Ezra,

This is even more stunning when you graph it. The 25th, 50th, and 75th percentiles of income aren't very far apart from each other. Even the 90th percentile isn't that much higher than the 75th. But break out the 90th, the 95th, and even the 99th and 99.5th and the spread widens dramatically. (Helps to have data that isn't topcoded when you look at this)

My girlfriend and I make about $170,000 between us but when I tell her we are rich, she laughs at me. As you've pointed out, that's pretty much what plenty of joint professional couples make, and while it allows us to rent a nice apartment in a nice city and go out to nice restaurants once in a while, that's pretty much it. Our lifestyle isn't that radically upscale from when we were both graduate students with about $35,000 in income between us. It doesn't *feel* rich.

Woohoo, I've just cracked the top quintile! Does this mean I'm rich?

The income distribution data needs to be normalized to cost of living. If most of the people making between 88,000 and 250,000 are living in higher with significantly high housing costs, than it is a different picture.

In other words, when speaking about "rich" or "upper class" we really should be speaking about a cost of living ratio i.e. salary/cost of living, and determine what level, 150% or so, that would be rich. Defining the distribution this way, the number of folks in the 88-250K group may be normalized to look more like the 60-100K group.

A lot depends on where you live. If you make $170,000 a year and live in Grand Rapids, Michigan, you are living unbelievably comfortably. If you make $170,000 a year and live in New York City, you're living very well, but you sure don't feel rich.

I don't think social class is defined by income. It's defined by social characteristics.

The defining characteristic of the middle class is the struggle to get ahead, economically, and status-wise.

The defining characteristic of the upper class is that they hide. They avoid showing their wealth, or being in the public eye. When I go to visit rural friends and relatives, I start to act this way, so in that context, I am upper class.

Erza--

The truth is that people earning $150,000 are "rich"
even in Manhattan, where I live. There have been times, in the past, when I worked for a for-profit company like Dow Jones, that I earned roughly that much, translated into today's dollars. I felt rich.

As Matile put it, if you
are in that bracket you can "rent a nice apartment in a nice city and go out to nice restaurants once in a while."

Compared to how most people live in nice cities (not to mention how most people live in not so nice cities), that's a pretty good life.

It's just that most people living in that bracket don't know many famliles living on $47,000 a year (median household income) so it's hard to grasp that people in
that households in that band (say $35,00 to $65,000 to adjust for higher cost of living in some places), really are the middle class.

The hard fact is that people earning $150,000 to $250,000 really could afford to pay more in taxes without sacrificing anything necessary to well-being.

And, if we're going to have the things we want--including universal healthcare--they will have to. Moreover,it won't be such a big deal. It just means going back to a pre-Reagan tax system.

I've known a lot of families making around $150,000, and none of them would have described themselves as much beyond upper middle class

'Upper middle class' implies the 2nd quintile of income. If you're in the top quintile you can't accurately call yourself 'upper middle class' anymore than a student with a 4.0 GPA can call themselves a B-student. If you're in the top 5% and call yourself 'upper middle class' you're either lying to yourself or your have a very poor grasp of the range of income in America.

The way it works is that, since those top-quintile $150,000-earners tend to hang out almost exclusively with other top-quintile $150,000-earners, they perceive themselves as "average". Normal. Just folks. They really have no idea how the bottom 80% of the population lives.

This, plus the conviction that they deserve their affluence, fuels this belief system:
a.) I am affluent because I deserve to be (have earned it)
b.) Those other people are less affluent
c.) Therefore, those other people must not deserve to be affluent (must somehow not have earned it)

And on this foundation, the Reagan Revolution was constructed.

I have to disagree with Maggie Mahar. People in areas with a high cost of living actually do spend more to get less; that's what a high cost of living means. In point of fact, Manhattan residents making $150K are not living in bigger, nicer houses than people living in blue-collar midwestern suburbs making $60K: they are living in walkup apartments. Manhattan residents buying a box of cereal for $7 at the deli are not getting tastier, crunchier cereal than blue-collar midwestern suburbanites.

