Thursday, September 9, 2010

Do You Earn Less Than Your Neighbors?

When I walk around my neighborhood, especially in the evening when the comfortably appointed living rooms and the Tuscan-inspired kitchens are lit from within, I often think, where do these people get their money? Within my zipcode, I live on the other side of the tracks.  The good bit of the other side, but nevertheless, that's not where I choose to walk the dog. 

So when Slate's Timothy Noah, in his series about the growing income gap in the United States, gave me a gadget that allowed me to see how I measured up, income-wise, to my fellow zipcode members--as well as to the rest of the country--I was curious, if a little apprehensive.  And the results were:

  • I make only about 65 percent of what the median household in my zipcode does;
  • And yet, I make more money than 72 percent of the country.
This means that:
  • I live near a lot of rich people, which I knew; and
  • Because of this, I see myself as below average, which is sort of like making C's at Harvard
(Click here for the post with the gadget)

Keeping up with the Joneses is not a new idea, by which I don't mean it originated in the 1950s, but that we'd still be living in grass huts or igloos if we humans weren't by nature competitive.  But as Juliet Schor pointed out in her prescient book, The Overspent American, in 1996, most Americans don't compare themselves to their direct neighbors any longer.  Unlike me, they aren't walking their dogs in the evenings, but are at home keeping up with the Kardashians or the Real Housewives. Schor wrote in 1997 that people were comparing themselves to the characters on Friends, but although that seems like ancient history in terms of popular culture, it's even more true now than then.   

It's not when, as Schor points out, that people making $70,000 a year compare themselves to people making $90,000 that the problems occur.  In fact, it might make for a rather healthy striving to earn more, although for the next few years not many of us can hope to make a pay jump. 

The problem occurs, Schor writes, when someone who makes $30,000 compares herself to someone who makes nearly six figures.  That lower earner will put herself into debt to keep up---think leasing a car, Tory Burch flats.  Move the numbers up, and that means private school and a rented summer house. And the trappings of the good life, to which we all are apparently supposed to aspire, are more conspicuous than ever, no matter where the Dow sits. 

Schor cites another book, The Millionaire Next Door.  It, too, was written fifteen years ago, and it shows what happens to those who focus not on the consuming, but on the accumulating of wealth.  These guys--back then it was mostly guys, and I'd love it if Thomas Stanley would write a sequel, if he's in fact still alive, to see if things have changed in terms of demographics--bought modest bungalows in established neighborhoods, domestic sedans with cash, and spent their money only on educating their children.  These people didn't care about their neighbors' money, though I wonder how they (or more interestingly, their wives) would have done in the face of reality shows, the bling of which persists even as the economy and those within it struggle. 

The best stat he showed was that the average net worth of a lawyer is less than that of a teacher, because teachers don't need the things lawyers do: high end foreign cars, custom made suits, and kids in posh private schools.  Which goes to show, it's not what you make that matters, it's what you spend, or rather what you don't.  Easy to say, but difficult in practice, especially when you turn on the t.v.    

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