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The upper middle class

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Chris Rock, New York magazine interview:

For all the current conversation about income inequality, class is still sort of the elephant in the room.

Oh, people don’t even know. If poor people knew how rich rich people are, there would be riots in the streets. If the average person could see the Virgin Airlines first-class lounge,* they’d go, “What? What? This is food, and it’s free, and they … what? Massage? Are you kidding me?

*Offers spa treatments, “expert mixologists,” and, at Heathrow, a “lodge and viewing deck” with an “après-ski vibe.”

Once a social system has moved all or nearly all of its members above the level of brute starvation, wealth and poverty soon become inherently relative concepts, but that doesn’t make them any less real. One of the consequences of living in an extremely rich country which features increasingly extreme wealth stratification is that people who would have been considered rich fifteen minutes ago are suddenly part of the “upper middle class.”

Take, for example, what has happened to economic relations within the American university. It’s well known that American colleges and universities must increase their operating budgets every year at rates faster than inflation because of reasons, and therefore it becomes inevitable, given the contemporary economic structure of the country as a whole, that these institutions will spend enormous amounts of time and money currying favor with super-wealthy potential donors. Giving money to a “non-profit” educational institution provides the masters of the universe with sweet tax breaks, while allowing them to indulge in the ego-gratifying pleasures of plastering their names all over various buildings and centers and even whole schools and colleges.

And so it has come to pass that the highest-paid people within universities (aside from some football and men’s basketball coaches, which is a subject for another day) are those employees who are responsible for, respectively, kowtowing before the great and the good, and investing the proceeds gathered up by successful administrative mendicants.

Thus the highest-paid employee of Columbia University is this guy, who runs the school’s endowment, and who was paid more than five million dollars in FY2013 for his trouble.

Meanwhile the university’s president, Lee Bollinger, had to scrape by on a hair under $3.4 million in total compensation. (Bollinger was one of 36 presidents of American private colleges and universities who were paid more than one million dollars last year).

Bollinger got into academic life more than 40 years ago as an assistant professor at the University of Michigan’s law school. By 1979 he was a full professor, and was pulling down $31,500 per year ($103,000 in 2014$). The following year the university’s new president, Harold Shapiro, earned a salary of $75,000 ($215,000 in 2014$).

Now the thing is I bet Lee Bollinger doesn’t feel very rich, despite the fact that he makes, in real, inflation-adjusted terms, more money every two weeks than he did in an entire year back when he was a full professor at an elite law school, before he got into the administrative rackets (Bollinger was provost at Dartmouth and president of Michigan before ascending to his present position).

After all Bollinger’s job consists largely of hobnobbing with people who “earn” more in two weeks than he makes in year. And some of those people make less in a year than some other people make every two weeks.

Which is how an academic who makes three and a half million per year ends up feeling sort of “upper middle class.”

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  • jim, some guy in iowa

    there was a mini scandal around the u of i a while back because the president’s husband was being compensated for the time he spent helping his wife entertain the wealthy donor class

    • postmodulator

      I don’t know. If I had to talk to those people for extended periods of time and wasn’t allowed to shoot them, I might want some compensation for my pain and suffering.

      • carolannie

        Yabbut, the wife of a male president would get to do that for free. And it would not be counted as a donation of time or anything, just what a wife should do.

        The wives who undergo this torture for their spouses should get paid handsomely, probably more than the spouse because it redounds to the spouse’s benefit.

        • There’s a lovely scene in a recent Scandal episode where the perpetually frustrated, put-upon First Lady says to a friend, “the minute a woman is elected president, First Lady will become a paid, official position, because no man will do this work for free.”

          • Just_Dropping_By

            Cute, but if Hillary wins in 2016, there’s no way a Republican-controlled House votes to give Bill Clinton a paycheck just for being “First Gentleman.”

            • GFW

              Queue the “That’s no gentleman …” joke.

              • Lee Rudolph

                But definitely a Scholar. Rhodes, even.

              • TopsyJane

                Having a male consort in the White House might even lead not only to a paid position but the abolition of that idiotic faux-title First Lady. The late Jacqueline Kennedy Onassis, a woman of taste, fought a losing battle to be called simply Mrs. Kennedy, opining that “First Lady” sounded like somebody’s saddle horse.

                Of course, there’s worse. Several times I’ve heard Jill Biden called, in all seriousness, “Second Lady.” A tooth-grinder if ever there was one.

                • Richard Gadsden

                  Abbreviating is worse: SLOTUS

  • sleepyirv

    The Iron Law of Income – Everyone thinks all their problems if they were just making 15% more.

    • Fosco

      This ought to be investigated scientifically. I offer myself as a test subject.

  • Lurking Canadian

    Humans perceive at least light, sound and seismic events in logarithmic terms. I am increasingly convinced that is also how we perceive wealth. I think the average citizen feels one billion is about three times greater than one million; and one million is maybe twice as much as one hundred thousand. It’s the only way to explain the lack of riots.

    • LeeEsq

      The other way to explain it is that Steinbeck was right when he described poor Americans as feeling like “temporarily embarrassed millionaries.”

