IT CAN be hard to keep up with Mitt Romney’s gaffes but a recent one was potentially illuminating; his suggestion that middle income Americans earn between $200,000 and $250,000. In fact such an income is only received by the top 4% of the population. The median US income is around $50,000.
But if you are pretty rich, you may well mix only with people in your income bracket. Thus anecdotal evidence will lead one to overestimate the median income figure. Research in Britain shows that the view of what constitutes “high pay” differs between high earners and the general public. In 2008, those earning more than £150,000 thought the threshold for high pay was £162,000 a year; the general public thought it was £35,000, a figure an investment banker would regard as derisory. Interestingly, the High Pay Commission found that, in 2011, those earning over £200,000 estimated the threshold at £100,000, while those earning between £100,000 and £200,000 thought it was £55,000. It may be therefore that, the closer your actual pay is to the average, the more solid your connection is to that of the average person.
The rising inequality of incomes mean that even moderately well-off people do not feel that rich; not least because the elite have driven up property prices in desirable areas (central London, Manhattan) to levels that those not working in the finance sector cannot afford. Meanwhile, the very elite can insulate themselves from everyday life. Think of the experience of the average first, or business, class air passenger. They sit in a different lounge from the other passengers, enter the jetway through a different door, sometimes enter the plane through a different door as well, sit in a curtained-off section and then leave the plane before everyone else. They could make an entire transatlantic flight without coming into contact with the hoi polloi.
The problem is that the political elite tend to mix with the financial elite (because they need to raise money from them) and, for security reasons, also have to cut themselves off from the average voter. So it may be doubly hard for them to understand the pressures of those who are actually on median incomes.