I’ve noticed many anecdotal examples of people saying “X” amount of income is “decent” or “isn’t really that much”, when in fact making “X” amount would put you in, say, the 90th percentile of earners.
For example, you’ll hear people on the internet throw the term “six figures” around like you really ought to make six figures, like it’s nothing, when if fact that would put you in the upper echelon of earners. Meanwhile, you might hear people talk about a figure like $40,000 like you could barely survive on it, yet it’s more like the average income for full-time workers over 25.
Has anybody else noticed this phenomenon? What do you attribute it to? Is it just another example of “everybody on the internet is rich and has an IQ of 150”? Or are we really so spoiled with our first world problems that to not be in the top 5 or 10 percent of earners is considered a failure?
After paying for private school, tennis lessons, the mortgage on two homes, the redecorating we did on the vacation home, and the 3 weeks we spend in Hawaii each year… there really isn’t that much left over!
I’m always amused by people saying things like “100,000 isn’t really enough if you live in Manhatten” (or some other place in the US with high cost-of-living).
Obviously cost-of-living does effect how much your salary is really worth, and that factor should be considered in discussions of income. But the effect isn’t anywhere near that extreme, the median income in Manhatten is under 50k.
Yes. When people say things like that, what they’re really saying is “we make X amount of money, but we struggle to not spend every penny of our paychecks”- which may be true. But that’s because of choices they make- sure, $250,000 goes fast if you have a 3 BR condo in a high rise in Manhattan, drive a Lexus and a BMW, send 2 kids to private school and are paying for another one in law school… but those are all choices. If this hypothetical family got rid of one of the cars, put their kids in public school, made their law-student kid pay for his/her own tuition, and/or moved to Brooklyn, suddenly they can retire in 10 years on that 250K.
If you were a doctor, lawyer, professor at an elite school, or in some other well-paid profession, and you were surrounded by a society of others in similar professions, then a six-figure income would be the norm. You would naturally assume that almost everyone you met had a six-figure income. You would expect that your children would earn a six-figure income upon growing up. You would have little reason to think about the travails of those earning $40,000 a year.
You might be vaguely aware that there are classes of people such as waiters, bus drivers, plumbers, and construction workers who earned less than you, but their social reality would be so far removed from yours that you wouldn’t have much reason to think about them.
iiandyiiii made a good point. America’s savings rate is remarkably low. I attended a lecture by a psychologist from Rutgers recently who made the point this way: “I visit homes in Camden or Newark where the family has four children and they’re worried about whether they’ll have enough to feed their youngest child. Then I visit homes in Morristown where the family has four race horses and is worried about whether they’ll have enough to feed their youngest race horse.” Everybody, regardless of income level, is pressured by society to spend until they drop, so even the rich feel that they’re living on thin ice and couldn’t possibly make due with less.
If you’re a software engineer in the Bay Area and you’re not making six figures after 5 years, it’s reasonable to ask what’s going on.
If you’re working construction in rural Tennessee, making half that would be great!
But, people making the norm don’t post about it on the internet, or discuss it with their higher-paid friends. And many people are only friends with people in similar careers making similar money, which is why it’s sometimes hard to consider how people live ‘on the other side of the tracks’.
Sometimes I think it’s a good experience to have been really poor at some point in your life, so you have perspective on how you’re doing later in your career.
I think a big part is also that most households these days have more than one earner. So when someone asks “Wow, how do you support your family on your measly $30k/yr?” the answer is often “With the help of the $20k/yr my spouse pulls in.”
Any time you have a discussion about income, especially online, you’ll have some people that are talking about individual income, and some people that are talking about household income. The latter will be thinking of larger numbers than the former, and because people don’t always define their terms precisely there’s confusion.
I think at least some of this kind of talk comes from young professionals who have student loans that reduce their discretionary income substantially, and who are saving proportionally more than their lower-earning counterparts for retirement.
If you take, say, 25% of their income for retirement savings instead of 10% that their lower-income peers are saving, and $25,000 per year in student loans, that $100,000 paycheck starts to look a lot more like the $65,000 paycheck by the terms of measurement our culture uses.
That’s not to say they aren’t getting something for that money. Obviously, they’re getting the ability to make the money in the first place (the loans) and eventually the retirement benefits. But in terms of how most people measure their financial success–cars, where you live, discretionary spending, etc.–it won’t feel that different.
The other thing is that private schools are not just a luxury choice like any other. The need for a private school varies based on where you live, and if you live in a city with poor public schools (which are disproportionately where the high-paying professional jobs are) then private school starts to look like less of a luxury and more of a necessity. Rationally or irrationally, many young professional parents regard private school as a safety issue for their kids, not as a happy discretionary purchase. Again–it’s not that they aren’t getting something for their money–its just that paying to have a school without daily violence isn’t how most people yardstick themselves in terms of income.
I think a lot of it is due to what the perceived income to support a certain lifestyle is.