  • mpowell

    Do these guys really feel like they are upper middle class? This isn’t the couple on $400K. This is 10x as much.

    • c u n d gulag

      Do you realize how much it costs to buy, redecorate, and furnish yet another summer get-away home?
      Pffft!
      Just like that – 4+ million, GONE!

      • burritoboy

        Oh yes – I’ve seen people blow way past the four million. Due to self-caused construction problems, one couple I know of spent more than eight million and still are millions away from having a non-ruin (they built and then had to demolish down to the foundations). They originally thought they were only going to spend two million at the absolute most. Self-caused, so I’m less than sympathetic, but it’s easy to blow almost any amount of money on this.

        • skate

          Mr. Blandings builds his dream house.

      • JustRuss

        Keep in mind that most struggling university presidents get free housing in a home owned by the university, or if they decide it’s not mansioney enough, a housing allowance on top of their 7-figure salary. So swinging that cottage on the beach isn’t as hard as you might think.

  • Rob in CT

    As someone (Krugthulu?) pointed out in response to that Rock quote: yep, but the really rich have their own jets. Krugman’s point was that it’s worse than Rock says. Your point is a fair one too.

    Depending on the circles you travel in, you might feel well-off or you might feel not so well off. I am surrounded by folks who make as much or less, so I feel very well off. I know people who are in a similar income bracket but who are surrounded by more wealth, and they feel differently (also, they live in a more expensive area, which matters too).

    So the more unequal things get, the more distance there is between, say, a 5%er and a 1%er and a 1%er and a .1% and so on. In theory, this *could* result in the 5%er finding that maybe he’s got more in common with a 50%er than a .1%er… buwahahahahaha, silly me, this is America!

    • mpowell

      I thought about this a lot. I don’t think the separation should matter to the 5% much. It’s a question of what kind of policies you are pursuing to ‘fix’ things. If all you want to do is levy a huge estate tax, sure, that’s a point where the 5% has more in common with the 50%. But if you look at the income of the top 5% or top 10% over the last 30 years (excluding the top 1%), they’ve retained their share of GDP in earning power and the although the US economy isn’t growing as fast as in the 50s and 60s, neither is the vast bulk of the developed world, against whom the US compares rather favorably in aggregate (in real growth terms). Does that 5% really want to trade his/her substantially higher salary for French style job protection? I doubt it. But again, would they like a less expensive, more efficient health care system? I think that’s a reasonable sell. But just out of self interest, no, I don’t think they stand to benefit from much of the agenda I hear on the left. They should still vote for Democrats, of course, but that’s largely for the same reason that large portions of the left hates the Democrats – ‘neoliberalism’.

      • Rob in CT

        The estate tax is actually one of my big bugaboos. I would levy a “huge” estate tax (it would be a progressive tax, though, so even those upper middle class people it hit would be hit fairly softly). My mother, who is well-off but not exactly wealthy (e.g., net worth significantly less than this academic makes in a year) HATES HATES HATES the “death” tax. She sees it – any estate taxation at all – as a moral abomination. No matter how it is structured. People should be able to give things to their children, The End. Sorry, it drives me nuts.

        As for why a 5%er’s enlightened self-interest should be to vote Dem (and liberal Dem at that), well, to me that’s pretty simple. A 5%er has an *incredibly* sweet deal in the United States. Conservative & Neoliberal policies have basically not changed much for a 5%er – as you note, the top 10% has basically treaded water (at a very, very nice level). The policies (and external forces) of the past ~40 years have massively benefitted those above the 5%er at the expense of the ~90%. This has wrought a number of ills, which involves the possibility of screwing up the aforementioned incredibly sweet deal. Thus, a 5%er could see it as both morally right and personally smart to support a reversal of these policies, in order to correct those ills. Returning to an income/wealth distribution that looks like ~1975 doesn’t hurt a 10-5%er much, if at all, but dramatically improves the lot of the 90%.

        [this is without even discussing the idea of “what happens if suddenly I’m not a 5%er anymore?”]

        Take it up the income scale and your argument makes more and more sense.

        • Rob in CT

          One more thought, concerning having things in common.

          A 10%er, a 25%er, a 50%er and a 95%er (indeed even, a 1%er) all have to work for a living.

          The details differ substantially, but that’s one key similarity. My wife and I can’t just quit our jobs tomorrow and live off our savings/investments.

          This matters to me, at least. Maybe others don’t see it that way.

          • nixnutz

            Believe me, I read all your posts in this thread thinking “isn’t this the same guy who was just saying that the 95th percentile is basically working class?” i.e., I take everything you say on the matter of class with metric tons of salt.

            • Rob in CT

              The fuck? I’ve never said any such thing. I’ve repeatedly said the opposite: that claiming to be “middle class” if you’re at ~95% is absurd.

          • Just_Dropping_By

            This is a point that I’ve made elsewhere: the only useful definition of being “rich” or “upper class” is being able to indefinitely sustain an upper middle class lifestyle based entirely on “passive” income sources like interest, dividends, royalties for past work, etc. It’s ridiculous to claim someone is “rich” if they would literally be penniless and homeless within a few months to a few years if their earned income dropped to zero.