It may well be true that people in high-cost-of-living areas wouldn't suffer too much from tax increases, because some of the tax increase would come out of the hide of landlords and others. But that's a different argument.

If you prefer graphs to words, I gotcher Compassionate Conservativism right here

That's then last slide from this excellent and too-little-known posting on Afferent Input.

(Read the first comment on that posting for a perfect illustration of the mindset I was describing above.)

I have seen the analysis carried at least two steps farther, with the top one-tenth of one percent broken out, and then the top one hundredth of one percent, and the pattern holds: the farther out on the tail, the more disproportionate the income gains during this the reign of HRH George II by grace of Rehnquist King of Amerika.

Who says Bush is a failed President? I think he has accomplished most of his actual aims, and has enjoyed pissing on the rest of us in the process.

The defining characteristic of the upper class is that they hide. They avoid showing their wealth, or being in the public eye. - Doctor Jay

I dunno about this. In England before the middle of the Victorian period (and in some parts of the US even to this day) "if you got it, flaunt it" was the operative code. Read Made in Texas (I think I have the title correctly) by Michael Lind, for example.

There's a difference between "being rich," which implies enough disposable income to not have to worry about things, and simply having an income in the top 1% or 2% or 5%.

$150k earners can become rich over time.

You have to save up a decent amount of money over a period of years before you can claim to be rich.

The defining characteristic of the upper class is that they hide. They avoid showing their wealth, or being in the public eye.

This is true only of the descendents of families who are living off their family trusts. For them, staying wealthy means maintaining their family fortune, which means not spending it, so they are going to be discreet, even if they do still have a nice home in Connecticut in a neighborhood that's known for being one that "no one can afford anymore."

That crowd is quite rare. Even wealthy families have children who themselves become investment bankers, and I've never heard of I-Bankers who "hide" or "avoid showing their wealth."

The truth is that people earning $150,000 are "rich"
even in Manhattan - Maggie Mahar

It's pushing it for a family of 3 to live in anything bigger than a 1 bedroom appartment in Queens (forget about Manhattan) on a $100K/year combined income.

That's not rich, even accounting for the fact that such a family might have chosen to live in the city because of the advantages of living in NYC.

The vast disparities in cost of living do cause problems for the Democrats: if we include urban/inner-suburban families making $150K a year as middle class professionals (and this includes doctors, lawyers, a family of two tenured professors*), then we get hit in rural areas with "rather than helping out only the truly needy and even the middle class, Dems are self-serving rich people making $150K a year who help themselves to government funds -- see this is why government programs don't work" by the GOP.

OTOH, if we don't maintain middle class programs for people making over $100K, then we start eating away at what should be our (financial if not numerical) base as they start to think "I may be successful, but I'm not rich ... so why are the Dems. wanting to tax me as if I were rich?".

* BTW, pace Doctor Jay and expanding on Tyro's point, this is actually how I would define the difference between working class/middle class and rich: the rich don't have to work for a living, but can live off of investments, etc. (and long before they "retire"). Middle class people have to work for a living. And working class people look at the work middle class people do and say "you call that work? ... I have to [insert dull, tiring, dangerous or laborious job here] to earn peanuts!".

The disctinction Tyro is making I believe is correct. If we're talking about "being rich" (too much of a subjective phrase IMO), we're talking about "wealth" not so much "income". So if we are worried about economic inequality for example, aren't we talking about the concentration of "wealth" (not so much a concentration of "income")?

Well, concentration of income makes it more difficult for people to save and thus acquire wealth, which exacerbates economic inequality.

Being rich also implies a certain kind of invulnerability, or at least resistance to disaster. Someone making $170K a year is much better off than someone making $50K a year, but they still don't have enough money to cover a major medical or legal disaster. In new york city, they don't enough have enough money to send a couple of kids to private school at the same time, which you would think would be a hallmark of being rich. They don't have nearly enough money to save the millions that it would take to maintain their lifestyle when they retire. Oh, and if they bought a house they're in debt to their eyeballs and quite possibly under water.

