Monday, April 28, 2008

Insight into income and class

My friend firecat posts a link to an article about an informal survey on how much money it takes to feel rich. Respondents were shown either no pictures or one of 3 sets of paired pictures (two happy couples, a yacht and mansion, a camera and iPhone) and then asked about what income and net worth would make them feel rich.

The group that saw the luxury items said it would take significantly more income to be rich compared to all the other groups. Interestingly, there was no significant difference in the results for those who saw consumer goods, happy faces, or no picture. The pattern for net worth was similar.

I like how this non-scientific study plays with the definition of rich. In order to define rich, you have to fantasize about what kind of life would feel rich, and then imagine how much income and net worth that translates too. More experience of higher income correlates with a higher definition of rich:

s you might expect, those with higher incomes also defined "rich" as significantly higher-income and net worth compared to those with lower incomes. High income respondents defined "rich" as a net worth of over $4.3 million, while low income respondents said it would take less than half that much to be rich -- an even $2 million.

Of course, the other side of that coin is that even with the experience of an actual income that poorer people have defined as rich, people with that income don't think of themselves as rich. They're imagining an even more luxurious lifestyle.

The only result that surprised me was on the charity question.

We also asked respondents to tell us how much they would give away if they won a tax-free million dollars. None of the images made a difference -- the average amount given was about $200,000 for each group, regardless of which picture they saw. What did make a difference in giving? Actual income. Those who said they earned over $100K per year would give away an average of $154,000 out of a $1 million prize, while those earning under $100K per year said they'd give away an average of $207,000 -- a significantly larger amount!

This is probably not selfishness, but a more accurate idea of the purchasing power of the two sums and how giving away that much money would affect your standard of living.

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