            • Srsly Dad Y

              Crap. Until you said that, I was rich.

            • Crusty

              That depends on their spending. There are people who could avoid work with a trust fund of ten million, and others who’d blow through that pretty quick and have to go get a job at an investment bank or playing for the yankees or something.

              Who is richer? Guy with 10 million dollar trust fund, million dollar home, modest vacation home somewhere else, draws on the trust fund to the tune of say, $300,000 per year, and doesn’t work versus

              Investment banker who makes between 750,000 and 4 million per year (depending on bonuses), lives in a 3 million dollar house, expensive vacation house, multiple private school tuitions, expensive cars, yacht (boat), club memberships and let’s throw in an alimony, and who couldn’t keep up the lifestyle if he lost the job. He’s not rich?

              • Just_Dropping_By

                Note that I said indefinitely sustain “an upper middle class lifestyle,” not a “wildly profligate lifestyle.” Obviously, anybody could theoretically exhaust all their wealth if they really tried simply by paying someone else their entire net worth.

                • Crusty

                  My point is that there are people who are both working and rich, and that living off passive income isn’t the only reasonable definition of rich. Paid enough to spend like a drunken sailor with a taste for luxury is also rich.

                • mark

                  “Upper middle class lifestyle” starts vague and gets even vaguer if “rich” is defined up even further.

                  You might as well put numbers. If you think sustainably long term capital return is perhaps 5%, then rich starts in the $2 million to $5 million range?

                  I’d buy that but that also means a couple earning $400k has to count as rich for most purposes too–unless they are living “extravagantly” they should have banked something like the necessary amount in a decade of work.

                  Of course, in practice people who I consider rich often choose to emulate even richer people, so they sink millions into a home and similar expenditures. They have $3.5 million net worth but it’s in a classy home and a vacation house, not a cash-generating investments, thus in their minds (perhaps using your definition as justification) proving they aren’t “really” rich.

                  (I say all this as an SF Bay Area resident, well aware of how pricey homes can get.)

            • Rob in CT

              Eh, I dunno about this. This would make everyone below, what, the 99% of wealth (not income) or so not rich.

              We’re talking about different kinds of rich (rich vs. filthy rich, I guess).

          • mpowell

            I haven’t been persuaded yet that inherited wealth is a substantial driver of inequality yet. People like to call CEO’s, hedge fund managers and such ‘rentiers’, but in fact, they’re doing something to get their money whether you think it is properly earned or not. And it generally involves an absolutely enormous amount of working hours over the course of their career. Trying to define some level of income above which you are no longer ‘working for your living’ doesn’t seem to really work, in my opinion. A hedge fund manager who makes $1B in a given year is still working a lot, even if in your view they would be better off retiring.

            I also don’t agree that you can just look at the shift in income as a percentage of GDP between the different groups and conclude that policy has taken from the bottom 90% and given it to the top 1%. But it could easily be the case that factors like globalization have caused real incomes for the bottom 90% to stagnate while pushing up real income for the 90-98 and the top 1% even more. When you talk about treading water for the 90-98, you are talking about treading water as a % of GDP, in real terms that income has gone up and any further increase would most likely have to come at the expense of the bottom 90%. You can’t assume that the policy of pre-1975 would have preserved the same income structure and growth trajectory of the economy from the pre-1975 era. Especially since the growth slowdown since then has been broadly felt in developed countries. Most leftists would prefer to reduce the income share of the top 1% and the 90-98% both. I think, most likely, the 90-98% and top 1% both benefit in aggregate from globalization, for example.

            • L2P

              What does this:

              I haven’t been persuaded yet that inherited wealth is a substantial driver of inequality yet.

              have to do with this:

              People like to call CEO’s, hedge fund managers and such ‘rentiers’, but in fact, they’re doing something to get their money whether you think it is properly earned or not.

              In any event, a couple things. Many (most?) hedge fund managers are the direct beneficiaries of inherited wealth. I know dozens of them personally and all share (1) a huge book of business consisting largely of their (wealthy) parents’ friends and associates and (2) tons of support from trust funds or direct payments from (wealthy) parents so that they’re not really worried if they can’t make the fund work. Plus of course the Ivy background that wealth got them.

              But more importantly, that immense amount of wealth drives inequality for generations. It’s a huge different in scale. Bequeathing $1 Billion to a few descendents creates dozens of ridiculously wealthy family for generations. Bequeathing $1 Million gets a few people slightly nicer housing and schools for a few years.

              • Origami Isopod

                It doesn’t even have to be immense wealth. Legal discrimination against African-Americans in hiring, union membership, home buying, and bank lending has left African-Americans impoverished relative to white Americans long after those laws were repealed, to a degree that is not necessarily explained by illegal/informal discrimination.

              • mpowell

                The point is just that although a CEO gets called a rentier, it is different from inherited wealth. And there is a world of difference between inheriting billions of dollars and growing up in a $500K/year family and leveraging those connections to become a billionaire. That’s a huge jump from the 1% to the 0.001%. The vast majority don’t make it. I’d say more but as long as people agree that what a CEO is doing is a lot different from inheriting that level of wealth, I’d leave it at that.

