Why Do So Many Rich People Think They're in the Middle Class?
Everybody wants to be rich, but nobody wants to admit to being rich.
That's the takeaway from some fascinating articles written by Josh Barro and David Leonhardt this week. Both discuss how tricky it is to get people who make far more money than the average American to recognize that no amount of complaining about how expensive their life is allows them to claim a spot in the middle class.
Barro wrote about the political challenge of increasing taxes on households making between $150,000 and $225,000 a year — an income category that many political and media influentials fall into — when they don't think of themselves as rich. As he notes, households in this income bracket make two to three times the national median income for a married couple, which automatically bars them from being considered ordinary earners.
Barro's thesis was affirmed by a barrage of indignant reader comments in response to his article. One reader lamented that she was "barely scraping by" on $250,000 a year when she lived in Los Angeles, and another declared that those making $150,000 to $225,000 a year in the New York metropolitan area is "definitely middle class." This all despite the fact that, as Leonhardt points out, fewer than 5% of households make more $200,000 or more nationwide.
So why are people who are more prosperous than almost everybody in their country convinced that they're part of the middle class?
The 1% make the 5% feel poor: Barro contends that many people who make a high income fail to realize that living in an expensive area is a privilege, not a right. Access to the best schools, career opportunities and cultural offerings in the country comes at a steep price, and just because these costs eat up very high salaries and don't leave enough money for swimming in a pool full of cash doesn't mean that they aren't very high salaries. Live somewhere cheaper, and you can buy nicer things, take more lavish vacations and still save more.
Barro is right as far as he goes, but there are also other factors contributing to this loss of perspective when it comes to class standing.
The rich themselves are extremely stratified, and the higher up the ladder you go, the wider the gulf between the rungs. In 2011, Mother Jones reported that the distribution of average income for families across the U.S. worked out like this:
Top 1 to 10%: $161,139
Furthermore, the richest of the rich are faring far better than the rich. For decades, the top 0.1% have captured almost all of the gains in national wealth; for the first time in over half a century, the top 0.1% has almost the same wealth as the bottom 90%, and is likely to have more soon:
This is all to say that the obscenely wealthy have a way of making the ordinarily wealthy feel impoverished, even when the latter have access to all manner of luxury.
The notion that satisfaction with one's lot in life is measured relative to perception of others' lot in life has been backed by loads of social scientific literature. So when people are complaining that $200,000 doesn't mean they're financially comfortable, that's in part because people tend to have their head tilted upward.
What does it mean to be rich in a society with broken institutions? On a more sympathetic note to the ordinary rich, there are reasons that somebody in the top 5% to 10% of Americans might relate to the average citizen more than the hedge fund manager living a few blocks away.
Broadly speaking, high incomes do not guarantee easy access to things we consider necessities in a good life or the ability to withstand its greatest threats. Child care is exorbitant: The average annual cost of infant day care is $14,300 in Minnesota, according to Child Care Aware of Minnesota. The cost of tuition for quality higher education, which can run upward of $60,000 a year at many private institutions, is not easy to manage just because a household has breached six figures. Medical emergencies bankrupt the middle class left and right and place a very serious strain on somebody with even a decent cushion of wealth.
Thanks to perverse incentive systems in these policy spheres, even somebody who has it easy compared to their peers around the country can end up thinking in terms of paycheck to paycheck in many circumstances. (High levels of debt among well-to-do young people will likely only compound this problem in the future.)
Contrast this with the fact that in many European societies, higher education is affordable to all and quality child care and medical care is provided for free. These societies tend to not have the same opportunities for extreme wealth the U.S. does, but they provide near-universal access to things that even a privileged life doesn't necessarily earn you in the States.
Maybe when it comes to how clueless some people can be about class in the U.S., we should focus less on hating the player, and more on hating the game.