Never Too Rich to Be middle-class: An Assessment of the Reference-group Theory and Implications for Redistributive Taxation

Abstract

Politicians of all stripes appeal to the support of the middle class and aim their policy proposals at this group. Reference-group theory explains why citizens could believe themselves to be middle class, even if their income level or social status places them above or below. It postulates that, since the reference groups of most people are relatively homogeneous, anyone could feel ‘average’ compared to the reference group. The authors aim to test this theory by comparing perceptions about the middle class with a categorisation using objective income statistics. A survey of the adult population of the Canadian province of Quebec showed a significant proportion of citizens believing to be part of the middle class, even though their equivalised income levels placed them outside of a generally recognised income range for this group. Most notably, this subjective misplacement on the income distribution was heavily concentrated among individuals whose incomes were too high to be a part of the middle class. Our results also show that support for higher taxes on the rich might be overstated, as some respondents simply do not realise that they are a part of this group.