The poor rich

Norm wonders why so many well-off people don’t realize they are rich.
I’m not convinced by his answer - that folk don’t want the stigma of being thought rich.
Another possible explanation lies in the salience effect. The very rich get a disproportionate amount of attention. There are far more newspaper reports about, say, Wayne Rooney’s salary than there are about the reality of (relative?) poverty. This leads people to think the rich are more numerous than they are, and the poor less numerous. This effect is magnified by conspicuous consumption: when we see fancy cars and big houses, we infer that their owners are rich, when in fact they might only be saddled with humungous debt. It’s also magnified by occupational segregation. Very many middlingly rich people don’t associate with those significantly poorer than themselves*.
It’s also possible that the lower rich are burdened with high expectations. If you think a “middle class” lifestyle means taking two holidays a year or sending your kids to private school, then your outgoings will be as high as your income, and you’ll not feel rich. This process might be compounded by a lack of self-control and bad budgeting.
There is, though, another possibility - that the middlingly rich are not that rich. Take a man on £100,000 a year - an income which, with a non-working wife and two kids puts him in the top 6% of incomes. In one sense, he’s in a similar position to those far further down the income scale. He faces much the same fear of losing its job as those on much lower incomes; the probability of job loss might be lower, but the cost, should it materialize, is higher.
He’s poor, in the important sense that he cannot afford freedom**. Objectively, he is working class.
This vindicates one of Marx’s predictions - that the relative numbers of the working class would increase over time, as the middlingly bourgeois became proletarianized.
 And herein lies a paradox. Although the “poor rich” don’t feel rich, they don’t feel truly working class either, in the sense that they don’t much identify with people on, say, £15,000 a year and don’t have the (organized?) hostility towards the capitalist class  which Marx thought they would eventually get.
Instead, we have the worst of both worlds - people with a sense of resentment and entitlement without class solidarity. And this has some unpleasant effects.
* I’ve long suspected that London Underground is partly responsible for this. If we take the tube, it’s possible to travel from wealthy areas of London to the City without ever seeing poverty.
** He's also poor in the sense that he can't afford a decent house in London.

Comments

[Jimmy Hill]

If a person is poor if they can't afford a decent house in London doesn't this mean that almost any distribution of weatlh that isn't completely egalitarian will mean that some people are poor?

Given that there are only so many decent houses in London even slight inequality will mean that some people will be able to afford to live there and others not.

Finally, your last point is only a paradox if you insist on seeing the world through the lens of class based ideology. :)

[Keith]

Alternatively you could just see this as an example of how people are never satisfied with what they have and want more. This is the classic argument against economic orthodoxy, i.e. both the Left and Right think that growth and more stuff makes you better of in some sort of philosophical sense. "Happier" or "content" when it only makes you aspire to ever more material rewards and social distinctions and makes you jealous of people poorer than you who may be less invested in competition for material success and so apparently better off. And once a minimum standard of life is achieved maybe they are better off. But then can you muster up the balls to jump off the escalator you have been riding for years maybe since private school? Resentment may be at your own lack of courage to make a fundamental change in life.

[BT]

Massively increased inequality makes even Mr 100K per year jealous of the top 1%.

95% of people today say they are middle class - they survive on their wages and have a modest net worth.

Even those who own assets, such as their home, normally also have large debts, such as their mortgage. So their net worth is not high.

To be considered rich today, you must have far more in assets than in debt and be able to live on the income from your assets without working, if necessary.

[gastro george]

The article pointed to by Norm is patently rubbish. It just reflects that, if people think some people should be paying more tax, it shouldn't be them.

Other surveys that directly ask US citizens where they fit in the income spectrum show that people place themselves much higher than their real position - they don't realise how unequal the US is.

[Cahal]

I have thought this for a while, and in my opinion it basically comes down to the financial sector (yet again). Even someone on a 6 figure salary will have a mortgage and probably some other debts, so at the end of the day they are answerable to the financial institutions like everyone else.

[MB]

I found these two posts quite informative: http://krugman.blogs.nytimes.com/2010/09/19/rat-race-america/ and http://krugman.blogs.nytimes.com/2011/01/12/why-does-inequality-make-the-rich-feel-poorer/

[CharlieMcMenamin]

I can't quite see your point regarding the Tube. I'd have thought it more accurate to say that it is *only* in cities with functioning mass transport (which means London in a British context - and Newcastle at a push) that those earning £100k are likely to meet those on,say, £15k on their way to work. Elsewhere, they just drive in their expensive cars.

[charlieman]

@CharlieMcMenamin: "I'd have thought it more accurate to say that it is *only* in cities with functioning mass transport (which means London in a British context - and Newcastle at a push) that those earning £100k are likely to meet those on,say, £15k on their way to work."

Indeed, most London tourist guide books remark about happy banter conducted on the underground. The wealthy converse with shop girls and building workers, only the most snooty hiding behind their newspapers with disregard to the discourse around them. The movie "Pretty Woman" is based on one of such encounters, but its transportation to Los Angeles renders the story less credible.

[CharlieMcMenamin]

Charlieman: yeah, that's quite funny. But you do meet - using a fairly minimal definition of 'meet', as in get crushed next too - people who aren't like yourself on the tube, and you don't in an executive car

[Denny]

I always say if we just educate folks from the beginning we delete all these issues. Get a credit card buy real estate an asset not a TV. Pretty simple in my opinion.

[socialist steve]

'We have the worst of both worlds'

Oh, my heart really bleeds for you.

[Glenn]

Hmm working in London, leave home @ 7.30, back home @ 8pm; its dirty, smelly, you're working for some dictatorial public school boy who knows fuck all, and have barely time to eat lunch. 40 years of this to get a final salary pension which they've diluted down to nowt by the time you claim it (early because you've been restructured out of a job and forced into retirement). Such is life in the civil service!

That's why some of us feel poor. Shit jobs, we can't do anything else and are locked into a dirty, shitty way of life. Oh and we own a tiny home that may be 10 miles from the centre of London, but might as well be 100 miles away (the trains would be faster).

[Jen Love]

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http://www.enablefinance.com

[Mariana]

People are never satisfied with their condition and they are always trying to be much better off than their peers.

[Will Richardson]

Anyone who cannot afford to live from the income their capital generates that is has to earn their income is by definition a worker.

How middle class people are taken in is a mystery!

Some interesting graphs of how labour productivity has lagged earnings, despite the massive increase in top salaries keeping this up higher than it would be otherwise;

http://bilbo.economicoutlook.net/blog/?p=13193