This sounds lie "poor rich people, how can they survive", but instead I think it's a sign of just how thoroughly the US has been turned into a nation of the insecure. Whatever you have, unless you're in the top 5 percent or above, you could lose it all with one misstep. And the punitive way the people on top treat the bottom 60% of the country makes it clear to the "upper middle" just how important it is not to make that misstep.

I think Ezra quoted a study a few months ago where people who made $20M thought they were "poor" compared to people with $100M. I think we also compare ourselves to our parents. My dad was a VP with a Fortune 500 company and we lived in a doctor/lawyer/exec neighborhood. He didn't come home to cook and clean like my spouse and I because my parents could afford to have one stay at home. We had a nicer house than I have now and my dad had a pension plan. It felt like a lot more money.

At the same time, the CEO of his company didn't make orders of magnitude more than the worker bees, so you saw a lot less income disparity. Krugman's new book addresses the change in income distribution since the 50s.

I have to agree with DAS. "Rich" to me means not having to work for a living. I could afford to live off my savings for a few years, but there is no way that I could make it to 65 without working and even though many people don't even have savings, I don't feel "rich".

There should be a qualitative difference in the way we define middle and upper class. It may not be a very useful definition for policy discussions, but I've always thought of the middle class as composed of people who have to work for a living, who have to work to maintain their lifestyle. People on a fixed income.

The truly rich are those who could potentially live off of the interest from their wealth, royalties, etc.

Anyone who earns the sort of income that would permit them to acquire enough wealth that the returns from its investment would be enough to live off of is rich.

To me, it is assets that determine if you are rich or not, not income. I make over $150K and I don't consider myself "rich" because I don't have much in the way of assets. I have had big dry spells in my career (unemployed 20 out of 26 months and then unemployed 6 months) that each created a lot of debt. It takes a lot of good years to pay off that debt. I compare myself to my parents, who were an accounting clerk and a maintenance worker. When I was a teenager, their only debt was some minor credit card debt and a small mortgage payment on their home in Southern California. Their retirement nest egg and medical insurance were provided by their work (I have to provide my own). I don't feel any richer than they were, even though I make far more inflation-adjusted than they did.

Also, I think a qualitative distinction between the lower class and the middle class is that the lower class performs "labor" whereas the middle class performs "work," in the sense that Hannah Arendt uses these terms.

Laborers are those who perform repetitive, often manual tasks dealing with basic necessities of human life that will never go away. Their tasks are essentially circular: no matter how many times they're performed, they will always start at the beginning again.

The middle class are characteristically engaged in creative acts: being involved in the production and design of things, in bringing something new to the world.

I think the subjective experience of different kinds of work is a crucial class distinction.

I don't think these cost of living adjustments make too much sense. While people making 150,000 in Manhattan may like to claim that that's just like making 80,000 in Ohio, the fact is, they choose to live in Manhattan with its high cost of living for a reason. One of the things that makes them rich is all of the positive externalities that come with living in a huge prestige city with tons of cultural events.

Watch out for Census top-quintile income figures. I don't know if you factored in the "Top Code". All income above $1 million dollars a family is excluded from the Census figures by the simple expedient of making the highest income category a check-box: "above $1 million dollars."

The Top Code may hide as much as half the income of the top fifth of families. Repeat; if you adjust for the Top Code you may double the income of the top-quintile families in the Census survey.

I tried (in my amateur way) to adjust for the Top Code by comparing per capita income growth since 1967 (not Top Coded) to overall family income growth reported by the Census.

Per capita income doubled between 1967 and 2005 according to the Census. I assume, therefore that the sum of mean quintile family income in 2005 should be roughly double the sum of parallel numbers in 1967. Any shortfall should be what the Top Code is hiding (I added a small amount to the 1967 top quintile number for the Top Code then). The short fall was equal to 100% of the top quintile mean income reported by the Census: effective doubling it.

Not sure of the exact relation between per capita and family income growth but it should be ball park.

