7 ms·

Who Are the Top 1 Percent in America?

69 points by randomname2 9y ago

ckip 9y ago
Misleading. Likely intentionally so. Top 1% mostly comes from artificially scarce markets and pyramid schemes: lawyers (with intentional bottlenecks on supply at the associate level and a pyramid scheme to make partner), doctors (with intentional barriers in both requiring unrelated undergrad study and the hazing style apprentice model), elite university professors (pyramid scheme with grad students and post docs; salaries are now typically above $200k, reaching a million), executives (pyramid scheme based on connections and kickbacks), finance, etc. The only domain requiring unique productive skills is doctors... The rest is all market manipulation.
- deleted 9y ago
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- ataturk 9y ago
  What is hidden from us nearly all the time is that above the "rich" like Gates, Zuckerberg, Bezos, etc. are the ultra wealthy top of the pyramid. If you want to understand how the world truly works, take a look at those people, what they are involved with, whom they are inter-married with and what power they hold over all of us. Realizing that even guys like Carlos Slim are only halfway to the top was eye opening to me. How dare we "working rich" attempt to hold on to any pittance allowed us. Just to be clear--I completely agree with your post. The people making bank in the mid-tier of "wealthy" do it via lobbying and other "can't lose" tricks, manipulation, as you say. My advisor in grad school was pulling in at least $200K in the late '90s. That's almost 20 years ago now.
- gbacon 9y ago
  Where did you find your stats on distribution (“mostly”)? The article mentions other professions without the supply limiting that physicians and attorneys enjoy. “Typical firms owned by the top 1-0.1 percent are single-establishment firms in professional services (e.g., consultants, lawyers, specialty tradespeople) or health services (e.g., physicians, dentists),” Smith et al. write. “A typical firm owned by the top 0.1 percent might be a regional business with $30M in sales and 150 employees, such as an auto dealer, beverage distributor, or a large law firm.” Engineering-services firms also fit this description. Specialty tradespeople include plumbers, electricians, and lawn care and to belong to this cohort, they are running more substantial operations than solo self-employed: at least $3-10M top line and twenty or more employees.
  - deleted 9y ago
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  - sharemywin 9y ago
    Don't forget the franchise systems.
    - gbacon 9y ago
      Excellent point. Some franchise terms require significant net worth and have six-figure fees, but that is not the case across the board. I have heard that Chick-fil-A’s franchise fee is only $5,000 but also that they are very selective. Subway’s initial fee is in the $10-15k range[0] with the cost to open between $100-300k, and the company will provide and help with financing. [0]: http://www.subway.com/en-us/ownafranchise/franchisingfaqs http://www.subway.com/en-us/ownafranchise/franchisingfaqs
  - ckip 9y ago
    I find my stats in studies with much more robust methodology. Here is a reference chain: https://www.nytimes.com/2017/11/17/upshot/income-inequality-united-states.html https://www.nytimes.com/2017/11/17/upshot/income-inequality-... Tldr: "Almost all of the growth in top American earners has come from just three economic sectors: professional services, finance and insurance, and health care, groups that tend to benefit from regulatory barriers that shelter them from competition. The groups that have contributed the most people to the 1 percent since 1980 are: physicians; executives, managers, sales supervisors, and analysts working in the financial sectors; and professional and legal service industry executives, managers, lawyers, consultants and sales representatives."
- jacques_chester 9y ago
  > The only domain requiring unique productive skills is doctors... The rest is all market manipulation. The difference between you and I is that I trust experts to be experts. I'm also aware, because I studied law, that "oh it's a supply-side cartel" is basically a myth. Anyone who can rub two braincells together to singe their fingers can find a lawschool that will take them in (after all, that's what I did). There are more grads than openings, year after year. Lawyers are expensive because the stakes for fucking up are potentially very high and the good ones are in high demand. Same with medicine.
  - te_chris 9y ago
    Yep, the thing big clients are buying from big law firms is their liability insurance, not their super-unique law expertise.
    - jacques_chester 9y ago
      I think it's a lot of things. Any lawyer is insured to the level that makes sense for their work, so at some level that's really not a differentiating factor. A lot of it comes down to things as varied as depth of bench, using their famous letterhead as a club, familiarity and traditional relationship, old boy's network and so on and so forth. But it's still silly to give a one-conspiracy-fits-all account of the legal world.
      - te_chris 9y ago
        I should've been more explicit, I meant against bringing it in-house. My partner is an experienced commercial real estate lawyer so, really, I'm just reflecting her view - she's worked on both sides, in-house and private practice. The only reason, in her experience, that companies don't bring that sort of work in-house is insurance and the hassle of liability being worn by the law firm rather than the company. Also, it allows the client (i.e. manager at the client) to have someone to blame when it all goes tits up.