              • catclub

                Many (most?) hedge fund managers are the direct beneficiaries of inherited wealth.

                You could have knocked me over with a feather.

            • Rob in CT

              I haven’t been persuaded yet that inherited wealth is a substantial driver of inequality yet.

              Well, since the estate tax has been significantly weakened since, for example, the year of my birth (1976) [seriously, the present-day estate tax is a fucking joke], my proposal is not far off from restoring the past (reasonable but hardly draconian) situation. I prefer a progressive version for the same reason I prefer a progressive income tax to a flat tax.

              I also don’t agree that you can just look at the shift in income as a percentage of GDP between the different groups and conclude that policy has taken from the bottom 90% and given it to the top 1%. But it could easily be the case that factors like globalization have caused real incomes for the bottom 90% to stagnate while pushing up real income for the 90-98 and the top 1% even more.

              Thus, policy plus external factors, like I said, resulted in the 90% taking it on the chin and the tippy top doing well. I don’t see any real disagreement here.

              You can’t assume that the policy of pre-1975 would have preserved the same income structure and growth trajectory of the economy from the pre-1975 era.

              I agree, and I don’t assume that. I picked that era merely to point to the change in distribution of income (let alone wealth). I agree that the policy mix required to get back there would be different (if indeed one can get back there, which I doubt. I support trying, though).

              • mpowell

                I took the stance of the discussion to be, “what would a selfish member of the 95th percentile prefer policy-wise”. And I’d agree with you on the estate tax entirely. It boggles my mind the way people oppose that. But on trying to get back to a 1975 style distribution? My argument is that you have to do a lot more work to show that it wouldn’t result in a reduction of that person’s earning power or earning power growth.

                I took your argument to be that, essentially, a lot of policy that helped the median earner would also help the 95th% (or at least not hurt). I think it depends on the specifics and in many cases would not. That in fact, the financial interests of the 95th% and the 0.1% may still be aligned in quite a few policy disputes despite the separation in their incomes.

                • Rob in CT

                  My basic argument is that the insane policies of the Right are killing the golden goose and, therefore, a smart 5%er should oppose them for more than just moral reasons (though those moral reasons are important too!). Basically: they’ve pushed things so far that they’re gonna fuck it all up for all of us (except perhaps those who can jet off to the Caymans or their private islands or whatever).

                  That’s the pure self-interest argument. I don’t make it often, because I think the moral case for a more left-wing policy mix is strong and should be made. But it can be made, and I think it’s stronger than you do. Also: I think a 5%er might take a relative status hit, but a small one that’s worth taking.

                  Ok, I think we’ve done this one to death.

                • cleek

                  the 5th percentile for a single person in the US is $90k/yr. that’s a good chunk of money. but you need 10x that to get to the 0.1%.

                  i’m not sure how much 90K/yr and 900K/yr have in common.

                • Lee Rudolph

                  killing the golden goose

                  I’m all for giving these guys a golden goose or two.

                  In fact, I recommend rectal feeding with molten gold.

              • Rob in CT

                Further, I think the concentration of wealth in the hands of a tiny few is a bad thing in and of itself and the estate tax is one method of putting a break on that. I think the moral case is very, very strong. Incidently, you can figure out right quick the people who sincerely believe in meritocracy (put aside the lefty critique of meritocracy, which I’ve come to agree with, for a moment) and those who do not, when this subject comes up. Suddenly, people who claim that they’re all about merit will be arguing in favor of being able to receive piles of cash from mummy and daddy, tax free.

                • Lurking Canadian

                  Choosing the right womb is a very important skill.

          • Moondog

            Also, how stable are those percentiles? I personally have inhabited a lot of them, if talking about annual income.

        • Rob in CT

          Conservative & Neoliberal policies have basically not changed much for a 5%er – as you note, the top 10% has basically treaded water (at a very, very nice level).

          Doh, this is wrong.

          Though this group has not done as well as 1%+, it has seen real gains.

          http://www.hamiltonproject.org/multimedia/charts/us_income_inequality_median_and_95th_percentile_household_income_1975-/

          Therefore, the self-interest argument I’m (in part) making is weaker than I said it was. I guess I have to concede that one.

          Still, the moral argument and the “shit hits the fan” downside risk part of my self-interest argument holds, I think.

    • Denverite

      One of the more pleasant/enlightening experiences we’ve had in the past year is my daughter playing softball. Her team draws from the southern neighborhoods in Denver, which range from working class neighborhoods in SW Denver to very rich neighborhoods near the University of Denver. Parental occupations range from managing a construction crew to the director of the nightly news at one of the local TV stations (oddly enough, we’re good friends with both of those families). One time, on a lark, we started playing around with Zillow. Home values of her teammates’ families range from $140,000 to $6,000,000.

      The funny thing is that we’re much closer in income and home value to the construction crew manager (his wife is a low level government worker), yet I think we’d be considered in the same class as the news director’s family.

      • Rob in CT

        Sure, how people see class isn’t entirely about money.

