I'm not sure why the article is so obsessed with this "six-figure salary" thing (which seems to mean exactly $100,000).
$100k 30 years ago after inflation is $288k now. Anyone earning $288k now is definitely rich enough to "live the american dream" (in the article they price that at $130k).
It would have been a much more interesting article if it had just focused on cost of living increasing faster than inflation
"I'm not sure why the article is so obsessed with this "six-figure salary" thing"
Because people ascribe meaning to "large numbers" that are unmoored from the actual objective context and meaning of those numbers.
See also: people's penchant for using totals, sometimes even lifetime totals, to argue that certain projects (public or private) are too expensive/boondoggles/etc. They ought to be looking at ROI, rates, per-capita-rates even -- but they don't. Because they know the audience has attached emotional meaning to "millions" and "billions".
There's some justification for them using the 100k number. They bring up that child tax credits and health care subsidies are phased out around that point, as are IRA contributions.
It would have been a much more interesting article if it had just focused on cost of living increasing faster than inflation
I nearly fell out of my chair laughing at this line. Crazy Austrian folks call the increase in the supply of money "inflation" but that's not what most people think of when you say the word. The vast majority of people would agree that "inflation" and "the CPI" are basically the same thing. The CPI is the Consumer Price Index. It is a measure of the cost of living as set forth by the BLS here in the US.
So what you just said is that the cost of living is going up faster than the cost of living! That clearly can't be true, so there's a problem. The actual cost of living is going up faster than the government's measure of it. Okay, that's better. But it's still problematic.
If the government's measure of the cost of living is going up slower than the actual cost of living then a lot of people are getting screwed. Anyone on a fixed income that's inflation adjusted like Social Security or a pension. Anyone buying a TIPS bond, anyone who gets regular cost-of-living raises so that their salary keeps up with their expenses, etc.
If the CPI number was accurate then all these things would be OK. But since it seems like it's not the fact that huge swaths of socioeconomic activity is tied to these indicators is really pretty tragic.
I think Carl Sagan captured the essence of why these kinds of things take forever to get found out:
"One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back."
I think they're poking the perception even today that people have. If you say to someone that you earn 100K they might claim that you're wealthy or rich, but the as the article states it doesn't automatically mean that anymore.
I'd agree with you that $288K makes someone wealthy or rich, but human perception and the reality aren't often one in the same.
You're confident that the problem isn't that inflation is being intentionally understated via the government having altered the CPI to mask inflation? (ie that the cost of living is showing the true rate of inflation)
So pick another index. How about the Billion Prices Project [1] from MIT. Oops, that pretty much tracks the CPI. Guess maybe the CPI isn't intentionally understated.
You're still not poor though. In fact, if you have a million dollar net worth with expenses covered by your current income, you're definitely in the "rich" category compared to 99% of the US.
If you own a family home in some neighborhoods, you have a million dollar net worth. Even if you inherited it from your folks and minimum wage goes to property taxes instead of rent.
Granted, you could sell the home and join the regular rat race with everyone else, but what's the point of being frugal if you can't leave the surplus to your kids?
Comments
I'm not sure why the article is so obsessed with this "six-figure salary" thing (which seems to mean exactly $100,000).
$100k 30 years ago after inflation is $288k now. Anyone earning $288k now is definitely rich enough to "live the american dream" (in the article they price that at $130k).
It would have been a much more interesting article if it had just focused on cost of living increasing faster than inflation
Because people ascribe meaning to "large numbers" that are unmoored from the actual objective context and meaning of those numbers.
See also: people's penchant for using totals, sometimes even lifetime totals, to argue that certain projects (public or private) are too expensive/boondoggles/etc. They ought to be looking at ROI, rates, per-capita-rates even -- but they don't. Because they know the audience has attached emotional meaning to "millions" and "billions".
There's some justification for them using the 100k number. They bring up that child tax credits and health care subsidies are phased out around that point, as are IRA contributions.
I nearly fell out of my chair laughing at this line. Crazy Austrian folks call the increase in the supply of money "inflation" but that's not what most people think of when you say the word. The vast majority of people would agree that "inflation" and "the CPI" are basically the same thing. The CPI is the Consumer Price Index. It is a measure of the cost of living as set forth by the BLS here in the US.
So what you just said is that the cost of living is going up faster than the cost of living! That clearly can't be true, so there's a problem. The actual cost of living is going up faster than the government's measure of it. Okay, that's better. But it's still problematic.
If the government's measure of the cost of living is going up slower than the actual cost of living then a lot of people are getting screwed. Anyone on a fixed income that's inflation adjusted like Social Security or a pension. Anyone buying a TIPS bond, anyone who gets regular cost-of-living raises so that their salary keeps up with their expenses, etc.
If the CPI number was accurate then all these things would be OK. But since it seems like it's not the fact that huge swaths of socioeconomic activity is tied to these indicators is really pretty tragic.
I think Carl Sagan captured the essence of why these kinds of things take forever to get found out:
"One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back."
I think they're poking the perception even today that people have. If you say to someone that you earn 100K they might claim that you're wealthy or rich, but the as the article states it doesn't automatically mean that anymore.
I'd agree with you that $288K makes someone wealthy or rich, but human perception and the reality aren't often one in the same.
You're confident that the problem isn't that inflation is being intentionally understated via the government having altered the CPI to mask inflation? (ie that the cost of living is showing the true rate of inflation)
So pick another index. How about the Billion Prices Project [1] from MIT. Oops, that pretty much tracks the CPI. Guess maybe the CPI isn't intentionally understated.
[1] http://bpp.mit.edu
Same thing with millionaires. A million dollar net worth is not the same thing it once was.
You're still not poor though. In fact, if you have a million dollar net worth with expenses covered by your current income, you're definitely in the "rich" category compared to 99% of the US.
If you own a family home in some neighborhoods, you have a million dollar net worth. Even if you inherited it from your folks and minimum wage goes to property taxes instead of rent.
Granted, you could sell the home and join the regular rat race with everyone else, but what's the point of being frugal if you can't leave the surplus to your kids?
Most net worth calculators (e.g. to be an accredited investor) exclude the equity in your primary residence.
Which doesn't exactly make a ton of sense, unless you are trying to restrict to liquid assets.