News flash: Money can't buy happiness. Too bad, because Seattle has a lot of it. Money, that is. While just over 6 percent of King County households...
News flash: Money can’t buy happiness.
Too bad, because Seattle has a lot of it. Money, that is.
While just over 6 percent of King County households have incomes in excess of $200,000, that’s 50,000 of them: enough moneyed heads-of-household to jam Safeco Field.
And some 70,000 (Qwest Field-filling) households have a net worth of at least $1 million, defined as the value of their assets (home equity, savings, cars, etc.) over debt. That means there are five times as many “millionaires” in King County as there are school teachers.
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Of course, as Dr. Evil learned in “Austin Powers,” a million ain’t what it used to be. Pay off the mortgage on a Queen Anne bungalow, throw in savings and a fat IRA, a couple cars, maybe a vacation house or a rental, and you’re there.
So are you happy?
“Who is rich?” Benjamin Franklin asked. “He who is content.”
“Who is that? Nobody.”
The mass of humanity live lives of quiet desperation, chimed in Henry David Thoreau. “Money sometimes costs too much,” added his pal Ralph Emerson.
To which actress-philosopher Bo Derek countered: “Whoever said money can’t buy happiness didn’t know where to shop.”
With philosophic swords thus crossed, Pacific Northwest magazine has set about doing some stories exploring the impact of Seattle’s exploding wealth, for better and worse. To begin, just how green are we? (We mean money green, tree huggers.)
Scarborough Research polled the populace and estimates that 4 percent of King County’s homes, or 17,000, are worth $1 million or more. Some 12 percent of us have a luxury car and full-service stockbroker, 7 percent a powerboat or sailboat, and approximately 113,500 of us took five or more vacations outside the United States during the past three years.
Many of the rest of us think we’re getting there. In a 2003 Gallup Poll, only 2 percent of Americans called themselves rich, but 31 percent said it was very or somewhat likely they would be rich. Among 18-to-29-year-olds, a full half said, with quintessential American optimism, that they expected to become rich some day.
So, what does “rich” mean these days?
“A WEALTHY MAN is one who earns $100 a year more than his wife’s sister’s husband,” columnist H.L. Mencken once cracked. Or, a percentage point more than the dude in the next cubicle.
It’s more complicated than that, of course: Man is not created equal by salary alone. Compared to the office pecking order, our personal wealth is far more affected by our marital status, number of children, age, health, needy relatives, charitable giving, when we bought our house, inheritance, spending, investment choices and plain dumb luck.
And despite our dogged optimism, we’re far more likely to be poor than rich. Some 170,000 of the county’s 1.8 million live below the poverty line, the government reports. (That’s below $13,690 for a household of two.) But overall, the county is richer than the American average. In 2006, median King County household income was $65,940, compared to the nation’s $48,201.
But wealth in the country is climbing so fast that Wall Street Journal reporter Robert Frank, who covers the phenomenon, called his book about the trend “Richistan.” By the net-worth measurement, 9.3 million American households are “millionaires.” The Census Bureau says that in 2005, 23 million American households earned more than $97,032. King County households bring in princely sums, but they’re not king. It ranks a modest 59th among U.S. counties in households earning more than $200,000 a year. But among larger cities, Seattle ranked seventh.
And here at software central, we’re partly responsible for the greatest concentration of wealth at the top since 1928, just before the Great Depression.
Economists recently calculated that the top 1 percent of Americans (who had annual incomes of $348,000 or higher) own 38 percent of the wealth, according to “Wealth and Our Commonwealth,” a book by Bill Gates Sr. and Chuck Collins.
By comparison, an estimated 40 percent of Americans don’t have one month’s salary in savings. While the various economic brackets gained in roughly equal percentage amounts from World War II to 1968, since then the trend of the rich getting richer and the poor getting poorer has steadily accelerated.
Why? Part of the reason is simple arithmetic. The poor rent, the middle are buying, the rich own. The poor pay interest; the rich earn it. Unless government or some calamity intervenes, over years and decades the compounding difference becomes overwhelming.
Part is the simple history of the Industrial Revolution. America has gone through spurts of wealth concentration every time technology leaped ahead — the first big one in the early 19th century, when Thoreau groused, “A few are riding, but the rest are run over.” Peaks in wealth concentration occurred in the post-Civil War Gilded Age that gave rise to unions and trust-busting, the Roaring Twenties that resulted in the Depression and New Deal, and today with the computer revolution.
