What Does It Mean To Be Rich in America?

We have learned over the past five years that there are lots of ways to be rich or poor. We have come to recognize that health, safety, a home, a new smartphone or a car that works pretty well can be enough.

But that acceptance, if one can call it that,  is driven also driven by the increasing awareness that some people are really, really rich - and that they are probably people we dont know personally, nor is it a condition which most of us realistically expect to attain.

There are, however, measures of wealth, objective after a fashion, that help us figure out where we stand versus where we think we should. As the following article warns us, however, those metrics are not always reliable. Making 125% of the median family income in a given metropolitan statistical area (MSA) sounds pretty sweet, until one realizes that that would relegate one to a life of relative poverty. This occurs because we tend to be unaware of the lives beyond our own small circle of acquaintances and because we have become hardened to the claims of suffering we simply wish not to notice.

The hollowing out of the middle class, with few clambering up the latter and lots more sliding down, has thrown the measurement of these trends into high relief. It matters because national and global debates about what works or doesn't, what is enough or not drive public policies from which we may all benefit or suffer. The better informed we are, the more likely we are to see what is right - and to get whatever it is we want. JL

Scott Sumner comments in The Money Illusion:

Rich means a family income of more than 125% of the median family income of a metro area.
Every once and a while I do posts on the utter absurdity of almost all data used for analysis of income inequality.  Tyler Cowen links to a perfect example from Kevin Drum:

Via Harrison Jacobs, here’s a recent study showing the trend in income segregation in American neighborhoods. Forty years ago, 65 percent of us lived in middle-income neighborhoods. Today, that number is only 42 percent. The rest of us live either in rich neighborhoods or in poor neighborhoods.

Since the overwhelming majority of Americans self-identify as “middle class,” this puzzled me.  Or I should say that it puzzled me until I discovered Drum’s definition of “rich.”
Here are the highest and lowest metro median household incomes, and also the 125% cutoff:
San Francisco:  Median income $63,024,  ”rich” cutoff:  $78,780
McAllen Texas:  Median income $24,863,  ”rich” cutoff:  $31,079.
(BTW, a city about half way down the chart is Buffalo, with a $38,488 median income.)
So a husband and wife who both worked at McDonald’s in McAllen, right at the legal minimum wage, would each make $14,500/year, for a total of $29,000.  If the couple worked another 10% at overtime pay, they’d easily fall into Kevin Drum’s “rich” category.  A whole neighborhood full of these lucky duckies would be a “rich” neighborhood.
At first glance the San Francisco cutoff seems a bit more plausible.  But I challenge Drum or anyone else to go to San Francisco, find a couple who each make $40,000 per year, and convince that couple that they are “rich” compared to the typical San Francisco family.  Here’s my claim.  Imagine a poll was done of all two-income families in San Francisco where the husband and wife (or husband and husband, since this is San Francisco) worked full time and each person made between $40,000 and $50,000 per year.  If the poll asked that group if they were “rich,” I believe it would be the first opinion poll in all of human history with a 100%/0% breakdown.  And guess which answer would get 0%?
My point is not that the changes people talk about in income inequality are not occurring, but rather that the data they use are complete garbage.  And I find it hard to believe that the debate in the media and blogosphere is not in some way impoverished by the utter worthlessness of income data, no matter how much people insist “they are right” even if all the numbers they use don’t show what they claim.  Maybe they are right, but how can we tell?
And these are not just small problems.  Sorry, but if family incomes of $32,000 in McAllen or $48,500 in Buffalo were “rich” we would not have health insurance subsidies for “low income” people earning up to $94,000/year.  I’m not nitpicking here; these numbers are not even in the right ballpark.  The debate should not be whether $32,000 a year is rich, that doesn’t even pass the laugh text.  The debate should be about whether it is more properly called “poor” or “middle class.”  In fact, income is not a good way to characterize families.  I’ve been in the poor, middle class and rich income classes at various times in my life, but in fact I’ve always been either middle or upper middle class in a cultural/socioeconomic sense.
PS.  I’m not trying to pick on Kevin Drum here, he’s a talented blogger and these sorts of errors are made by almost everyone in the blogosphere.