Economists Define Millionaire Status in America

Two economists, Dr. Jesse Bricker of the U.S. Census Bureau and Dr. Jonathan Skinner of Dartmouth College, have proposed a revised definition for identifying millionaires in America, which, if adopted, would substantially increase the number of individuals classified as such. Their research, presented in a working paper for the National Bureau of Economic Research (NBER), focuses on a more comprehensive measure of wealth that includes not only financial assets but also the present value of future Social Security and pension benefits. This approach contrasts with the commonly understood definition of a millionaire, which typically refers to individuals possessing at least $1 million in net worth, primarily derived from liquid assets and investments.

Under the traditional definition, the U.S. has seen a fluctuating but generally substantial number of millionaires. For instance, data from Spectrem Group in 2022 indicated that approximately 7.4 million U.S. households, or about 5.9% of the total, had a net worth of $1 million or more. However, Bricker and Skinner's methodology incorporates a broader spectrum of wealth. They calculate the present value of expected Social Security benefits and defined-benefit pension plans, adding these to traditional measures of net worth. This inclusion accounts for a significant portion of an individual's long-term financial security that is often overlooked in simpler net worth calculations. Their analysis suggests that when these future income streams are factored in, the number of Americans who can be considered 'wealthy' or 'millionaires' by this expanded definition could be considerably higher, potentially reaching into the tens of millions.

The economists' work highlights the complexities in wealth measurement and the potential for different definitions to yield vastly different demographic profiles of affluent individuals. Their proposed framework aims to provide a more accurate picture of economic security by acknowledging the value of guaranteed future income streams, which are particularly relevant for older demographics and those with long careers in public service or unionized industries. This expanded view of wealth is crucial for understanding economic inequality, retirement security, and the overall financial health of the nation. The NBER working paper, titled "The Wealth of the Wealthy: A New Measure of Affluence," details their methodology and presents estimates based on survey data, including the Survey of Consumer Finances. The implications of their findings could influence policy discussions related to taxation, social welfare programs, and economic forecasting by providing a more inclusive understanding of financial well-being.

While the traditional definition of a millionaire often focuses on investable assets and excludes liabilities, Bricker and Skinner's approach seeks to capture a more holistic view of an individual's economic standing. This includes considering the present value of expected government transfers like Social Security, which represent a substantial, albeit not entirely liquid, form of wealth for many Americans. By doing so, their research offers a nuanced perspective on who truly possesses significant economic resources, moving beyond a simple snapshot of current market valuations to incorporate the long-term financial guarantees that underpin economic security for a large segment of the population. The precise number of millionaires under their new definition is still subject to refinement and depends on specific assumptions about discount rates and future benefit levels, but the paper strongly indicates a much larger pool of financially secure individuals than commonly recognized.