If you are like me, you first heard about the book, The Millionaire Next Door, from Dave Ramsey who mentions it in his seminars. I used to work as a grunt hourly-wage-earner (before moving on to being a grunt hourly-wage-earner-elsewhere) at Nashville’s late great independent bookstore Davis-Kidd, and remember Dave setting up his book table with his self-published version of Financial Peace before many people had heard of him.
Dave used the book written by Thomas Stanley and William Danko to point out that people became millionaires by driving used cards, living beneath their means, and avoiding credit cars. They claimed there were working class millionaires.
Helaine Olen doubts there are many left. She concludes that,
at least once upon a time, our millionaires could at least plausibly claim to have once been part of the great middle. For the younger generations, that’s increasingly no longer the case.
The Millionaire Next Door 1996-2013. RIP
Sounds pretty dramatic.
Olen’s argument comes from a study of how many wealthy people come from working class origins:
A little-noticed marketing report released last month by U.S. Trust contained the disturbing statistic that while almost a third of Baby Boomers worth more than $3 million claimed to have grown up in lower-middle-class homes, the number fell precipitously for younger cohorts, with 18 percent of Gen Xers and a mere 6 percent of such Millennials saying they came from working-class stock.
And when business owners were studied separately, two-thirds of the Baby Boomer group described their family of origin as lower or middle-class. Generation Y? A mere 12 percent.
In a nation that prides itself on its class fluidity and entrepreneurial spirit, this is just the latest sign that our engines of social mobility are, to borrow a cliché from the blue-collar automotive repair profession, stalling out.
Olen, we should note, is a highly biased writer. Her book against “the personal finance industry” is reviewed by Businessweek and did not impress. She is well aware of the Dave Ramsey lesson and is directly challenging him without naming him.
When Oleg pretends to explain causes she actually does something else.
How could this happen? Well, when Mitt Romney proclaimed twentysomethings should “borrow money from your parents” in order to get ahead, he gave the game away.
But that doesn’t explain anything. Rich parents have been loaning to their children forever. That has nothing to do with why we once had working class millionaires (as Oleg begrudgingly admits) and now we don’t have so many.
The only other answer she gives is that school is more expensive. But plenty of millionaires never went to college. That is a side issue.
The answer is that the economy has been undergoing silent damage for years. Oleg won’t agree, but I think Mike “Mish” Shedlock has the answer:
The “real” problem is not offshoring, NAFTA, or declining real wages… Those are symptoms of problems not the “real problem”. However, I can easily name many real problems.
Ten Real Problems
- Fractional Reserve Lending
- The Fed
- Lack of a gold standard
- Deficit Spending
- Public unions
- Davis Bacon and prevailing wage laws drive up costs
- Disability fraud
- Politicians get into bed with corporations, unions, and crony constituents
- Lack of incentives to hold down costs on Medicare, food stamps, and entitlements
If you fix the first four or five, most of the rest of the problems will be fixed automatically.
Wage Inequality and Declining Real Wages
The primary reason for wage inequity is the Fed’s inflationary boom-bust practices. In addition, public unions and untenable pension obligations drive up costs (and taxes).
As I have stated dozens of times, inflation benefits those with first access to money (the banks and the already wealthy).
For Oleg, like many others, the idea that the government by its continual creation of “new money” is siphoning wealth from the would-be millionaires and transferring it to the super-rich is not within her awareness.