      • KarenJo12

        VI used to work for the agency that regulates car dealers in Texas. I was in a long and complicated hearing against BMW, where I was the poorest person in the room by orders of magnitude. I was in another hearing with Anastasio Somoza’s nephew and Count Ciano’s grandson. All those people were both wealthier and obviously higher class than I am. I was also in lots of hearings against used car dealers or guys who owned Chevy dealerships in small towns who were a lot wealthier than I but most people would peg several class levels lower because they affected fauxbilly accents and tacky cultural preferences. (I was not above taking advantage of the perceived class difference by speaking in academic English and discussing opera, while adopting a pained expression when my opponent spoke. The citizens of Texas deserved good representation. And I often played fauxbilly with the swells, too.)

  • MacK

    For my suffering through god knows how many long hauls I get access to the Virgin Lounge in Heathrow – and whenever I have to fly through other airports, particularly the charter part of Gatwick or Luton – packed with screaming children and guys swilling 5 pints of Stella before flying – I think of it. Yes, there is a masseur – but the massages are usually booked up.

    Now that Virgin has done a deal with Delta the place is packed with various Delta customers. They remind of the Russian fisherman in the 70s and 80s who used to stopover in Shannon while their Aeroflot flight to Moscow refuelled, wandering around the duty free, shocked at the things on display (they particularly used to head for the food and drink section and pick up packets of bacon.) They too know that in a few minutes they will exit the wonderland and get on that Delta flight to Atlanta ….

  • Srsly Dad Y

    Brad DeLong (I think) called this fractal inequality, a term I really liked. It does seem that, wherever you are on the ladder, the scale of inequality among people that you interact socially or professionally with on a regular basis looks about the same — say, from about 1/10th as “rich” as you are, to about 10x (just to make up numbers). Most people don’t know people above or below their fractal band, and even rich people look “up” and see qualitatively richer people.

    • Incontinentia Buttocks

      Absolutely. Some of my most generously compensated friends are senior partners at big corporate law firms whose clients, almost by definition, make much more money than they do. My friends spend much of their lives as the poorest guys in the room.

      • Srsly Dad Y

        Same here (re my friends, I mean). I don’t know the super-rich people they know. And I don’t mean to be sanctimonious, but I think I know personally a lot more financially strapped people than they do.

      • PhoenixRising

        If your friends are among the partners at top firms which are still distributing shares this year, they are very very lucky to still be the poorest guys in those rooms. My BIL was a partner at a firm that went under a few years ago, and his family went from needing a house that can host a party for the summer interns to real trouble in about 3 months.

        Of course he used his connections to find something else at $325K, but that’s salary. He will never again be as close to really rich as he was, and the rest of his working life will be much like the past 6 years, in which he has been a highly compensated servant for the real players in the room.

        Happily for my wife’s niece and nephew, the new house is in a neighborhood where they go to public school with kids whose families are actually strapped, so there is a much improved chance that they are not going to turn out little assholes like his kids from his first marriage. So yay for failures caused by the economic downturn, giving credit to “innovative” “seed-round” startups, and an oversupply of lawyers–all at once.

    • Lee Rudolph

      I dislike that use of the term “fractal”, which really only makes sense (not that Benoit Mandelbrot was ever as interested in making sense as he was in promoting himself) when an infinite number of changes of scale (steps on the ladder) are under consideration. However, “fractal inequality” is a catchy phrase and certainly the phenomenon it’s being used to describe is real. Not just for wealth, either, but also (to bring up an example that is being brought home to me forcefully this week, which I’m spending at a mathematics conference) for—say—mathematical chops (or, I’m sure, musical chops, etc., etc.). In a social group as comparatively small as “mathematicians” (or in a necessarily much smaller subgroup like “singularity theorists”, or a group of intermediate size like “people who could credibly be invited to a conference on singularities”) the band may be somewhat wider (I mean, I know several Fields Medalists, and I’m pretty sure that at least two, and probably three, of them also know me) but it’s definitely there (I’ve also been in the presence of Fields Medalists that I think would generally be ranked even higher than the ones I know, but I’ve hardly ever even tried to speak to any of them), and I know for certain that at least one guy I used to know pretty well (who almost surely failed to get a Fields Medal for purely non-mathematical reasons) thought of himself as way, way below one in particular of the ones I could hardly speak to.

      • Srsly Dad Y

        Yeah, quasi-self-similar qualitative inequality doesn’t have the same ring.

    • Philip

      “Fractal inequality” made me think of Sam Vimes in the Discworld books.

      When you got right down to the bottom of the ladder the rungs were very close together and, oh my, weren’t the women careful about them. In their own way, they were as haughty as any duchess. You might not have much, but you could have Standards. Clothes might be cheap and old but at least they could be scrubbed. There might be nothing behind the front door worth stealing but at least the doorstep could be clean enough to eat your dinner off, if you could’ve afforded dinner.

  • LeeEsq

    Class has always been a complicated beast to study and the links between class and income are not as strong as people think. Its why we have such a thing like the concept of genteel poverty. A poor person from a patrician family with title was of a higher class than the noveau riche industrialists in 19th century Europe on account of their background. In the Americas class and income are more strongly alligned but are complicated by racial issue in North and South America.

