Saturday, May 7, 2011

The Millionaire's Club

It's that time again--an article with some misleading statistics makes a bold, unverifiable claim. In this case, it's Daniel Indivigliofrom The Atlantic claiming that 9% of Americans are millionaires.

It doesn't take much to deconstruct this. It's a little tricky, because the links and wording don't give us full information, but the first thing he does is lump everyone into households. This, more or less already falsely doubles the number--or more. A millionaire wife and a layabout husband get combined together, and the slacker hubby disappears in a statistical anomaly. Second, he combines all sorts of figures to arrive at the "millionaire" label--it's not just income, it's also housing and retirement. Heck, anyone who lives in a $200,000 house is already a fifth of a millionaire, and anyone with a pension or 401(k) is probably adding huge numbers to it. But those things aren't liquid and no one would even consider those as factors, because you can't really use them in your day-to-day living expenses.* Finally, inflation and cost of living doesn't appear to be factored in--someone making an income of a million bucks is going to live quite differently in Manhattan than they do in Minot.

When you stack all of these variables in, it's not very surprising that 9% of Americans (i.e., have households with Americans in them) are millionaires (or have a million dollars in assets they can't really touch).

I'm not sure what the agenda of the writer is. Is it to say the rich are getting richer? Well, even given the chart he presents shows that millionaires are less numerous than they were in 2004. If it's just to show the novelty of the rich economy, the fact that he has to rig the numbers belies this. It just seems to be a useless article and one more reason I tend to not trust journalists.

*As mentioned above, I can only assume this is part of the equation. The source doesn't say, but the way some of the article and the source material describes the results point towards this being asset-based instead of income-based. This makes a huge difference. Even if this turns out to be income-related, the other two points above stand.

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