What's Different About Today's Rich?
"Let me tell you about the very rich. They are different from you and me.... They think, deep in their hearts, that they are better than we are. They are different."
- F. Scott Fitzgerald
The quote from a short story, "Rich Boy," by this American author notes one characteristic of perhaps some of the rich. Economist Edward Wolff has more to say about the demography and financial status of the more-than-prosperous. For one thing, the rich of today are more likely to have earned their wealth with entrepreneurial activity. Those who live high by clipping bond coupons are a shrinking lot.
Half of the wealthy inherit wealth; Their average inheritance was $782,000 in 1992. "They aren't starting from nothing," notes the New York University professor, who is perhaps the nation's top authority on the well-to-do.
Responding to Fitzgerald, author Ernest Hemingway agreed the rich are different: "Yes, they have more money," he wrote. Indeed they do. Look at the top 1 percent, about 1 million American households. Their average wealth in 1995 was $7.9 million. Their average income was $625,000.
Asked to describe a typical rich person, Professor Wolff says he is 55 to 74, a college graduate, perhaps with a post-graduate degree, white, married, working full time, self-employed, and healthy.
Many find the wealthy fascinating. The book, "The Millionaire Next Door," by Thomas J. Stanley and William D. Danko, has been a bestseller for months.
Considering that interest, readers may not mind a few statistics. They show that the rich are changing in their characteristics. The analysis comes largely from an academic paper Wolff prepared for a recent conference at the University of Michigan Business School. He uses data for 1983 and 1992, not having pulled out detail from more recent data for 1995. The Census Bureau surveys income and wealth every three years, with the latest scheduled for this year.
* Women are just starting to enter the ranks of the rich on their own.
In 1992, 2 percent of the top 1 percent in income were never-married females. There were none in 1983. Seven percent in 1992 were women separated, divorced, or widowed. The number of working wives rose as a share of the nonelderly, two-earner, married families - from 36 to 40 percent among the wealthiest families and from 40 to 48 percent among those households with top incomes.
* The rich are getting younger.
Between 1983 and 1992, the percentage of top wealth holders under 45 rose from 10 to 15 percent. The percentage of top income earners aged 35 to 44 rose from 16 to 26 percent. Salaries on Wall Street, in entertainment, and in professions like medicine, law, and accounting have created "a whole new class of young wealthy individuals," Wolff notes.
* Asians and Hispanics are creeping into the very rich community.
Between 1983 and 1992, non-Hispanic whites fell from 97.9 to 94.2 percent among wealth holders; non-Hispanic blacks fell from 0.5 to 0.1 percent (despite the Michael Jordans of the sports world); but Hispanics increased from zero to 0.9 percent, and Asians from 1.6 to 4.6 percent.
* More of the rich are taking it easy.
The proportion of full-time workers among the nonelderly wealthy fell from 86 to 77 percent in 1983-1992. Part-timers rose from 4.6 to 8.6 percent, and retirees from 3.6 to 9.6 percent.
* More rich families work in finance, insurance, or real estate - 22 percent in 1983, 36 percent in 1999.
* The self-employed - largely those owning their own businesses - almost doubled from 38 to 69 percent. These are the "new rich," Wolff says.
* Some 56 percent of the wealthiest described themselves as having excellent health in 1992. That compares with 34.6 percent of the nonrich.
The inequality of wealth continued to grow from 1993 to 1995. Whether that has continued to the present won't be known for a few years. But in 1995, the wealth of 18.5 percent of all households was zero or negative. That was up from 15.5 percent in '83. These families owed more in credit card debts, mortgages, etc, than they owned in cars, houses, certificates of deposit, or other assets.
Oh yes. The richest 10 percent still own 88 percent of directly owned stocks and mutual funds.