Another reason is that too many of us are better at consuming than saving: We spend too much to ever get rich.
We now have nearly as many cars as people in King County, and a Honda Civic today is the size of an Accord two decades ago, and fancier to boot. Median home size has risen from 1,575 square feet in 1973 to 2,275 today. Appliances unknown in 1950 are now standard in most homes: dishwashers, clothes dryers, televisions, computers, food processors. Now the fad is to jump from Kenmore to Viking. Mom’s at work but pays for day care. Health costs are being passed along. Tuition is crushing. It’s expensive to be an American.
And some of it is your government at work. While a single taxpayer will pay a 25 percent tax rate on earnings between $31,850 and $64,250, a millionaire pays just 15 percent on investment capital gains, down from nearly 40 percent in 1978. The rich don’t give all those big campaign contributions for nothing.
Top income-tax brackets have oscillated wildly, hitting 90 percent in the 1960s, but since 2000 have dropped to 35 percent. The rich do pay most of the taxes — the wealthiest 10 percent pay nearly 70 percent of all income taxes — but they also get most of the tax breaks, from a Congress and presidency they finance.
There are two arguments about this. Stop us if you’ve heard this before.
One, voiced generally by Democrats/liberals, is that government has to intervene to equalize some of the advantage that comes from inherited and accumulated wealth. Graduated taxes, a minimum wage, social security, welfare, public schooling, affirmative action, tuition aid and estate taxes all level the playing field because too much inequity discourages hard work and — if unaddressed — eventually winds up in revolution. Sharpen ze guillotine!
Uncle Sam’s income redistribution is not as big as you might assume. After all the taxes and transfer payments are added in, the top 20 percent of Americans lose just 3 percent, the bottom gains only 1. Big deal. According to The New York Times, the top 300,000 Americans in 2006 earned as much as the bottom 150 million. Not exactly communism.
The other argument, generally voiced by Republicans/conservatives, is that the rich are necessary. Wealth trickles down, or lifts all boats, by driving the economy. Not only do the rich spur ambition by example, and require it by competition, but they provide capital for the investment that creates jobs. The United States has more inequity than Western Europe, but more innovation and growth as well. The rich pay for cutting-edge technology by purchasing luxuries that soon become standard. From power car windows to the iPhone, the rich pay an early premium to adopt stuff the rest of us will get by and by.
Who’s right? Even as you read this, legions of think-tank economists are grinding out the statistics that candidates will bombard you with during the coming election year.
MEANWHILE, HOW are you doing?
By many standards, pretty good. Billionaire Warren Buffet said all Americans today live better than the richest man in American history, who (in share of overall national wealth at his time) was John D. Rockefeller. From home heating to dental care, jet travel to broadband entertainment, interstate freeways to sensible shoes, we live lives Rockefeller couldn’t dream of. That includes an average-life-expectancy gain of 30 to 40 years beyond what people had in Rockefeller’s late 19th century.
Adjusted for inflation, American median per capita income is double that of 1967, triple that of 1950.
If you earn that median King County income of $65,940, you are richer than 99 percent of the world’s population, according to the calculation of globalrichlist.com. About a billion people earn a dollar a day or less.
But some of us earning that median are obsessed with those 52,840,029 people in the world who are making more. Money is a way to keep score.
Washington has seven of the 400 richest Americans, by the calculation of Forbes magazine, including No. 1, Bill Gates. You had to have at least $1.3 billion to get on the list at all. Depending on the price of Microsoft stock, Gates (with $60-odd billion) on any particular day may or may not still be the world’s richest man, compared to Mexican tycoon Carlos Slim Helú. (Note: More than half Gates’ net worth is now outside Microsoft, because he sells 20 million shares every quarter to diversify to other investments, according to Forbes.)
Both Gates’ wealth and that of former partner Paul Allen is down from their peaks in 2000, but even after losing half his fortune, Allen still checks in at No. 11 on the Forbes list, at $16.8 billion in 2007. Other Washingtonians listed are Microsoft exec Steve Ballmer, Amazon founder Jeff Bezos, cellphone pioneer Craig McCaw, sunglasses creator James Jannard of San Juan Island, and real-estate titan Tim Blixseth.