For example, to have a similar lifestyle to what our parents had in say… 1985 (2 cars, home in suburbs, cable TV, VCR, 2 kids, maybe a computer of some sort), it takes a whole hell of a lot more than $40k per year. I’d say that a household income of 80-100k is probably what’s necessary these days for something similar.
In the context of that kind of lifestyle, 40k is chump change by comparison. Even a single person making 40k per year is probably struggling somewhat unless they’re really cutting some costs somewhere- housing, car, entertainment, etc…
Of course, 2 earner households have been the norm for a long time now, so that 80-100k household income is not at all that uncommon, but it’s still somewhat uncommon for only one person to make 6 figures. Even most lawyers don’t actually make that much money. A lot do, but a lot make in the 80s and 90s and still have to put up with the craptastic working conditions for it. (personally, I wouldn’t put up with being a lawyer for anything less than 250k a year, but that’s me)
I guess the most distilled form of my question is, how can so many people view a 90th or 95th percentile income as anything other than fantastic? I guess maybe everybody on the internet is in the 50th percentile and up? It just makes me chuckle sometimes. I actually feel bad for somebody that thinks, say, $100,000/year isn’t that much.
Given that the median global income is a few dollars a day, how do you view even the lower middle class in America as anything but fantastically wealthy?
The answer isn’t completely the same, but there’s a lot of overlap. It has to do with the cost of living, standard of living, and who one is comparing oneself to.
Just because lots of people are doing worse doesn’t mean one has to be thrilled with one’s lot. The vast majority of people are dead, and I’m alive, which puts me over them, but I still have my complaints and aspirations…
What does that say about the country if 40k is also about average?
I’m thinking more in terms of individual income. Often this trope I’m asking about here comes about when people are discussing potential careers, and there’s always at least one person that says something like “oh, you should be a doctor or petroleum engineer, otherwise you’ll be poor”.
I guess if all of this really is true, then it’s a pretty sorry state of affairs when the cost of living is so high that a top 10 percent income doesn’t make you “rich”.
Part of it is what “that much” buys. $100k - or even $200k - wouldn’t cover two mortgages, private school for two kids, redecorating the vacation home and three weeks in Hawaii a year. Its plenty to have a nice house, drive a nice car, go on vacation, and eat out while saving for retirement and college for the kids - but you aren’t sending your 1.8 children to Westover or Andover while raising Arabian horses, shopping at Gucci and driving a Tesla. That’s reserved for the 1% - not mere 5%ers. The gap between the 95% and the 99% is much bigger than the gap between the 50th percent and the 95%. So often when people say “it isn’t that much” they are trying to correct the impression that 200k a year has you flying first class while drinking Dom. (And it can, but not as a regular thing or you’d be broke).
(My daughter just got a sales piece to go to Westover, we laughed and told her her college fund was for college, not for high school. But she has a college fund, which if we had median incomes all these years, she wouldn’t - or it wouldn’t be nearly as much).
It’s a fairly new phenomenon my friend calls the “working rich” vs wealth. You can afford a fair number of luxuries as long as you keep working. But as soon as something happens - you lose your job, you get hospitalized, etc - BAM, you lose a lot of your material wealth. There’s a fair bit less certainty in lifestyle unless you become independently wealthy. Income inequality can be a real pain.
The idea of “ideal income” tends to be tied more strongly to acquisition than any other index of wealth. That is, you’re only “earning enough” or “wealthy” or “doing well” if you can buy what everyone else in your income bracket is buying.
If life wasn’t consumption-centric, the notion of income levels would change radically.
This is so true. I don’t know why, but I’ve always felt that if you have enough to put a roof over your head and buy food and medical care, that’s a happy life and you’re doing pretty darned well. I guess having this sort of attitude is nice, because anything more than comfortable subsistence will feel like a bonus.
I’m not so sure. A lot of the people I know making six figures but feeling like it’s not enough are thinking about how to take care of their parents who lost their retirement funds in 2007; trying to afford to take their kids out of a public school that can no longer afford a music program (or paying for a music teacher); and trying to plan for retirement in world in which we all live to be 120 (and social security and Medicare become means-tested).
That’s not what I think of as “consumption-centric” even though all of those things can be described as buying goods.
The 90th percentile is about 140k in household income. That is not impossible for a 2 income household if both are college educated and have a lot of experience. But aside from that, its not easy. Making it on one income would require you either be in one of the top 20 paying careers (mostly medical fields), work 80 hours a week or be a really successful entrepreneur.
According to thisonly about 30 careers pay $50/hr or more, of those about 16 are medical fields, the rest are various kinds of jobs in engineering, law, finance and business. $50/hr at 40 hours a week is 100k a year. But a lot of those people work more than 40 hours a week.
Fundamentally I guess it is for the same reason as a society we think everyone who doesn’t look like a model is ugly. Humans are by nature negative in their outlook in my view.
However like you said, maybe people on the internet are generally doing better. Because poor people vote less the median and average income of voters is higher than the national median and average. Perhaps among people who frequent places on the internet to debate ideas the median is higher.