have it, they're a lot less likely to make sacrifices. "A tax hike on people making over 150K to speed up deficit reduction? That's madness! I make that much and I'm barely making ends meet!" How these people survived when they were earning less is beyond me. Perhaps they just got one of those 150K jobs right out of high school that everyone had in those days.

I'm kidding about those jobs, but I get the feeling. In 2012 I made more than double what I did in 2010, and yet all that additional cash has found ways to spend itself (starting an RRSP, bigger/better/more frequent vacations, nicer clothes, nicer apartment... the list goes on). My typical daily bank balance is no more or less than it was then. I'm making less than the median household income in Ottawa, but more than the median individual income, and I'm pretty happy with that at 27. My point is that income and budgets are kinda like ponds and koi fish - the latter will always find a way to get bigger in relation to the size of the former.

If people don't have an accurate understanding of their financial position relative to others, how can we expect them to make informed and rational decisions on what constitutes a fair share for each segment of society to pay in taxes? "People making more than I do" isn't the most intellectually robust argument, and it may not even be financially robust depending on who's making that statement. The idea I keep coming back to on this is shoving it in people's faces when they submit their tax returns or receive their T4s - it could give people on the lower end of the spectrum the motivation to step up their hustle, and those on the higher end a sense of how good they have it, which might push them to ensure that the opportunities and resources they had continue to be be available.

Or they might get selfish and push the ladder of opportunity down behind them. I'd like to think that wouldn't happen, but I am an optimist.

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