TEXT OF INTERVIEW
TESS VIGELAND: In an ideal world the holiday season is not about money. It’s about all the other things that make us rich: family, friends, the comforts of home.
But the question of how much money makes us rich took center stage in the fight over tax cuts. And whether having an adjusted gross income of $250,000 and up means you’re wealthy. We produced a special hour-long report on this question in October. And today we’re reprising that hour, with a special twist at the end.
Now let’s clarify a couple of things. First, when politicians were batting around the $250,000 figure, they were talking about what’s left after taxes and deductions. Second, we’re not talking about money and happiness here. Just money. And how much of it makes you wealthy.
Of course by using that word, I’m throwing a wrench into things, because there’s well-off, there’s wealthy, and then there’s rich.
Ted Klontz: Ben Franklin said, he asked the question who is rich? And he answered that by saying he who is content. And then he asked the question, who’s that? And he said nobody.
That’s Ted Klontz. He’s a financial psychologist and author of “Mind Over Money.” Through today’s show we’ll be hearing from him and from Robert Frank, who writes the wealth report blog for the Wall Street Journal.
We started with Frank and the question: Is $250,000 rich?
ROBERT FRANK: No, if you look at the statistics in America, it would make them rich on a national basis, but relative to peer groups, relative to what true wealth is in America, no.
VIGELAND: Ted Klonz?
KLONZ: Well I think if people measure their wealth in terms of dollars probably not, and they probably will never have enough dollars.
VIGELAND: Well, let’s get to the question of relativity, which Mr. Frank you brought up, and this really is a question of perception I think. According to census data in 2008, and I’m going to credit Dan Gross over at Slate for compiling this, median household income nationwide was just over $50,000. And as he pointed out even in the wealthiest areas of the country — San Francisco at $74,000 median income, New York metro $61,000 — $250,000 is way above all of those. How does anyone argue that $250,000 a year is somehow middle-class, Mr. Frank?
FRANK: I think it really depends on what kinds of things you want to buy and what kind of lifestyle you want to have to be “comfortable” or to be wealthy. In New York City, if you want to send your kids to private school, if you want to own a car, if you want to own an apartment larger than 400 sq. ft. All of those things require income probably in the $500,000 or more category. Now if you lived in Omaha, Neb., or South Dakota, $250,000, $300,000 is very comfortable and probably wealthy. So it’s not so much relative to peers but relative to the cost of where you live.
KLONZ: This is Ted, and one of the concepts that we talk about is something we call “relative deprivation.” It’s a sense that people have a judgment of whether they are wealthy or poor based on who they hang around. There was a Harvard study not too long ago where students were asked would you rather make $50,000 while your peers make $25,000, or $100,000 while your peers made $200,000? And the majority of the students choose $50,000.
VIGELAND: But when we are talking about government policy, why should those kinds of external influences — ‘I don’t feel rich’ — play a part in that? Shouldn’t that be very dispassionate and realistic based on the numbers?
FRANK: One of the pitfalls of what’s happened with the discussion of wealth in America today is that it’s becomes very politicized, and I think misrepresented by both the left and right. Look, the government needs money right now for lots of things: for health care, for the deficit, the states need money. I think the term “rich,” the term “wealthy,” has been applied with numbers really to make it politically sellable to voters. And I think that’s really distorted the debate.
Marketplace is on a mission.
We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.
Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?