    - barry-cotter 9y ago
      This is really excessively cynical. Any law firm can buy liability insurance, not all law firms have the kind of legal expertise of Cravath, Swaine and Moore or Slaughter and May. They don’t have unique expertise but they have extremely rare, expensive and reliable expertise available in quantity and on demand. When the stakes if a contract goes to court are in the billions you do not skimp on mere millions in legal fees.
- restuijs 9y ago
  The tasks of physicians don't require unique skills, in the sense that there is no other route to obtaining those skills. What they do requires skill, but often they are skills that could be and are acquired by different means, but are prevented from use by the arbitrary educational structure required by regulation. Physicians too benefit from the artificial benefits of rent seeking.
  - JoeAltmaier 9y ago
    Permitting physicians to practice without certification has historically been a mess. That's why the rules are there. To filter quacks and con men.
    - GFischer 9y ago
      Agreed, but it definitely could be argued that the pendulum has swung way to the other side, and that many diagnoses and procedures that could be performed by someone with 1 or 2 years of education are performed at a substantially higher cost and inconvenience by doctors. Maybe an equivalent to the lawyer's "bar exam" without the degree requirement? http://www.slate.com/blogs/business_insider/2014/08/02/states_that_allow_bar_exams_without_law_degrees_require_apprenticeships.html http://www.slate.com/blogs/business_insider/2014/08/02/state...
      - TheOtherHobbes 9y ago
        It could be argued, but that argument would be incorrect, because leaving diagnosis to untrained individuals unrealistically favours "obvious" - but wrong - shallow diagnoses over less obvious deeper diagnoses. You could argue that doctors aren't great at deep diagnoses either, and unfortunately that seems to be true. But they're still likely to better than someone who lacks the experience or knowledge to understand why a shallow diagnosis may be misleading or limited. Law is a different problem. Lawyers are paid to be persuasive, using some knowledge of law as a foundation for rhetoric. Specialist lawyers are likely to have access to useful domain-specific professional networks. But a lot of law is relatively menial (but expensive) form-filling. The very specific and self-contained skills used to handle routine property transfers, wills and probate, and so on, can easily be handled by paralegals. Medicine doesn't have those nice clean silos. If someone has abdominal pain, the range of possible causes is huge, and often very dependent on an extended medical history.
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- stanleydrew 9y ago
  > The only domain requiring unique productive skills is doctors Most doctors I know are simply information routers. Unless you're talking about surgeons I don't see what makes medicine more uniquely productive than, say, legal work.
  - ckip 9y ago
    Medicine contributes to economic output. Most legal work takes away from it.
- alexasmyths 9y ago
  Doctors and Executives are not 'pyramid schemes' in any sense of the word, and profs at elite universities represent a very small economy. 'Management' is a skill, not a 'market manipulation' and a very difficult skill at that. Most of these 1% work huge numbers of hours, typically had to work pretty hard through school, and are smart and talented people - even if there is shifty stuff here and there, and a lot of 'born in the right family luck'. I don't know any successful people who are fools who just lucked out through life. They're all pretty amazing.
  - ckip 9y ago
    Management is a skill. Moving up the totem pole to executive at increasingly senior levels is political games. It's a skill, but not one that contributes to economic output. Founders excluded, of course.
chiefalchemist 9y ago
Two things: > "They find that a significant chunk of the income accruing to the top 1 percent of earners in the United States today goes to the owners of mid-market firms in a broad range of non-financial industries around the country. In other words, it’s not Wall Street..." It depends. How are these mid-market firms financed? How are their customers finance? Who/what ultimately drives the decisions and actions of these firms? - While inequality is one measurement, the other is poverty, lack of opportunity, etc. The issue I see time and again (read: pattern) is once the discussion is tied to the 1% (via inequality) the push back is "there's nothing wrong with being rich (and greedy)" and immediately the war (for change) is lost. On the other hand, if we focus on the marginalized, their day to day plight, etc. then we are less likely to get distracted. The point being, sure go ahead hoard all the money you want...but in the 21st century do so many _have to be left out_? How advanced are we when such history, a preventable pattern of history keeps repeating?
- heymijo 9y ago
