No, he is saying that $1B in wealth (about 400 people) generates $77m (threshold to make list of highest earners) in income assuming a 7.7% rate of return (which seems unrealistically high to me).
The top 1% does not make such a small amount. The top 1% has a net worth of $18 million after accounting for loans and other debts, and an income north of 1.7million... And that's in 2013. It's even worse now.
We should be talking about net worth, not about income, or else people who pay themselves a salary of $1 but are billionaires are classed as "lower class", which is obviously nonsense.
> The top 1% net worth and the top 1% income are different things,
Obviously. But if the figure is exclusive of their primary residence their return on investments isn't especially impressive-- e.g. it's sub index fund rates even assuming they have no other income than gains. :)
> 12% of the population will find themselves in the top 1% of the income distribution for at least one year
That is just wild. I wish they dove deeper into the data here. The top 1% of earning, based on a quick google, is 1.3m/yr. That's a lot! Are there, say, estate windfalls pushing people around to cause some of those blips?
Also, this article fails to separate income from wealth/assets, which seems to be a common pitfall in this kind of conversation. Many of the people with the most wealth are not those with the most income. So while there appears to be lots of income volatility, I would be interested in seeing the same thing for wealth over time.
I'm having trouble parsing what you wrote, but I assume you mean that the paper specifically looked at top 1% as defined by earnings or net worth?
My point is that while we frequently use the 1% as a reference for discussions on inequality, the driving force of wealth accumulation isn't that some people make 350k+, and people understandably get caught up in those semantics.
Ah! I was wrong; I was thinking 'net worth' not income. And the net worth of the top 1% is around 35% of the total national wealth. (Which is curiously close to the income tax number of 40%)
> Vast majority of top 1% don't even have much capital to speak of.
I disagree, they have vastly more capital than the 99% of earners below them. Unless you're comparing those 1%ers to someone like Zuckerberg specifically, there's really no way to square this statement.
According to the Economic Policy Institute, the earnings threshold to be in the top 1% of earners in 2017 was $718K.[0] That's a pretty incredible amount of annual capital for an individual. Sure, it's not enough to start a hedge fund, but even after taxes, you're able to seriously invest in things like real estate, which fewer Americans are able to do.
There are over 500 billionaires. My point being that OP's point comes off as an emotional argument as opposed to a data-based one.
Edit: I now understand the OP meant "100-millionairs". Even so, the math is still off. As of 2015 there were ~5000 100-millionaires and billionaires in the US[1]. That's 0.0015% of the population.
> I would hypothesize that even within this 9% we’d find the wealth concentrated at the top in the “2nd 1%”, i.e., the top 2% likely make the middle class look mostly irrelevant.
I doubt this particular point. The 98th percentile of earners make something like $200-$300k a year, the 89th percentile make about $100k/year[0]. That's a big difference, and it will equate to an even bigger difference in wealth, but not enough that the 98th percentile will substantially outweigh the combined 89th-97th percentiles. (Arguing otherwise means assuming that the one group has 8 times as much wealth per capita as the other).
It's also true that the 98th percentile includes plenty of people in the HN crowd. That's the point: well paid professional types (or software engineers) are not being hurt by the gains that accrue to the very top of the income distribution.
So far as they/we cluster in the same industries/subsectors that are growing those billionaires, we have--to some extent--shared interests. For instance, Amazon software engineers might gain by clawing back money from Bezos and the stockholders, but they don't have a monetary interest in redirecting pay to the warehouse workers.
> Using the popular “4% rule” 1M would generate 40K per year before taxes – hardly a way to live in style! That income is less than 80% of the average U.S. household income.
This is hands down the worst way to look at this number. That's income for not doing anything! That's also generational wealth! 1M dollars in the bank is an order of magnitude better than a 40k year salary and it's a bit of a joke to compare them against each other.
"Unless you're exceptionally lucky as well as exceptionally successful, it takes more than one working lifetime to amass enough wealth to be in the top 1%, and so you will only get there if you inherit some significant amount of wealth."
Not really. In terms of income, it's $500K/year.
If you go into certain kinds of banking from a decent school, and do well, you can 'easily' earn that.
Again, this is 1% income, not assets of which I'm speaking.
But even then - if you spend 30 years in banking, and do well, you'll probably be in the 1%.
If you were to say the top 0.05% - I think I might be more inclined to agree with you.
Most of the 1% are not 'rich', they're really the upper bounds of 'upper middle class' - I'd say the 0.1% is where you can start calling yourself 'wealthy' in terms of economic class.
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