Survey Shows Americans Hold A Skewed Definition of 'Rich'
By JUNE FLETCHER Staff Reporter of THE WALL STREET JOURNAL
Obie O'Bannon, a Washington, D.C., lobbyist, lives in a six-bedroom brick Colonial home. He drives a BMW, sends his two kids to private schools, and vacations in Europe. He's worth over $1 million.
Is he rich? He doesn't think so. And neither do a surprising number of Americans, according to a new survey commissioned by Weekend Journal.
What? A million dollars isn't rich anymore? The economic news these days may be depressing, but Americans' idea of what it takes to be wealthy is more inflated than ever. According to a nationwide opinion survey on wealth conducted as the stock market was sliding, Americans believe you need to make $1 million -- per year -- to be considered "rich." And you also need a lot more than a big house: Think private planes and an in-house movie theater.
In reality, only about 1% of U.S. households bring in that much -- and far fewer own their own jets. But analysts say a decade of unparalleled prosperity has skewed the public's take on wealth. And those high expectations could sharpen the pain for everyone if the economy keeps stumbling. Americans "will have to scale back their expectations," says James Bryan, professor of economics at Manhattanville College. "Real wealth will seem even further out of reach."
For our survey, we asked NPD Group Inc., a Port Washington, N.Y., research company, to poll a representative sampling of Americans from nine regions on how they think the other half lives: How much money does it take to be rich? What are the trappings -- a yacht, an expensive car, a private jet? And what is the greatest benefit that comes with being well-off? To gauge whether their perceptions were beginning to change as respondents' stock portfolios plummeted, we did the test twice -- with 1,863 people in the first week of December, and another 2,095 in the last week of January.
Given that the stock market's peak had passed, we expected to find somewhat humbled views of wealth. Not so: While 70% of the folks in the January survey said they thought the economy was in a downturn, "most didn't feel it influenced their perception of what it takes to be rich," said Judith Hepplewhite, a senior analyst with NPD. They described "rich" Americans as having, on average, a net worth of $2.86 million. And the January jitters didn't seem to matter: On average, a "rich" person had to gross $1.19 million a year, according to the second poll. In December, the magic figure was slightly lower, $1.09 million.
And what about all those possessions the rich are supposed to have? Sure, vacation homes and expensive cars topped the list, but almost a third of those surveyed also expected the rich to own a private plane and a yacht. One-fifth even thought they should have a home movie theater. Neil Snyder, a professor of business at the University of Virginia, calls it a case of outsize expectations. "A Mercedes used to do it; now you need a Bentley," he says. "Now you don't just need a private airplane -- you need a jet."
To be sure, not everyone felt that way. Many respondents said you'd need an annual income of $250,000 or $500,000 to be rich. But more than 10% of those we asked said you needed $3 million a year, and more.
One thing, though, was consistent: Regardless of what people made -- or where they lived -- their idea of wealth far outstripped their own earnings. In New Jersey, Pennsylvania and New York, which had the highest incomes in our survey, respondents said a person needs to make $1.4 million -- 26 times their own mean income of $53,100. Those in the West North Central region (the Dakotas, Nebraska, Kansas, Missouri, Iowa and Minnesota), said it would take $1.3 million -- about 35 times their mean income.
Two French Chateaux
So how did Americans get this inflated view of the rich? Analysts say that 10 years of a strong economy, and tales of overnight stock-market wealth, have made them more aware than ever of how fantastically rich other people can get. Even though the average person is getting richer, the gulf between the super-wealthy and the merely affluent has grown wider.
And it's always easy to find someone richer -- even in harder times. Olivia Hsu Decker, a San Francisco real-estate broker, for example, owns several homes collectively valued at more than $20 million, and grosses more than $3 million a year. She travels around the world, dresses in designer clothes, and often hosts parties for the jet-set in one of her two French chateaux. Yet when she compares her assets to those of her friends and clients, many of whom are billionaires, she sees yachts and private planes she can't afford. "I feel poor."
Like those in our survey, Ms. Decker appears to have formed a profile for the rich: They're the people who get what the rest of us can't. In the mostly landlocked East South Central region, for example, a survey-high 35% of respondents said the rich should have yachts -- compared with just 26% in the coastal Pacific states. "What's a Mercedes worth, status-wise, if yours is simply one of 10 in the neighborhood?" says Frank Howell, who teaches sociology at Mississippi State University.
But it's not all about money. In fact, contrary to the stereotype of Americans clamoring for material things, our respondents actually saw free time as the greatest benefit of wealth. The No. 2 benefit: You can choose not to work.
Still, to get to that point requires a lot more than most Americans have. Standing amid dropcloths and looking at the walls of a huge house he's redecorating, it doesn't take long for Michael Johnson to figure out just how much. "A million a year," says the Fairfax, Va., house painter, "That's what I need."
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The Dow Jones Rich Index
Here's how people in nine regions across the U.S. view what it takes to be rich, according to a survey by NPD Group. Shows average income of respondents, and the pre-tax yearly income they thought it would take to be considered "rich."
* A. West North Central They Make: $38,400 'Rich' Make: $1.33 million Comments: More than a quarter of those living here thought swimming pools make a big splash -- more than in the balmy Southeast.
* B. East North Central They Make: $46,600 'Rich' Make: $1.15 million Comments: 50%of the people here -- more than anywhere else -- thought vacation homes were a staple of the rich.
* C. Northeast They Make: $49,800 'Rich' Make: $1.1 million Comments: To be considered a big wheel in New England,38% said you need a car costing at least $75,000.
* D. Mid-Atlantic They Make: $53,100 'Rich' Make: $1.4 million Comments: To turn heads here, you need to a big income and a net worth of $3.4 million -- the highest in the country.
* E. South Atlantic They make: $50,500 'Rich' Make: $830,000 Comments: Though incomes are high here, respondents set a lower threshold for 'rich.'
* F. East South Central They Make: $46,600 'Rich' Make: $1.15 million Comments: 50%of the people here -- more than anywhere else -- thought vacation homes were a staple of the rich.
* G. West South Central They Make: $52,200 'Rich' Make: $1.21 million Comments: It doesn't take a mansion: More people here than elsewhere would be dazzled by a home just a little larger than average -- 2,225 to 5,000 square feet.
* H. Mountain They Make: $41,100 'Rich' Make: $1.09 million Comments: Would you rather have more free time, or more money? Nationwide, a slim majority went for the cash. But here, 53%wanted the free time.
* I. Pacific They Make: $50,100 'Rich' Make: $1.49 million Comments: Other regions chose free time as the biggest benefit to being rich, but on the West Coast, it's the chance to quit your job (28%).
All results based on a January survey of 2,095 Americans, representative of the overall population, conducted online by NPD Group, Inc. Margin of error is 2%. ------------------------------------------------------------------------
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The Dow Jones Rich Index
What does it take to be considered rich in America? A summary of NPD Group, Inc.'s January survey 2,095 respondents across the nation:
What's the minimum you'd have to make each year (before taxes) to be considered rich?
$1,185,700
Comment: These days, seniors are the only age group that believes you need to make less than a million a year to be rich -- and even they expect an income of $775,200.
The minimum household net worth?
$2,860,000
Comment: You need a fat bottom line to impress the middle-aged -- about $3.2 million. That's about a million more than young adults and seniors expect.
The minimum house size?
5,000 square feet
Comment: Nearly 40% of the highest earners ($75,000+) consider a home between 5,000 and 10,000 square feet big enough to outdo the neighbors.
Which is important to you?
More free time: 46%
More money: 54%
Comment: Are men the greedier gender? They're more likely to value money (57%) than women are (52%).