  I appreciate this suggestion. When reading this I thought "Why do I care if the 1% are working or rentiers?" The outcome, being a growing class of marginalized people who lack equality of income, opportunity, and meaning is the same whether these people are rentiers or not. I'm reminded of this excerpt from a recent article on Dollar General stores that was posted to HN. "Essentially what the dollar stores are betting on in a large way is that we are going to have a permanent underclass in America. It’s based on the concept that the jobs went away, and the jobs are never coming back, and that things aren’t going to get better in any of these places." https://www.bloomberg.com/news/features/2017-10-11/dollar-general-hits-a-gold-mine-in-rural-america https://www.bloomberg.com/news/features/2017-10-11/dollar-ge...
  - ameister14 9y ago
    I care because landlords are a type of business that can be passed on whole to children and allows for the creation of hereditary wealth and hereditary wealth maintenance without risk. If the profitability of a business is mostly because of a single person working there who takes most of the profit, when that person dies their children will not be able to easily maintain that income and so are more likely not to be hereditary members of an upper class.
justherefortart 9y ago
This is why we need estate tax. It should also apply to trusts and the like. If you're in the 1%, most likely you did nothing to earn it. This is one of the reasons people left for America from the UK. You couldn't own land.
- deleted 9y ago
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- bovermyer 9y ago
  The article states that a large portion of the 1% (at least in America) is comprised of the working rich. Whether an estate tax is needed or not is irrelevant to the material of the article.
  - notfromhere 9y ago
    1% of income earners, not 1% of wealthy individuals. That's a very important distinction
- meritt 9y ago
  A large number of people here on HN are in the 1% as you only need a household income of $465k. That's easily met by two mid-level engineers at Google, Apple, Facebook, Netflix, AirBNB, et al.
rbcgerard 9y ago
If I’m reading this properly I’ve seen this dynamic countless times in middle market firms - founder/owner/CEO’s paying themselves $150k/year salary at companys doing $5m-$30m EBITDA. I.e. they pay themselves way below market because six vs half a dozen and optically having a lower salary is better.
- delinka 9y ago
  Not to mention that "salary" is taxed higher than "capital gains." Paying oneself a "reasonable salary" (according to the IRS; and such that one is paying full tax on that salary) and taking other distributions at lower capital gains tax rates legally reduces the tax bill and lets one keep more money in one's own pocket. You, too, can benefit from this scheme. Set up your S-Corp, stop being someone else's employee, and play along in the tax reduction shell game!
  - rbcgerard 9y ago
    Sorry, it does not work like that (through 2017 anyway). If you own a pass through (s-Corp/LLC etc) distributions are untaxed, however all earnings of the firm are taxed at your personal tax rate. It’s not to say that wage and firm earnings are exactly the same, but pretty close.
    - GFischer 9y ago
      There are a LOT of ways to game taxes if you're either an S-Corp or a C-Corp (without going into stuff like overseas, disguising personal expenses as business expenses, and other classics), and the original papeer has a very telling graph showing it (ok, so it's less than a 5% reduction, but it's still a tax break). See the original PDF, page 72 "The marginal tax rate falls at the top because active S-corporation income is a larger share of total labor income at the top but is not subject to the 2.9% Medicare tax and 0.9% ACA Additional Medicare Tax. See Section 7 for additional details." http://faculty.chicagobooth.edu/owen.zidar/research/papers/capitalists.pdf http://faculty.chicagobooth.edu/owen.zidar/research/papers/c... Not to mention they're going to get WAY bigger under Trump: http://www.latimes.com/business/hiltzik/la-fi-hiltzik-pass-through-trump-tax-20171004-story.html http://www.latimes.com/business/hiltzik/la-fi-hiltzik-pass-t... Edit: as meritt posted, it's going to be like 20% (!!!), not taking into account the other tricks.
mgkimsal 9y ago
This looks like it's talking about 1% in terms of income, or perhaps more specifically, earned income ("wages"). It's not talking about the 1% with respect to accumulated wealth. I would suspect there's some overlap, but the two aren't the same. Much of the "1% wrt accumulated wealth" group wouldn't have "wages" (if I'm understanding this correctly).
- GFischer 9y ago
  Yes, and that's because they're challenging Piketty's hypothesis that capital gains are outperforming wages, so they don't care about accumulated wealth (that could have been accumulated through either method).
- sct202 9y ago
  That's a really good call out especially since the 1% in income one year might not be the same as next year, especially since the article mentions owners of small/mid sized companies that might have a really good year and hit the 1%.
- fsargent 9y ago
  The fact that capital gains include both corporate wealth and land value is insane. One is a productive asset that for the most part improves society, and can grow in quantity and value indefinitely. The other (land) is a measure of scarcity for an essential commodity. It's fine that people make lots of money doing hard or rare work. Also great that people are loaning their saved money so companies can expand. It doesn't make sense for people to get wealthier for owning land.
- eevilspock 9y ago
