A while back, the Fiscal Times sparked a controversy by publishing an article arguing that a family with an income of $250,000 per year is not really rich. When taxes, housing costs, college costs for children and so on are accounted for, even those with an income five times the median family income are just barely getting by, it said.
Subsequently, The New York Times published an article sympathizing with the plight of those making only $250,000. They are certainly not poor, but neither are they rich in any meaningful sense of the term, it said.
In December, the Times reported that many rich people have seen a sharp drop in their income during the recession. Since then, there has been a steady stream of reports that financial institutions based in New York City have significantly reduced bonuses for their top executives – a major portion of their yearly compensation. New York City government officials have even expressed concern about the economic impact.
Last week, Bloomberg News reported that one Andrew Schiff, who makes $350,000 a year working for his brother’s investment firm, lamented that he can’t afford to upgrade his family’s Brooklyn duplex and may have to give up his summer rental in Kent, Connecticut.
And this week, The Fiscal Times reported that a WSL/Strategic Retail study recently found that a middle class family needs at least $150,000 of income just to cover the basics.
Lastly, Ann Romney, wife of Republican presidential hopeful Mitt Romney, whose net worth is estimated to be in the range of $250 million, told Fox News this week that she does not consider herself to be wealthy. I bring all this up to show that there is no generally accepted definition of who is rich in this country today, at least among those that most people would consider to be rich. There are many reasons why this is the case.
Those that are seriously rich by any standard don’t seem to be as different from the rest of us as they used to be.
One is that inflation and real economic growth are constantly moving the goal posts. For example, according to the Economic History Association, it only took somewhere between $23,400 and $119,000 to be as wealthy the year I was born as $1 million would today. Conversely, it would take between $8.4 million and $42.8 million to be as wealthy as a millionaire was in 1951.
On the other hand, even the richest person on earth wouldn’t have access to computers, the Internet, cell phones or all of the life-saving drugs that have been invented over the last 60 years. In short, even for poor people the standard of living has increased enormously. Meanwhile, those that are seriously rich by any standard don’t seem to be as different from the rest of us as they used to be.