The Top Code was instituted at a time of more equal distribution of pay when the idea was to keep a few billionaires from from warping the general picture of family welfare reported by the Census. Now of course it is the Top Code itself that is warping the picture of what is really happening in our powerless labor economy. Just one more example of misreporting -- like the 50 year outdated poverty formula.

The phrase "income after ''mandatory'' expenses" comes to mind...

Minor observations. Due to the drop in costs like rent, etc. I am much "richer" as a 15k/yr grad student outside of NYC than I was in NYC making 45k/yr. I actually save more money.

My friend made 50k/yr in NYC and after food and rent had basically no savings, yet whenever she went to her parent's in Wisconsin for XMas, she was expected to pay for the big holiday meal since she was the "richest" person in the family.

It always amused me just how high your salary had to be just to afford a place with a dishwasher. (rough guess, 70k/yr)

That dishwasher comment applied to Manhattan only. I always thought of a dishwasher as such a luxury item in Manhattan. Something only for the most successful.

Are you folks who claim that $150,000 / annum is middle class in places like New York City also thinking that more than 20 % (or even 10 %) of earners in NYC make more than $150,000 ? Or do you think that the middle class in high-cost-of-living cities is small, and the working class pretty much everyone?

Are you folks who claim that $150,000 / annum is middle class in places like New York City also thinking that more than 20 % (or even 10 %) of earners in NYC make more than $150,000 ?

$150K in 2008 dollars = ~$125K in 1999 dollars. According to the Census Bureau, 17.7% of the households in Manhattan in 1999 had a household income of $125K or more.

I'm in agreement with most of the points made by Joel and Tyro. There's a clear difference between talking about people who earn a high income and those who have wealth. Savings are guaranteed capital. You have it. You can use it for leverage to gain more wealth.

If your wealth comes as a result of income, then your status depends entirely on what stage of life you're in. If you're say 30, then most of your wealth is locked up in future potential earnings. Someone making $80,000 is probably well-off and able to cover all their necessities and enough luxuries to feel comfortable. But unless they somehow have complementary savings, they aren't going to feel much security.

If the concern is that raising taxes on income might piss off people who think of themselves as middle-class based on their income, then why not simply make the capital gains tax more progressive?

As H suggests, cost of living is a red herring. It has political ramifications, but fundamentally it's an out-growth of personal choice. If you're making $150,000, you probably have the qualifications and experience to find a job someplace cheaper that will pay you nearly as well. You chose to live where you did because of the status, prestige, and other external rewards that location provides. Your cost of living incorporates those into its price.

According to the Census Bureau, 17.7% of the households in Manhattan in 1999 had a household income of $125K or more.

Thanks, alkali.

I guess if you can make it there, you can make it anywhere.
(Although there seem to be damn-all New Yorkers making it here in Silicon Valley. Musta all stayed in NYC.)

I don't think that you could ever narrow it down to a particular income level (or amount of wealth), but generally I think when people talk about the rich they are referring to a fairly small group of people--like the aristocracy that they replaced. They're the point on the top of the social pyramid.

It's maybe worth noting that the greater DC area has a pretty high cost of living, and, if I recall correctly, one of the highest per-capita rates of millionaires in the country.

Some national politicians (and, in general, people who live in areas with higher costs of living) may have a very different idea of how much money/income it takes to be rich simply because it costs a lot more in there neck of the woods to actually live like a rich person.

when people say NYC they mean Manhattan below 96th street (most of the poor people live above 96th).

household income for Manhattan below 96th gets to 100k+ for 40% of the population. and of the remaining 60%...there's a heck of a lot of kids in their 20's whose parents pay their rent or own their apartment.

[C]ost of living is a red herring ... fundamentally it's an out-growth of personal choice. If you're making $150,000, you probably have the qualifications and experience to find a job someplace cheaper that will pay you nearly as well. You chose to live where you did because of the status, prestige, and other external rewards that location provides. Your cost of living incorporates those into its price.