  Does it really matter? I challenge the notion that the 1% in terms of "income" is earned through working more or harder. Rather that "earned income" is either extracted from the work of employees who have no choice but to work for less given the supply of labor vs demand, or it is extracted from one's unearned advantages (genes, better childhood, one's skillset happening to be in short supply, etc). While the free market may be a good mechanism for allocation of resources and labor for production, I challenge the notion that it is a good mechanism for determining what individuals deserve to keep for themselves.
jstewartmobile 9y ago
Any time I see an article focusing on income inequality instead of wealth inequality, I know I'm about to get my dose of invisible hand worship for the day. NYT statistic was that wealthiest 1% holds more than the bottom 90% combined. Top 1% wealth (roughly $10M and up) https://dqydj.com/net-worth-brackets-wealth-brackets-one-percent/ https://dqydj.com/net-worth-brackets-wealth-brackets-one-per... Top 1% income (roughly $400K and up) https://dqydj.com/united-states-household-income-brackets-percentiles/ https://dqydj.com/united-states-household-income-brackets-pe... Per Wikipedia, top 0.12% for household income is around $1.6M. Nothing to sneeze at, but we all know many people make much more. The distribution in the tail is so extreme that singling out top 1% to top 0.1% of incomes seems like cherry-picking to focus on groups that provide services and exclude groups that make money with money.
ra1n85 9y ago
>Secondly—and relatedly—S-corp owners are getting rich because so much of the revenue being generated by their enterprises is going into their own, rather than their staffs’, pockets. This may be occurring even in the absence of any nefarious Dickensian scraping of value out of exploited workers If owners are pocketing more revenue, in lieu of distributing it as profit sharing or employee salary increases, that would seem to indicate the salary bargaining position of current and new employees is not strong.
- gbacon 9y ago
  Buyers compete against buyers, but sellers also compete against sellers. Employees are sellers of labor.
  - taway20171214 9y ago
    > Employees are sellers of labor so are most employers.
  - TheOtherHobbes 9y ago
    Employers can manipulate the market politically much more easily than employees can. The result looks like this: http://econintersect.com/images/2013/10/67888593productivity-wages-1948-2011.JPG http://econintersect.com/images/2013/10/67888593productivity...
- harlanji 9y ago
  I've found a pretty hard salary cap. 15 years exp, Bs degree earned somewhere in the middle, increasing experience, good references... and then I get to SF and have experienced intense bullying when I ask for anything beyond the norm of a new-grad transplant who works through the holidays. Employment in programming jobs here isn't worth it for experienced people. Now if we restructured engineering orgs a little bit, we could pay the more experienced people proportional to the hidden value they create... but that would require "right brained"/non-Analytical thinking which is basically illegal. So we'll Lemming on until the engineering orgs with data driven decision making are replaced by the new Google of the heart.
assblaster 9y ago
As someone who fits into the top 1% of income, I find these analyses as inherently discriminatory against individuals in market positions that generate high incomes, a la Obama's "you didn't build that" statement. In other words, is it morally wrong for the secretary in a medical office to be paid less than what the physician owner takes home in salary/dividends? The analysis intuits this position, and pessimistically states at the end that nothing will change for the secretary, attributed earlier to a political economy working against their interests. Individuals make decisions throughout their life, especially early on, that determine the course of their futures. Do they have teenage pregnancy? Do they study hard in high school or trade school or professional school or engineering school? Do they have business intuition to start their own business? I think the indictment should be against the University-government complex which tricks young people into taking substantial debt to chase degrees in fields with no long term potential for high earnings.
- eevilspock 9y ago
  > is it morally wrong for the secretary in a medical office to be paid less than what the physician owner takes home in salary/dividends? To the extent that their differing roles are circumstances of birth and life, and that fairness is part of your morality, yes, it is. > Do they have teenage pregnancy? Do they study hard in high school or trade school or professional school or engineering school? Do they have business intuition to start their own business? Those are all circumstances of birth, be it nature or nurture. We have a strange notion of "deserve" in our society, that someone deserves more simply because they have a skill or circumstances that are in lower supply compared to demand. So physician skills are in shorter supply than secretary skills. But if they were shipwrecked on a desert island, and the secretary knows how to fish and keep them alive, suddenly he can command a greater share of income on that island. Arbitrary no?
  - unethical_ban 9y ago
    Supply and demand is a strange notion? And yes, the secretary would suddenly have a valuable set of skills that would command more in terms of "wealth". Generous social safety nets are a compromise between "everyone gets the same because all inequality is wrong" and "If you're not doing something important you should die in poverty".