    • Srsly Dad Y

      complicated by racial issue in North and South America

      Yes, but also because fame, celebrity, and influence are class markers in the way that family names used to be. Politicians, well-known creative types, and journalists, for example, often occupy social class positions out of proportion to their money wealth. And perceived psychic income still seems to play a role–a university professor is arguably higher in social class than a high school teacher, even if the latter happens to earn more.

  • NewishLawyer

    1. What income bracket would described the upper-middle class?

    2. I think there is a big difference in how the income wealthy feel vs. people whose wealth and money comes from capital, dividends, and interest payments from trust funds. If you are income wealthy, you can say that you still need to work for a living like everyone else. Someone did make the observation here that the upper-middle class could develop serious capital in a decade or so if they were willing to live modest lives for that 10-20 year period. Very few choose to do so.

    3. My grandparents were products of the Great Depression and this caused them to save, save, save. I benefited from this savings because it set up a small trust. Nothing I can live on but it was enough to pay for my entire higher education without needing student loans. I am internally grateful for this.

    4. I’ve been in a lot of situations where people assume I have a ton of student loans like everyone else and I just end up not knowing how to react.

    5. I went to a small liberal arts college for undergrad with not great food. There was a small greasy spoon Chinese restaurant nearby. The type of place that serves 2 days worth of chicken and broccoli for 5 dollars. It wasn’t great but it was a change. I once suggested going there and a classmate began ripping into me with all fury because said classmate could only eat using the mealplan. This was during Clinton’s second presidency.

    6. I’ve also gone to school with classmates who come from serious money. I was lucky enough to live alone. I had classmates who lived alone in all luxury apartment buildings with completely new furniture. My furniture were hand-me-downs. Another classmate’s parents own the most expensive house in San Francisco. It went on the market a few weeks ago for over 30 million dollars.

    7. My classmates who came from a lot of money were either very good at appearing to be middle class (One classmate said of us “You wear clothing that looks nice and like it is moderately expensive. X wears really expensive clothing that looks cheap.”) Or they knew how to be really generous with their moneys in ways that are above my means like taking people out to expensive restaurants. Or there is also a way that really rich people tend to develop an interest in simple lifestyles because they can and it can be a status symbol to wear an old jacket because you can easily afford another one.

    8. So this puts the upper-middle class in a weird spot. I am very grateful for being student loan free but also was able to afford some luxuries that fellow students could not. I never had to the ramen diet. Yet my resources were still finite and I couldn’t treat classmates to fancy meals either.

    • Srsly Dad Y

      Fractal inequality. Your rich friends are probably acquainted, through family friends at least, with some people who own jets and entire islands. They feel they are in a weird spot because they’ve always been able to buy friends nice dinners but can’t fly them to the Cote D’Azur.

      • NewishLawyer

        That could be. I also notice in writing my comment about how economic differences can cause sub-conscious differences in clothing.

        Some of my really rich friends are pretty much actively indifferent to clothing or have the confidence to wear the “really expensive clothing” that looks really distressed, worn down.

        I do not have this confidence completely if at all. I don’t like super blingly or formal stuff but I like clothing that looks decent and presentable even if I do wait until the end of season sales to get it most of the time. I can wear some stuff that looks slightly distressed.

        So here I am showing “I don’t need to shop at thrift stores” but not quite confident to pull off “I don’t have to shop at thrift stores but will pay 500 dollars for a pair of jeans that look like they came from a thrift store!” I was also humbled by two acquaintances talking about how they loved Banana Republic but could only shop their during sales. I think Banana Republic is okay looking but too expensive for what it is. This was a humbling experience.

        • SgtGymBunny

          Isn’t Banana Republic just an expensive Gap which is an expensive Old Navy?

          • NewishLawyer

            I think the designs are a little more formal and they also go for office wear but all three stores are owned by the same parent company and BN is the high market brand, yes.

        • The Dark Avenger

          Have you tried looking for stuff at a thrift store? Sometimes stuff is donated that is practically brand new, especially places like the Cancer Society or Goodwill.

          • NewishLawyer

            I think it is a skill that requires patience. I’ve browsed but for guys most of what I see looks like old shirts from the 1970s that smell of mothballs.

            Consignment stores are a slightly better in the odds department. I’m also short so that is an issue in terms of finding stuff.

            • Srsly Dad Y

              eBay, man.

    • Denverite

      I think the income bracket for the upper middle class varies widely based on (1) where you’re talking and (2) the size of the family you’re talking about. A single individual in Texas making $60k is probably “upper middle class” whereas a family with three kids in SF or NYC making $150k probably isn’t, in the sense that they are probably going to have to make some serious compromises in terms of apartment/house size, commute, childcare, etc.

      I’d probably characterize the upper middle class as the “working affluent” — families who have to work, but who can live pretty much where they want (though perhaps not in the nicest houses/apartments or the nicest neighborhoods), have enough recreational money to eat out whenever they want (though perhaps not at the nicest restaurants), go on vacations, etc. In other words, the people who used to be seen as “rich” before the wealthy got really wealthy.