Gates and Allen are examples of the wealth effect: Microsoft created thousands of millionaires, Gates has become the biggest philanthropist in history, and Allen has not only given away $800 million, he has changed the face of Seattle with office buildings, a stadium and more.
But billionaires are pretty rare. So are the celebrities and athletes whose contracts we often read about but who account for only about 3 percent of the super-rich. Most wealth is held by people we’ve never heard of.
So are they happy?
We put the question to Gates and Allen, but both declined to answer. So instead we’ll report that in 1985, researchers for the Universities of Illinois and Pennsylvania measured satisfaction from respondents on the Forbes 400 list and Massai cattle herders in East Africa, and found the two groups were almost equally content.
(It’s true. I once heard a Massai speak locally, and he remarked he found our hard, angular, cluttered and glassy homes less comfortable than his hut in Africa. No offense.)
For the population as a whole, we are unhappy to report that the answer to the “does money buy happiness?” question is, “Not necessarily.”
A correlation between wealth and happiness does exist. The percentage of Americans reporting themselves as “very happy” climbs from 22 percent in families with less than $20,000 income to 42 percent in families earning from $50,000 to $90,000. But then it plateaus at just 43 percent after that.
Similarly, a 2005 study by researchers Glenn Firebaugh and Laura Tach showed we tend to be more satisfied when we earn more than our peers. But once you get beyond beating the guy in the next cubicle, the effect isn’t strong: You just don’t compare yourself to peasants in Peru, or the Forbes 400.
For example, the overall proportion of Americans reporting themselves to be “very happy” has stayed fairly flat — between 30 and 40 percent in various polls — since World War II, despite a tripling of real per capita income. Our growing wealth really hasn’t changed our overall satisfaction with life.
Nor is the trend strong when comparing rich nations to poor: One survey showed Australia at 46 percent, the U.S. at 40 percent, India at 34 percent and Britain at 32 percent.
Pity your poor boss. A Science Magazine study last summer asked respondents to record their emotions at work every 25 minutes. It found higher-income workers were more anxious and angry than lower-income ones.
Researchers David Blachflower and Andrew Oswald of the University of Warwick in England not only noted the lack of correlation between income and happiness, but they tried to put a monetary value on what does make us happy. They calculated, based on a sex survey of 16,000 people, that increasing sexual intercourse from once a month to once a week was the equivalent in happiness to getting $50,000 more a year.
The National Bureau of Economic Research here in the U.S. put the value of a lasting marriage at $100,000 a year, and a divorce as equivalent of an income depletion of $66,000 annually.
(It was the Beatles who said money can’t buy me love, but when it comes to sex, the Internet does list $8,000-a-night escorts in London.)
Among the things psychologists say won’t make you happy in the long run are material possessions in general (we get bored with them, and they require maintenance), luxury items (every car goes the speed limit, every watch tells time), long commutes, wealthy friends or neighbors (you’ll be envious), complicated lives, bad marriages and, on a day-to-day basis, kids (they’re a lot of work) or one’s spouse (great for security, but not all that entertaining).
What will make us happy, shrinks contend, is simply aging: people tend to be most unhappy in their late 30s (often the peak of juggling career and children), then happier the older they get, on into retirement. Other things that work are good health, security (a home, job and retirement fund), independence, a good marriage, an interesting job, free time, having children (they’re good over the long run even if they do drive you crazy), friends and family, a challenge or sense of purpose, and interesting experiences like a vacation that can be remembered.
“Aha!” you cry. Many of those things — health, kids, vacations — cost money! Even living close-in to avoid the bad commute is costly. So the rat race makes sense after all! Bring on the treadmill! Hurrah for the punch clock! Chain me to my cubicle!
To which we say: You tell us. What does Seattle’s explosion of wealth mean? Are we better off, or happier? More anxious, or frustrated? How has your life been affected by the new concentration of money here? Has it gotten you a job? Put your dream house out of reach? Is being rich really cool, or a worrisome pain in the neck?
In the end, do you feel rich or poor? Why? Let’s talk.
Write to me at email@example.com.
William Dietrich is a Pacific Northwest magazine staff writer. Tom Reese is a Seattle Times staff photographer.