69 points by randomname2 9y ago

ckip 9y ago

Misleading. Likely intentionally so. Top 1% mostly comes from artificially scarce markets and pyramid schemes: lawyers (with intentional bottlenecks on supply at the associate level and a pyramid scheme to make partner), doctors (with intentional barriers in both requiring unrelated undergrad study and the hazing style apprentice model), elite university professors (pyramid scheme with grad students and post docs; salaries are now typically above $200k, reaching a million), executives (pyramid scheme based on connections and kickbacks), finance, etc. The only domain requiring unique productive skills is doctors... The rest is all market manipulation.

deleted 9y ago
[deleted]
ataturk 9y ago
What is hidden from us nearly all the time is that above the "rich" like Gates, Zuckerberg, Bezos, etc. are the ultra wealthy top of the pyramid. If you want to understand how the world truly works, take a look at those people, what they are involved with, whom they are inter-married with and what power they hold over all of us. Realizing that even guys like Carlos Slim are only halfway to the top was eye opening to me. How dare we "working rich" attempt to hold on to any pittance allowed us. Just to be clear--I completely agree with your post. The people making bank in the mid-tier of "wealthy" do it via lobbying and other "can't lose" tricks, manipulation, as you say. My advisor in grad school was pulling in at least $200K in the late '90s. That's almost 20 years ago now.
gbacon 9y ago
Where did you find your stats on distribution (“mostly”)? The article mentions other professions without the supply limiting that physicians and attorneys enjoy. “Typical firms owned by the top 1-0.1 percent are single-establishment firms in professional services (e.g., consultants, lawyers, specialty tradespeople) or health services (e.g., physicians, dentists),” Smith et al. write. “A typical firm owned by the top 0.1 percent might be a regional business with $30M in sales and 150 employees, such as an auto dealer, beverage distributor, or a large law firm.” Engineering-services firms also fit this description. Specialty tradespeople include plumbers, electricians, and lawn care and to belong to this cohort, they are running more substantial operations than solo self-employed: at least $3-10M top line and twenty or more employees.
- deleted 9y ago
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- sharemywin 9y ago
  Don't forget the franchise systems.
  - gbacon 9y ago
    Excellent point. Some franchise terms require significant net worth and have six-figure fees, but that is not the case across the board. I have heard that Chick-fil-A’s franchise fee is only $5,000 but also that they are very selective. Subway’s initial fee is in the $10-15k range[0] with the cost to open between $100-300k, and the company will provide and help with financing. [0]: http://www.subway.com/en-us/ownafranchise/franchisingfaqs http://www.subway.com/en-us/ownafranchise/franchisingfaqs
- ckip 9y ago
  I find my stats in studies with much more robust methodology. Here is a reference chain: https://www.nytimes.com/2017/11/17/upshot/income-inequality-united-states.html https://www.nytimes.com/2017/11/17/upshot/income-inequality-... Tldr: "Almost all of the growth in top American earners has come from just three economic sectors: professional services, finance and insurance, and health care, groups that tend to benefit from regulatory barriers that shelter them from competition. The groups that have contributed the most people to the 1 percent since 1980 are: physicians; executives, managers, sales supervisors, and analysts working in the financial sectors; and professional and legal service industry executives, managers, lawyers, consultants and sales representatives."
jacques_chester 9y ago
> The only domain requiring unique productive skills is doctors... The rest is all market manipulation. The difference between you and I is that I trust experts to be experts. I'm also aware, because I studied law, that "oh it's a supply-side cartel" is basically a myth. Anyone who can rub two braincells together to singe their fingers can find a lawschool that will take them in (after all, that's what I did). There are more grads than openings, year after year. Lawyers are expensive because the stakes for fucking up are potentially very high and the good ones are in high demand. Same with medicine.
- te_chris 9y ago
  Yep, the thing big clients are buying from big law firms is their liability insurance, not their super-unique law expertise.
  - jacques_chester 9y ago