      • Srsly Dad Y

        EDIT forget it.

        • Denverite

          Give me a hint?

          • Srsly Dad Y

            I was gonna say I prefer to think of myself as rich because it obligates me (in my eyes) to certain good behavior.

    • sibusisodan

      I am internally grateful for this.

      Don’t be afraid to express it externally too!

    • MPAVictoria

      “I think there is a big difference in how the income wealthy feel vs. people whose wealth and money comes from capital, dividends, and interest payments from trust funds. If you are income wealthy, you can say that you still need to work for a living like everyone else. Someone did make the observation here that the upper-middle class could develop serious capital in a decade or so if they were willing to live modest lives for that 10-20 year period. Very few choose to do so.”

      So what kind of sacrifices would someone making $3.4 million dollars a year have to make in order to save “serious capital”? Only have one maid? Perhaps driving a BMW instead of a Rolls?

      • NewishLawyer

        Don’t get me wrong. I think 3.4 million in income is wealthy. I was merely theorizing on the psychology.

        I think the discussion on LGM was about people who made in the low six figures. If you make 150,000-200,000 but live like you make 30,000-40,000 dollars a year; you can probably save up good money.

        • PhoenixRising

          Right, but you can’t. For example, two people making $85K each don’t have time to make all their own meals and ride the bus, which is what 2 people putting shift work together to make $42K total have to do. Because they can’t afford not to.

          It’s just not possible to maintain a 20 year career in anything that pays over $90K while living off $25K of it, unless you have no housing or childcare expenses. I have a cousin in that spot, and he actually DOES save half his income and will be able to retire in his 40s. Because no woman will go on the third date, he’s at no risk of being under pressure to change his lifestyle.

          Tradeoffs.

          • lizzie

            Well, um, yes it’s possible, because that is basically the life I’m living. I mean I don’t live off $25K per year, but we (family of four) make our own meals, we only have one car so I bike or take the bus to work, we shop at thrift stores, and generally live well below our income. This might seem affected or extreme but I grew up quite poor and it seems normal to me.

      • catclub

        Someone did make the observation here that the upper-middle class could develop serious capital

        I was going to point out that in that case, upper middle class is now above about the 96th percentile.

        Remember: 90th percentile is about $130K annual household income. 10-20 years saving 50% of that is less than $10M even with optimistic investment performance. Living on half one’s income would be challenging.

        • NewishLawyer

          That depends on how you live but I agree.

          There is a popular blogger named Mr. Money Mustache who writes about how to live like you earn 25,000 dollars. And advocates about how everyone should live like that.

          I think his choices are mainly aesthetic and seem to come from an ability to do so but not being required to do so.

          • Denverite

            Good luck with kids. If both parents work and you live in a high childcare cost area, it’s $12k per kid per year minimum until they’re five, and maybe $5k after that. If you have a couple of kids a couple of years apart, there’s the $25k right there — and heaven forbid that there are twins or an accident, in which case you’re deep into the red.

            And all of this assumes you’re cramming the kids into one room. If you need a third or fourth bedroom, that’s probably another $10k per annum.

            • Rob in CT

              Childcare is genuinely expensive, as is real estate in certain places (hell, I saw a condo a family member bought recently. 1600sqft for three quarters of a million dollars?!?! California, man, goddamn).

              So yeah, ok, it’s true those things can bite, so it’s a bit much to blithely assume that someone in such circumstances must be building up substantial investment capital. It’s another to take that turn it into a whine about how hard they have it (not what you’re doing, I know). And there has been so much of that whining going on over the past few years, I understand people being sick of it. I’m sick of it.

              • NewishLawyer

                I disagree with the analysis done by Mr Money Mustache because it mainly gives rise to all sorts of questions. These questions are philosophical:

                1. Why is it better to live in a more affordable town rather than have a shorter commute?

                2. Income is usually traced to certain geographic locations. So then you are asking people to move where cost of living is lower but this would raise prices because more people lived in said areas. Also why should people value time over money?

                Etc.

                I basically think the whole school is largely borne out of a dislike of anything vaguely yuppie.

              • L2P

                Counterpoint:

                There is a difference between whining about how hard you have it and whining about how nothing in your life makes you feel rich even though you clear more money in a year that your parents did in 30.

                I would rather that when you hear those complaints instead of thinking, “Christ. Rich bastards don’t know how bad things are for MOST people,” you instead think, “Christ. Rich bastards that aren’t super, super rich are, somehow, living not that differently than me. Just how ridiculously bad has inequality become that a fantastically wealthy person has legitimate complaints about living hand to mouth?”

                As someone who feels tremendously wealthy when I don’t have to use coupons, I don’t think it’s helpful to attack someone for saying that housing, childcare, and schooling (perfectly normal things to want) eliminate the vast majority of an upper-class income. IMHO it’s better to try to find common ground. If we can talk the 99th percent into seeing the value of subsidized child care, more school funding, and better housing regulation, the battle’s almost done.

                • Rob in CT

                  I hope what I said wasn’t taken as an attack. That’s not my purpose.

