Toward an Improved Definition of the Wealthy^*

* The title of this paper is based on the title of O’Boyle (1999b).

Abstract

A definition of the wealthy was proposed in this journal [Eisenhauer, J. G. (2008). An economic definition of the middle class. Forum for Social Economics, 37, 103–113]. According to the definition, “the wealthy” are people who could live poorly for a year while living off the interest on their wealth. This paper suggests a more general definition of the wealthy, which encompasses that definition as well as ones based on the ability to live at higher standards of living than the poverty level over longer periods of time than one year while living off interest income alone. Previous empirical work is revisited to show new insights offered by the new definition. The evidence points to the reemergence of a rentier class.

Keywords:

• wealth inequality
• Piketty’s fundamental inequality
• Saez–Zucman wealth shares

JEL Classifications:

• D31
• I31
• N32

Acknowledgments

The author thanks without implicating Martha Starr, Phillip O’Hara, Jill Hindenach, and anonymous reviewers for comments.

Notes

* The title of this paper is based on the title of O’Boyle (1999b).

¹ There is some ambiguity about whether “the rich” should refer to income, wealth, or another dimension of well-being, but to be clear, we use it to refer to income and not wealth. Also to be clear, whereas a person’s “income” is the wages, interest, and other monetary flows they receive, a person’s “wealth” (or, equivalently, their net worth or net assets) is the difference the value of the assets they own, on the one hand, and the debts they owe, on the other hand.

² The rise in their population and wealth shares would be even sharper if we were to define an “extraordinary” living standard in terms of the average labor income of the top 1% of the labor income distribution. It is unclear how that compares to the beginning of the twentieth century because Piketty, Saez, and Zucman (2016) do not provide top-labor-income shares before 1962.