    I think it's a lot of things. Any lawyer is insured to the level that makes sense for their work, so at some level that's really not a differentiating factor. A lot of it comes down to things as varied as depth of bench, using their famous letterhead as a club, familiarity and traditional relationship, old boy's network and so on and so forth. But it's still silly to give a one-conspiracy-fits-all account of the legal world.
    - te_chris 9y ago
      I should've been more explicit, I meant against bringing it in-house. My partner is an experienced commercial real estate lawyer so, really, I'm just reflecting her view - she's worked on both sides, in-house and private practice. The only reason, in her experience, that companies don't bring that sort of work in-house is insurance and the hassle of liability being worn by the law firm rather than the company. Also, it allows the client (i.e. manager at the client) to have someone to blame when it all goes tits up.
  - barry-cotter 9y ago
    This is really excessively cynical. Any law firm can buy liability insurance, not all law firms have the kind of legal expertise of Cravath, Swaine and Moore or Slaughter and May. They don’t have unique expertise but they have extremely rare, expensive and reliable expertise available in quantity and on demand. When the stakes if a contract goes to court are in the billions you do not skimp on mere millions in legal fees.
restuijs 9y ago
The tasks of physicians don't require unique skills, in the sense that there is no other route to obtaining those skills. What they do requires skill, but often they are skills that could be and are acquired by different means, but are prevented from use by the arbitrary educational structure required by regulation. Physicians too benefit from the artificial benefits of rent seeking.
- JoeAltmaier 9y ago
  Permitting physicians to practice without certification has historically been a mess. That's why the rules are there. To filter quacks and con men.
  - GFischer 9y ago
    Agreed, but it definitely could be argued that the pendulum has swung way to the other side, and that many diagnoses and procedures that could be performed by someone with 1 or 2 years of education are performed at a substantially higher cost and inconvenience by doctors. Maybe an equivalent to the lawyer's "bar exam" without the degree requirement? http://www.slate.com/blogs/business_insider/2014/08/02/states_that_allow_bar_exams_without_law_degrees_require_apprenticeships.html http://www.slate.com/blogs/business_insider/2014/08/02/state...
    - TheOtherHobbes 9y ago
      It could be argued, but that argument would be incorrect, because leaving diagnosis to untrained individuals unrealistically favours "obvious" - but wrong - shallow diagnoses over less obvious deeper diagnoses. You could argue that doctors aren't great at deep diagnoses either, and unfortunately that seems to be true. But they're still likely to better than someone who lacks the experience or knowledge to understand why a shallow diagnosis may be misleading or limited. Law is a different problem. Lawyers are paid to be persuasive, using some knowledge of law as a foundation for rhetoric. Specialist lawyers are likely to have access to useful domain-specific professional networks. But a lot of law is relatively menial (but expensive) form-filling. The very specific and self-contained skills used to handle routine property transfers, wills and probate, and so on, can easily be handled by paralegals. Medicine doesn't have those nice clean silos. If someone has abdominal pain, the range of possible causes is huge, and often very dependent on an extended medical history.
deleted 9y ago
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stanleydrew 9y ago
> The only domain requiring unique productive skills is doctors Most doctors I know are simply information routers. Unless you're talking about surgeons I don't see what makes medicine more uniquely productive than, say, legal work.
- ckip 9y ago
  Medicine contributes to economic output. Most legal work takes away from it.
alexasmyths 9y ago
Doctors and Executives are not 'pyramid schemes' in any sense of the word, and profs at elite universities represent a very small economy. 'Management' is a skill, not a 'market manipulation' and a very difficult skill at that. Most of these 1% work huge numbers of hours, typically had to work pretty hard through school, and are smart and talented people - even if there is shifty stuff here and there, and a lot of 'born in the right family luck'. I don't know any successful people who are fools who just lucked out through life. They're all pretty amazing.
- ckip 9y ago
  Management is a skill. Moving up the totem pole to executive at increasingly senior levels is political games. It's a skill, but not one that contributes to economic output. Founders excluded, of course.