                  I do think it’s a bit much to whine about ones expenses when one makes multiple hundreds of thousands per year, no matter where you live, and I’ll hold to that.

                  I agree that well off folks should be able to find some solidarity with people making far less and thus unite to support better policies. I’m with you there, and I tried making a similar point way above (re: we all have to work for a living, so there is some common ground to be had).

                  Part of the problem is that simply pointing out that someone’s struggles pale in comparison to those of others comes across as an attack. The point is not to say “shut up you privileged jerk” it’s to say “if you think you have it bad, consider that well over half the country has it worse!”

                  These arguments usually come up in fights over taxes. Specifically, the top bracket or two of federal income taxes. In such discussions, we learn that $250k/yr in NY is barely scraping by and such a person can’t possibly pay more in taxes. This deserves pushback. That’s all I’m saying.

        • Rob in CT

          Just for clarity, we’re talking about AGI, right? So $130k *after* certain deductions (e.g., 401k contributions).

          This is the thing: when everybody was talking about a tax increase at $250k, I kept pointing out that they were talking about $250k of AGI, and thus the gross income level for many such people is actually higher (max out 2 401ks, for instance, and that’s $35k). Yet this was “middle class.” It was crazy.

  • Don’t look at me. I’m just a heavy-equipment operator.

    • Linnaeus

      Hope you’re not doing it on cough medicine.

      • That would be bad. I don’t want to end up standing in front of the big table with a bunch of FAA and NTSB types sitting behind it.

        • Denverite

          From what I understand from that Denzel Washington movie, a bump of coke and you’ll be just fine unless and until you’re overcome by guilt and confess.

  • Linnaeus

    This just reminds me of how, in this country at this moment, someone making $250,000 a year is merely (or even “barely”) middle class, but a teacher or public sector worker making $60,000/year is unfathomably wealthy.

    • Crusty

      I agree with your sentiment, and not to reopen that debate, but depending on where the public sector worker is, that public sector worker may have a package of benefits that 99% of all private sector workers could never dream of.

      • JustRuss

        Don’t worry, Republicans are doing their best to make sure public sector workers are as screwed as everyone else.

        I happen to be a $60k/year public worker, and in 18 years I’ve seen my benefits get steadily whittled down, even in deep-blue Oregon. Not nearly as badly as those in the private sector, but I’d happily trade them for $250k/year

      • Rob in CT

        Not for long, it seems.

    • cleek

      $60k for a single person puts that person in the 88% percentile!

      http://www.whatsmypercent.com/

      • SgtGymBunny

        Thanks for this link, cleek. Now I get to spend my afternoon demolishing my pride by ranking my income to celebrities. Yay!!!!

        Oprah Winfrey would make your annual income in 1 hour 12 minutes 29 seconds.

        Nice.

  • Crusty

    Last year, for my honeymoon, I went on a trip to a very expensive resort. A place consistently rated as one of the top resorts in the world. Not quite a private hideaway that say, Mick Jagger or Leo DiCaprio rents out for a private getaway, still a normal place you can just go on the internet and book with a credit card, but very highly rated. It was great, and to the extent that anything like that can be worth every penny, it was worth every penny. It was also, barring some extreme, unforeseen good fortune, literally, a once in a lifetime trip. It won’t be in the budget or the schedule for the rest of my life.

    Anyway, while luxuriating in the hot tub of the adults only infinity pool, my new wife and I engaged in small talk with another couple. We mentioned that it was our first time there and it was great. They remarked that they like to try to get there four or five times a year, “because you just have to.” Anyway, me and the wife left thinking, they come here four or five times a year? WTF?

    Not sure what the point is, just thought I’d share.

    • Rob in CT

      First off, congrats.

      Second, yeah, wow. Our honeymoon was a pretty great thing too: a 3 week trip to New Zealand. We hope, someday, to go back and see the other island (South). If we can pull that off after having saved up enough to send our kids to college, I’ll be pleased. The idea of doing a trip like that every year would make my head spin. And yet, it’s chump change for some. Meanwhile, for many, many more, it’s a total impossibility, ever.

  • Crusty

    I’d like to talk about housing costs just for a minute. Not sure how its relevant, but this whole thing made me think of it. I happen to live and work in an area where if you want to live in an area with a “good” commute to the major economic center, i.e., where my job is, and in a “good” school district, whatever that means, the cheapest house you can find is basically $450,000. And its hard to find one of those. Now, in other parts of the country, I realize this gets you a dream house. What’s the point? I don’t know, but I don’t like it. I suppose some people have disposable income to spend on things like vacations, fancy cars and golf, is that they have a $700 mortgage payment instead of one that is $3k.

    • Denverite

      Yeah, in higher cost places with high cost child care, it’s not unreasonable to think you’re going to be paying about $60k a year to live in a modest house and put your kids in child care. About 2/3 of that is deductible, but still, it basically means that you’re going to need to make north of about $70k before you can even start paying for things like food, utilities, insurance, student loans, transportation, etc.

  • Taters

    Can’t live on 3.4 mil in NYC, people!
    But how dare a “poor” person own a cell phone!

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