Mmm, not really. If you take first-year big-firm lawyers, which is about as perfect a market as exists at the high end of the salary range, you'll see that lawyers in New York make $165K while their counterparts in Grand Rapids, MI make $100K. That's because rent in New York is a lot more than it is in Grand Rapids, not because living near the Met gives you a special inner glow.

Sorry to come in late to the game, but I blogged about this last year:

http://afferentinput.blogspot.com/2007/12/if-america-had-100-and-100-people.html

It's humbling to see how income is distributed to the top 1% versus everyone else...

It's not THAT HARD to find law firms that pay their first year associates $160k/year in their secondary non-NYC/Cal/CHI/DC office. People can always go the abovethelaw.com to find those things out.

What's much harder to get is those common "special bonus" for NYC associate. Very few big law firms offer those special bonuses outside of NYC/Cal/Chi/DC office.

The true compensation level for NYC based big law 1st year associate is closer to 250k/year if they bill at least 1900-2100 hours.(Depends on firm, of course) And that's don't forget there are firms like Wachtell Lipton with their 100% bonus. ($330k/year for the 1st year associates if they are good enough to keep their job at the end of the year)

While it can be tough to rack up 2100 hours/year, it's what people needed to stay on partnership track anyway. And I know plenty of gunners routinely beat it. Just today, I was reading about Silda Wall Spitzer was clocking 3300 billable hours a year when she was a Skadden associate.

Mmm, not really. If you take first-year big-firm lawyers, which is about as perfect a market as exists at the high end of the salary range, you'll see that lawyers in New York make $165K while their counterparts in Grand Rapids, MI make $100K. That's because rent in New York is a lot more than it is in Grand Rapids, not because living near the Met gives you a special inner glow.

There's a symbolic, status element to it. People who get a law degree from a school good enough to qualify for a prestigious NY firm expect to be remunerated commensurate to their educational talents and investment in academics, regardless of how much they need for rent or the mortgage. Plus, the law firms themselves use their salaries to justify higher hourly rates to their clients and as a sign of the quality of their services.

A better comparison would be to federal or municipal employees in different regions.

I manage a group of professionals who all make between 100-400K a year. They all think of themselves as middle class. When I point out median household income is around 48K and so forth, it really doesn't change their minds about how totally middle-class they are. And we live in the Northwest – not a high-cost-of-living sort of place. Much like Matilde in the first comment above, they are very confused. 150K a year - in every city in the world - allows you to live a very, very, privileged lifestyle. (Statistics around cost-of-living in various cities are easily available on-line.) Reading through the comments here, I wonder why people who are doing so well don't recognize their exceptional status.

DN

These people are rich:

http://www.abovethelaw.com/2008/03/how_to_jump_from_biglaw_to_bus.php

Just today, I was reading about Silda Wall Spitzer was clocking 3300 billable hours a year when she was a Skadden associate.

The only other married person I know who pulled that off had an awful, awful husband she was trying to avoid. Hmmm....

This conversation is a little disgusting.

I'm willing to grant that a few people on this thread may once have been middle class, but I'm almost positive I'm the only one here who has actually been working class.

Every single personal statement here reads as an argument against the idea that the writer is in fact "rich." Because admitting that you're rich means admitting that you personally benefit from all sorts of privileges beyond work ethic or even merit. This is American selfishness merely.

Anyone who actually knew anyone making, say, less than $50 grand a year would understand that "nice restaurants" in "nice cities" with several years worth of savings is in fact rich.

If dealing with being called "rich" on a blog for making $88,000 a year is something you have time to worry about, you're not middle class. I'm not pushing class guilt or wealth redistribution, I just think the lack of self awareness is embarrassing.

Justin, tell us how you really feel. I think the hyperbole and generalizations were a bit overdone.

Every single personal statement here reads as an argument against the idea that the writer is in fact "rich." Because admitting that you're rich means admitting that you personally benefit from all sorts of privileges beyond work ethic or even merit. This is American selfishness merely.

Blame the Puritans if you must.

Can someone explain to me why it is wrong to think "I deserve what I earn" but not for someone to think "I deserve what you earn"?