chiefalchemist 9y ago

Two things: > "They find that a significant chunk of the income accruing to the top 1 percent of earners in the United States today goes to the owners of mid-market firms in a broad range of non-financial industries around the country. In other words, it’s not Wall Street..." It depends. How are these mid-market firms financed? How are their customers finance? Who/what ultimately drives the decisions and actions of these firms? - While inequality is one measurement, the other is poverty, lack of opportunity, etc. The issue I see time and again (read: pattern) is once the discussion is tied to the 1% (via inequality) the push back is "there's nothing wrong with being rich (and greedy)" and immediately the war (for change) is lost. On the other hand, if we focus on the marginalized, their day to day plight, etc. then we are less likely to get distracted. The point being, sure go ahead hoard all the money you want...but in the 21st century do so many _have to be left out_? How advanced are we when such history, a preventable pattern of history keeps repeating?

heymijo 9y ago
I appreciate this suggestion. When reading this I thought "Why do I care if the 1% are working or rentiers?" The outcome, being a growing class of marginalized people who lack equality of income, opportunity, and meaning is the same whether these people are rentiers or not. I'm reminded of this excerpt from a recent article on Dollar General stores that was posted to HN. "Essentially what the dollar stores are betting on in a large way is that we are going to have a permanent underclass in America. It’s based on the concept that the jobs went away, and the jobs are never coming back, and that things aren’t going to get better in any of these places." https://www.bloomberg.com/news/features/2017-10-11/dollar-general-hits-a-gold-mine-in-rural-america https://www.bloomberg.com/news/features/2017-10-11/dollar-ge...
- ameister14 9y ago
  I care because landlords are a type of business that can be passed on whole to children and allows for the creation of hereditary wealth and hereditary wealth maintenance without risk. If the profitability of a business is mostly because of a single person working there who takes most of the profit, when that person dies their children will not be able to easily maintain that income and so are more likely not to be hereditary members of an upper class.

justherefortart 9y ago

This is why we need estate tax. It should also apply to trusts and the like. If you're in the 1%, most likely you did nothing to earn it. This is one of the reasons people left for America from the UK. You couldn't own land.

deleted 9y ago
[deleted]
bovermyer 9y ago
The article states that a large portion of the 1% (at least in America) is comprised of the working rich. Whether an estate tax is needed or not is irrelevant to the material of the article.
- notfromhere 9y ago
  1% of income earners, not 1% of wealthy individuals. That's a very important distinction
meritt 9y ago
A large number of people here on HN are in the 1% as you only need a household income of $465k. That's easily met by two mid-level engineers at Google, Apple, Facebook, Netflix, AirBNB, et al.

rbcgerard 9y ago

If I’m reading this properly I’ve seen this dynamic countless times in middle market firms - founder/owner/CEO’s paying themselves $150k/year salary at companys doing $5m-$30m EBITDA. I.e. they pay themselves way below market because six vs half a dozen and optically having a lower salary is better.

delinka 9y ago
Not to mention that "salary" is taxed higher than "capital gains." Paying oneself a "reasonable salary" (according to the IRS; and such that one is paying full tax on that salary) and taking other distributions at lower capital gains tax rates legally reduces the tax bill and lets one keep more money in one's own pocket. You, too, can benefit from this scheme. Set up your S-Corp, stop being someone else's employee, and play along in the tax reduction shell game!
- rbcgerard 9y ago
  Sorry, it does not work like that (through 2017 anyway). If you own a pass through (s-Corp/LLC etc) distributions are untaxed, however all earnings of the firm are taxed at your personal tax rate. It’s not to say that wage and firm earnings are exactly the same, but pretty close.
  - GFischer 9y ago
    There are a LOT of ways to game taxes if you're either an S-Corp or a C-Corp (without going into stuff like overseas, disguising personal expenses as business expenses, and other classics), and the original papeer has a very telling graph showing it (ok, so it's less than a 5% reduction, but it's still a tax break). See the original PDF, page 72 "The marginal tax rate falls at the top because active S-corporation income is a larger share of total labor income at the top but is not subject to the 2.9% Medicare tax and 0.9% ACA Additional Medicare Tax. See Section 7 for additional details." http://faculty.chicagobooth.edu/owen.zidar/research/papers/capitalists.pdf http://faculty.chicagobooth.edu/owen.zidar/research/papers/c... Not to mention they're going to get WAY bigger under Trump: http://www.latimes.com/business/hiltzik/la-fi-hiltzik-pass-through-trump-tax-20171004-story.html http://www.latimes.com/business/hiltzik/la-fi-hiltzik-pass-t... Edit: as meritt posted, it's going to be like 20% (!!!), not taking into account the other tricks.

mgkimsal 9y ago

This looks like it's talking about 1% in terms of income, or perhaps more specifically, earned income ("wages"). It's not talking about the 1% with respect to accumulated wealth. I would suspect there's some overlap, but the two aren't the same. Much of the "1% wrt accumulated wealth" group wouldn't have "wages" (if I'm understanding this correctly).

