$500,000 is not middle class
The New York Times strikes again
A loyal Econ Soapbox reader recently sent me the following article from the New York Times, “How a Family of 3 Lives on $500,000 on the Upper West Side,” part of their recent “Affording New York” series, which features individuals living in the Big Apple on vastly different incomes. Now, most people know that a family with two adults and one child and an annual income of $500,000 in Manhattan is going to be significantly different from anywhere else in the world. The amount of money New Yorkers often spend on necessities is in the stratosphere compared to the rest of the nation. The couple interviewed in the article, Anala Gossai and Brendon O’Leary, spend $3,900 a month for their one-bedroom rented apartment and $4,200 a month on childcare. That would be extreme in Middle America, but seems reasonable for Manhattan. It certainly isn’t unusual. The kicker, though, comes about halfway down the article, where Mr. O’Leary claims, “I think we’re middle class for this area. We’re doing OK.” As the Econ Soapbox reader put it, “This has to be trolling.”
I promise you, it is not.
As I’ve written about before, people have lost complete sight of what it means to be middle class. Families living on $140,000 are not poor. Families making $500,000 are not middle class. Not even close. First, the whole idea, as the NYT article says, that “In New York City, wealth is often viewed in relation to your neighbors, and many of theirs make more money,” is totally bogus. Under this definition, anyone can move to a wealthier neighborhood and then define themselves as lower or middle class. Make $1,000,000 a year? Move to a private community in Malibu. All of a sudden you’re poor! This is clearly nonsense. No one has the right to live in one of the nicest neighborhoods (the Upper West Side) on one of the most sought-after islands in the world (Manhattan). What an insane framing.
The double-whammy is that even with this framing, Ms. Gossai and Mr. O’Leary are wrong. They may feel like all their neighbors make more money, but that’s inaccurate. According to the N.Y.U. Furman Center, the median household income on the Upper West Side is $155,710. So even if we using the most cherry-picked statistic possible, this family is still upper class. They make over triple the median household income. This makes sense, given that a different article in the “Affording New York” series highlights Gaya Palmer, a 76-year-old artist who also lives on the Upper West Side on only $36,000 a year. She seems to be doing just fine.
The point is that saying, “We’re middle class conditional on only comparing ourselves to the insanely rich,” is not only meaningless, but it’s deceitful.
There is a difference between upper class and rich, just as there is a difference between lower class and poor. A family making $500,000 a year is definitely upper class, and plausibly rich. Claiming to be middle class because you chose to live in a super exclusive building is no different from claiming to be middle class because you spend $1,000 on Kobe beef every night for dinner. Both housing and food are human needs. Living in an incredibly expensive one-bedroom apartment and dining on steak every night are not. If the apartment in question isn’t all that nice, maybe it’s a bad financial decision. It certainly doesn’t change your income class.
Beyond living in one of the most desirable places on planet Earth, the Gossai-O’Leary family exhibits all the trappings of an upper-class lifestyle. They somehow spent $9,000 on baby supplies last year. Their dog costs another $4,440 a year. A drop-off laundry service is another $1,800 a year, which is used despite having laundry in the building. The family used to take trips to Switzerland, but now trips are “mainly” to visit family - destination unspecified. Most of these are individually defensible as an extreme splurge by a barely-plausibly middle class household. Taken together, however, it paints the picture of a family that is living well beyond the median.
The kicker is that the family is putting their excess cash into long-term savings, to the tune of $10,000 per month! Which is a great thing. Good for them. It should go without saying, however, that middle-class families do not save anywhere close to $120,000 a year. That’s just about equal to the median household wealth of $124,041 across the United States. In one year, this family is saving up the typical amount a household accumulates over its entire life. While paying $46,800 on rent. In fact, having a salary of $120,000 alone would put this family well within the middle class. They could literally support an entire additional household with their income. Again, this family is not rich by Upper West Side standards, but nor are they typical. Even in the rarified air near Central Park, they are upper class. People who live in Iowa, make $300,000 a year, and live in a two-bedroom cabin are not middle class just because they live in a two-bedroom cabin. The same applies to New Yorkers.
This matters because at some point push is going to turn to shove. The United States is going to have to make some tough financial decisions. The Federal government cannot run a multi-trillion-dollar deficit forever. That means either cutting the big welfare programs or increasing spending. The odds of Congress ever slashing Social Security or Medicare/Medicaid are low. There’s no support for it from either party. Thus, it’s going to come to tax increases. Those tax increases cannot only come from the super-rich. Even if you somehow took all of Elon Musk’s wealth and somehow put it towards the budget deficit, it would only keep the government above water for about six months. Not only is the upper class going to have to pay more taxes, but the middle class as well. That means recognizing who is in the upper class, and not credulously listening to people in the top 1% who claim not to be.