A Blog by Jonathan Low

 

Dec 12, 2011

Who Do Americans Think Is 'Rich?'

Diminished expectation, delusional sense of entitlement or realistic assessment?

According to the Gallup Organization, 70% of Americans think that making $100,000 a year qualifies as rich. 15% think you have to make at least $1 million a year (New York and LA, shout it out). The median of those surveyed considered @$150,000 a year to be rich. There was somewhat more agreement on assets: the majority think that if you own $1 million, you're rich.

Whatever relationship this has with reality is beside the point. It establishes a useful benchmark for understanding perceptions of wealth and success. Government data show that the putative $150K level puts a family in the top 10% of US household income. So, as a practical matter, that is not a bad proxy for 'rich.' Obviously, for those living in Haiti, Bangladesh, Somalia and various other parts of the world, these numbers are a fantasy. But in the US, this may have interesting implications for economic and tax policy. The Obama Administration proposed increasing taxes on those making over $250,000 a year, which was considered by many to be an imposition on the middle class.

The fact is that American expectations remain high relative to the structural changes pounding the economy. Particularly for those in the middle and upper middle classes for whom these numbers once seemed eminently attainable. That the possibility of achieving those levels has receded holds implications for the socio-political 'contract' - implicit though it may be - through which the nation has been governed for the past 230 or so years. JL

Catherine Rampell reports in the Economix blog:
We’ve written plenty of times about how little Americans know about the distribution of income in the United States, and how many rich people don’t realize they’re rich, at least relative to the rest of the country.

Now Gallup has surveyed Americans to ask what they believe the cutoff for being “rich” should be. The median response was that a person would need to make at least $150,000 to be considered rich.
Here’s a breakdown of the responses:


(The national poll was based on telephone interviews, using landlines and cellphones, with about 500 adults and has a margin of sampling error of plus or minus five percentage points.)

According to the Tax Policy Center’s calculations on income distribution, a household earning cash income of $150,000 would fall somewhere between the 89th and 90th percentiles. In other words, the typical American believes anyone in about the top tenth of the income distribution counts as “rich.”

President Obama and others, on the other hand, have set the cutoff around $250,000 when discussing “raising taxes on the rich.” Households earning cash income of $250,000 are somewhere between the 96th and 97th percentiles.

As you might expect, answers to Gallup’s survey question on the threshold for being “rich” varied tremendously by demographics and geography. For example, men cited a higher bar than women did — $150,000 versus $100,000, respectively:


Note that respondents with children under 18 said they would require $200,000 before considering themselves rich, whereas the childless were satisfied with a $100,000 benchmark. (That reminds me of this xkcd cartoon.)

As you might expect, those who live in urban areas — like New York City, where the cost of living is very high — or in suburbs had higher standards for being “rich” than did Americans who live in towns or rural settings

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