What is the Middle Class in New York City?
A student asks:
I need Ben’s take on a NYT story related to a “middle class” couple making $500k living in NYC. As someone who works in a flyover state I’m not completely up to speed on what it’s like to live as a respectable person on the coast but these people can’t be determined, can they?
This is a story in the New York Times that made many people angry on the Internet:
Normally, when you see a story like this you should think it’s a rant. Newspapers, blogs and newsletters have all learned that one of the best ways to get attention is to annoy people.
$400k/year is only enough to live paycheck to paycheck in San Francisco!
Here’s how AI will cause the Great Recession and 20% unemployment!
60% of people can’t come up with $400 for emergency expenses!
Stories like this are widely shared because they validate your own priorities for other people, anger others and are drowned out by people who like to refute extravagant claims. Rage bait actually works.
However, the New York Times has been doing a series on what it’s like to live in New York City at various income levels:
I actually thought this piece about a family making $500,000/year living in NYC was interesting because people rarely talk about their budgets openly like this.
They spend $4,200/month on day care. They rent a one-bedroom apartment for $3,900/month. They live across from Central Park but it’s only 800 square meters, they sleep with their son and have a cramped kitchen with no sunlight.
However, they enjoy living in the city and are happy to make these trades:
“When we talk about the possibility of moving to the suburbs, we are both really afraid,” said Mr. O’Leary. “I don’t like driving, Anala doesn’t. I feel like we’re going to get stuck. We really appreciate being able to walk everywhere.”
These kinds of decisions fascinate me.
Some people look at these numbers and think that these people must be brave. Some understand that if you want to live in a big city like New York, it costs a lot of money and you don’t get a lot of space.
Here is the part with the people holding hands:
They make half a million dollars a year and consider themselves middle class. When rich people describe themselves as middle class people that is bound to alienate people and for good reason. This family is not middle class. They are rich.
Their income puts them in the top 2% of earners in America. They know it save $120,000 a year more than the median income in all of New York City (about $80k).1
So why don’t they do it to hear rich?
They live in a very expensive place. But that’s a choice. They don’t want to live in the suburbs.
The main reason why they feel middle class is because they are surrounded by people who are rich or richer than them.
The Upper West Side has a much higher median income than the rest of the city:
About one-third of residents make $250k or more.
It is estimated that there are now 400,000 millionaires in New York City, more than any other city in the world. That number has increased by 45% over the past decade.
My favorite line from the show Fleishman is in trouble when Jesse Eisenberg told Claire Danes, “Excuse me, I make about $300,000 a year. [Manhattan].”
Almost no one thinks about wealth completely these days. Wealth is related to your peers, your neighbors and the people you see living lavishly on social media.
If you make a lot of money but choose to live in the same neighborhood as other rich people, that doesn’t make you middle class.
Some people buy boats. Some people take expensive trips. Some people send their children to private schools. Some people get memberships in country clubs. Some people want to live in walkable cities with lots to do.
Those are all luxury choices.
That is why wealth is not a number; it’s a concept.
We touched on this question in this week’s Ask New Combination:
We’ve also included questions about how much to save for retirement in your 30s, why you should or shouldn’t own bonds, how veterans should save their money and how to make up for lost time if you start saving for retirement too late.
Further reading:
Millionaires & Fraud
1And I think they save more than that in retirement accounts. And a good rule of thumb for the middle class is around two-thirds to double the median income. So let’s say it’s $160k in NYC.
