Drive into the Whole Foods parking lot, and you’ll see the latest BMWs, Mercedes, Audis, Porsches and Volvos. More relevant than what the 1% are paying is the widening gap between the 1% and the rest of their countrymen who are struggling to pay the food bills at Walmart.
So writes Elliot Schiff of Wilmette, Ill in the letters section of the Wall Street Journal (December 5, 2024; December 6 print edition.) As you can tell, I’m catching up on this month’s Wall Street Journals.
What is Schiff’s implicit assumption? That people who are driving the latest BMWs, Mercedes, Audis, Porsches, and Volvos are wealthy. The odds are that many of them are wealthy; the odds are also that many of them are not. You don’t generally build wealth by buying assets that depreciate quickly. New luxury cars tend to depreciate quickly. Schiff would do well to read The Millionaire Next Door. I posted about it here. In response to a question from commenter TMC on that post, I got the book from the library and enjoyed rereading some of the stories and facts.
Here’s one that directly relates to Schiff’s point. It’s from Table 4.1 of the book. 46.3% of millionaires had cars that were current year’s or last year’s model. But 37.6% had cars that were 3 years old or older. And 18.9% had cars that were 5 years old or older. Of course, you would want to know what % of the luxury cars Schiff names are owned by millionaires and the book’s data don’t tell us that. Remember also that $1 million when the authors were writing in 1996 would be just over $2 million today. Using the personal consumption expenditures index, which is a more accurate measure of inflation, the $1 million in 1996 translates to $1.77 million today.
So a reasonable question is: What percent of the luxury cars in the lot that Schiff observed are owned by people with a net worth of at least $1.77 million. I would give even odds that it’s fewer than 60%, and a 40% probability that it’s fewer than 50%.
READER COMMENTS
David Seltzer
Dec 20 2024 at 6:54pm
How many of the lux cars in the Whole Check parking lot were leased?
Peter
Dec 20 2024 at 7:11pm
I’d take that bet if you eliminate leases, rentals, and company vehicles AND assets includes ALL assets (property, 401k, pension, etc). Also we have to only count luxury cars, not “luxury brands” as most of those cars you see aren’t luxury at all but the poor mans version, i.e. a BMW 3 series isn’t a luxury car, it cost less than a VW Golf or Toyota Tacoma and likewise low end Audis, etc. A Porsche Cayenne or Boxster isn’t a 911.
Btw I know Whole Foods is just filling a stereotype here and I can’t speak to the mainland but here in Hawaii ever since Amazon bought Whole Foods, it’s the cheapest generally purpose grocery store in the state for comparable items. It may be perceived as high class like Target (lol, remember in the 80s when it competed with KMart, talk about some rebranding) but honestly it’s cheaper than the other chains from Safeway to Walmart. Amazon has really did wonders controlling price at Whole Foods and I’m forever glad they bought them.
Craig
Dec 22 2024 at 11:26pm
New Whole Foods opened close by and my prejudice is that they will be expensive, ie ‘Whole Paycheck’ is a derisive nickname for them, but honestly what I have found with grocery stores is that they cycle the deals. So right now I do Publix, Winn Dixie, Walmart Neighborhood Store, BJs, occasionally ALDI (just slightly too inconvenient) and I primarily shop their deals. One week Coke is on sale, next week Pepsi is on sale, Blueberries at Publix, Raspberries at Winn Dixie. I suspect Whole Foods will be similar, but we’ll see.
john hare
Dec 20 2024 at 7:19pm
Interesting conversation yesterday with a customer. He is in the rental business. I mentioned that I was under the impression that higher end rentals had less tenant problems than lower end units. He said the opposite was the case as people in $1,500.00 a month* units almost always paid while the ones in the $2,500.00 plus units often had trouble as they were living beyond their means.
*Central Florida where several years back $1,000.00 was high.
Matthias
Dec 20 2024 at 11:26pm
When people are talking about ‘the 1%’, don’t they usually talk about the top percentile of income, not wealth?
Income and (sustainable) consumption are a lot closer linked than either are with accumulated wealth.
David Henderson
Dec 21 2024 at 10:40am
Good point, Matthias. I should have made clear that the letter writer was responding to an editorial about the top 1% by income, and the letter writer, Schiff, was not carefully distinguishing between income and wealth. I was a little sloppy here.
Jose Pablo
Dec 21 2024 at 8:28pm
Even if Elliot Schiff were right in assuming that consumption implies wealth, his statement still doesn’t make any economic sense.
It is a far worse economic crime to assume (as he does) that a smaller gap in wealth between the 1% and the rest of the country will result in the “rest of the country” struggling less to pay their food bills.
Most likely a smaller gap will result in a bigger struggle. After all Belarus, Moldova, Azerbaijan, Poland, Croatia, Hungary … all have a smaller Gini coefficient than the US and I very much doubt their citizen struggle less at their local “Wallmarts”
Knut P. Heen
Dec 23 2024 at 8:18am
I would say less than 50 percent. You don’t need $1 million to spend $100,000. Although many probably also own a home worth about $1 million. The younger half is probably heavily in debt though. You have to go to the parking lot to assess the age distribution of the drivers. Wealth is a function of age (because the present value of human capital is never included in your wealth before it has been converted to saved income).
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