And as for Unapologetic Andrew, if your cost of living is "your" choice and therefore should be discounted, will you agree that many persons' financial status is also an outgrowth of personal choice. That is, the guy making 35 grand a year has made choices along the way that limits his income to that amount. If so, why should the fruits of my labors be used to further compensate him for his own choices?

Unapologetic Andrew, upon consideration, I may have been a bit harsh. And for what its worth, your explanation is exactly right: most Americans wish to be upper-class while acting middle-class.

TIWYW,TIWYG: Everyone in America, even the guy making 35 grand, benefits from all sorts of infrastructural, educational, cultural etc. advantages over a large portion of the world population. The system is simply not entirely merit based (see for instance the Peter Singer article linked in my name). I'm not objecting to you having lots of unearned wealth, because what small wealth I have is unearned in the same sense. What's really annoying is that most rich people not only want to enjoy this wealth, they want those with less to assure them that they in fact deserve their good fortune. I'm sure they would deny this, but it's true: whenever my working class background came up at Cornell, everyone would immediately start justifying their affluent life style.

I'm just saying, if you feel guilty, fix the problem. If not, shut up and don't expect the rest of us to reassure you as to your meritocratic worthiness.

I teach demographics of the U.S. in an intro survey course on politics at a major private university. I present these same data every year to my students and they are shocked and certain the data are wrong. You, I, and my students live in a privileged society, cut off from the real world of people struggling to get by (and the $100k folks are not struggling, even if they think they are). My hunch is this is why Obama does well w/ high income earners but not low income. His rhetoric--with its lack of detail--suggests someone who does not know the problems faced by those earning only $50k a year, while Hillary Clinton's detail-oriented rhetoric does connect.

Justin - I find it interesting that you necessarily assume that I have "lots of unearned wealth" (whatever that means) merely because I question the necessity for the kind of wealth redistribution favored by the Left. Like yourself, I come from a blue collar background. However, my factory worker father never assumed that he deserved a share of somebody else's income just because that person made more than him.

TIWYW,TIWYG, I certainly don't want to get in a silly argument over who has more working class cred, and I've stated several times that I'm not necessarily advocating wealth redistribution. I merely find it interesting that the wealthy are so emotionally fragile. My farmworker father never wanted anybody else's income, but he would have had a good laugh at the pious self-justifications of the leisure set.

Justin - "Leisure set?" What century do you live in? The people I know who make a decent living bust their ass each and every day for the paycheck they earn. Where do you live that you witness the aristocracy spending their lives so idly?

I have always wondered why the phrase "working class" still persists. Doctors, laywers, and small businessmen of all stripes seem to "working" hard to me. But if your view is held widely among those on the left, it is no wonder.

Most doctors and lawyers are doubtless hardworking pillars of the community, but they do not have difficult lives by any measurement. You seem to forget that manual labor was not eliminated by the invention of the computer; a significant portion of the world's population still work long hours of dirty,backbreaking and/or dangerous (short or longterm) physical labor well past retirement age. I think that is why we still retain that archaic phrase "working class."

Also, I haven't advocated one communist, socialist, Maoist or Stalinist policy, and your insistent insinuations otherwise make me wonder why I didn't abandon this discussion long ago.

So I take it that anyone who doesn't use a shovel at work is a member of the leisure set? And quite frankly, anyone who views everything in terms of class as you appear to do is obviously a socialist. Don't fear the label if you otherwise wear it proudly.

Really? I thought caring about the poor made me a fascist now. Maybe socialist implies fascist?

Well I've got to get back to plotting my rise through the politburo and screen printing Che onto hoodies. You can have the last word here if you like.

PS. Between the two of us, this blog is a hotbed of radical supporters of socialized medicine. Watch your step!

I live in Los angeles, have a master's degree and earn $88,000/year. I earn more money than most of my friends and I am the most in debt. Until recently , aging condos in my area sold routinely for half a million dollars. the cost of housing and my son's college tuition has cut deep into my salary. I could afford more if I made only $60,000/year and lived in Nevada or Arizona.

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