(Bloomberg View) — People have strong opinions about what constitutes affluence. Last week I ventured that U.S. households with six-figure incomes generally make the cut, given that they make up the top quarter of the income distribution. I heard back from lots of readers who disagreed, and lots who agreed. It seems like a topic worthy of further consideration.
Obviously, where you live — and how much housing costs there — makes a huge difference in whether $100,000 a year feels like affluence or not. So do other factors such as your debt load, your assets, the size of your family and your age. Household income is a broad measure that misses a lot.
Still, it's better than any other easily available measure I can think of. And the division between affluent and not affluent matters a lot — for tax rates, for government policies, for college financial aid, as well as for how we perceive our duties as citizens. The fact that we'll never all agree on a single number is no reason not to talk about the numbers.
As already noted, about a quarter of American households (24.7 percent) made $100,000 or more in 2014. Things really start to thin out above that: 11.3 percent made $150,000 or more, 5.6 percent made $200,000 or more, 3 percent made $250,000 or more.
Now, I would guess that the vast majority of people in the $150,000 to $250,000 range would say they are "middle class." In the sense that they share middle-class concerns about making their mortgage payments, getting their kids into good schools and saving enough for retirement, then yeah, they're sorta middle classish. But in the sense of "middle" as a word that actually means something, in comparison with "lower" and "upper," it's pretty weird. These people are — again, with caveats about where they live, how many kids they have and what their net worth is — in the top 11.3 percent of American households. That's not the middle!
It is true that a one-year income snapshot can be misleading. A 2015 study of U.S. income data from 1968 through 2011 by sociologists Thomas Hirschl and Mark Rank found that 53.1 percent of Americans made it into the top 10 percent of incomes for at least one year of their lives, while only 7.8 percent stayed there for 10 consecutive years. But I think we're talking mainly about that 7.8 percent here — people with good reason to believe that their high incomes will continue to be high. Another issue has been the explosion in incomes at the tippy-top of the distribution that economists Thomas Piketty and Emmanuel Saez documented in 2001. Incomes among the top 0.1 percent of taxpayers rose 116 percent from 1993 through 2014, they reported in their latest update. For those in the bottom half of the top 10 percent, incomes rose just 22.8 percent.
If you live in New York or San Francisco or Los Angeles and make $150,000 or $250,000 a year, you are well aware that there are people who (1) are much better off than you and (2) seem to keep pulling farther away from you. They are the 1 Percent, the 0.1 Percent or even the 0.01 Percent.