GFischer 9y ago
Yes, and that's because they're challenging Piketty's hypothesis that capital gains are outperforming wages, so they don't care about accumulated wealth (that could have been accumulated through either method).
sct202 9y ago
That's a really good call out especially since the 1% in income one year might not be the same as next year, especially since the article mentions owners of small/mid sized companies that might have a really good year and hit the 1%.
fsargent 9y ago
The fact that capital gains include both corporate wealth and land value is insane. One is a productive asset that for the most part improves society, and can grow in quantity and value indefinitely. The other (land) is a measure of scarcity for an essential commodity. It's fine that people make lots of money doing hard or rare work. Also great that people are loaning their saved money so companies can expand. It doesn't make sense for people to get wealthier for owning land.
eevilspock 9y ago
Does it really matter? I challenge the notion that the 1% in terms of "income" is earned through working more or harder. Rather that "earned income" is either extracted from the work of employees who have no choice but to work for less given the supply of labor vs demand, or it is extracted from one's unearned advantages (genes, better childhood, one's skillset happening to be in short supply, etc). While the free market may be a good mechanism for allocation of resources and labor for production, I challenge the notion that it is a good mechanism for determining what individuals deserve to keep for themselves.

jstewartmobile 9y ago

Any time I see an article focusing on income inequality instead of wealth inequality, I know I'm about to get my dose of invisible hand worship for the day. NYT statistic was that wealthiest 1% holds more than the bottom 90% combined. Top 1% wealth (roughly $10M and up) https://dqydj.com/net-worth-brackets-wealth-brackets-one-percent/ https://dqydj.com/net-worth-brackets-wealth-brackets-one-per... Top 1% income (roughly $400K and up) https://dqydj.com/united-states-household-income-brackets-percentiles/ https://dqydj.com/united-states-household-income-brackets-pe... Per Wikipedia, top 0.12% for household income is around $1.6M. Nothing to sneeze at, but we all know many people make much more. The distribution in the tail is so extreme that singling out top 1% to top 0.1% of incomes seems like cherry-picking to focus on groups that provide services and exclude groups that make money with money.

ra1n85 9y ago

>Secondly—and relatedly—S-corp owners are getting rich because so much of the revenue being generated by their enterprises is going into their own, rather than their staffs’, pockets. This may be occurring even in the absence of any nefarious Dickensian scraping of value out of exploited workers If owners are pocketing more revenue, in lieu of distributing it as profit sharing or employee salary increases, that would seem to indicate the salary bargaining position of current and new employees is not strong.

gbacon 9y ago
Buyers compete against buyers, but sellers also compete against sellers. Employees are sellers of labor.
- taway20171214 9y ago
  > Employees are sellers of labor so are most employers.
- TheOtherHobbes 9y ago
  Employers can manipulate the market politically much more easily than employees can. The result looks like this: http://econintersect.com/images/2013/10/67888593productivity-wages-1948-2011.JPG http://econintersect.com/images/2013/10/67888593productivity...
harlanji 9y ago
I've found a pretty hard salary cap. 15 years exp, Bs degree earned somewhere in the middle, increasing experience, good references... and then I get to SF and have experienced intense bullying when I ask for anything beyond the norm of a new-grad transplant who works through the holidays. Employment in programming jobs here isn't worth it for experienced people. Now if we restructured engineering orgs a little bit, we could pay the more experienced people proportional to the hidden value they create... but that would require "right brained"/non-Analytical thinking which is basically illegal. So we'll Lemming on until the engineering orgs with data driven decision making are replaced by the new Google of the heart.

assblaster 9y ago

As someone who fits into the top 1% of income, I find these analyses as inherently discriminatory against individuals in market positions that generate high incomes, a la Obama's "you didn't build that" statement. In other words, is it morally wrong for the secretary in a medical office to be paid less than what the physician owner takes home in salary/dividends? The analysis intuits this position, and pessimistically states at the end that nothing will change for the secretary, attributed earlier to a political economy working against their interests. Individuals make decisions throughout their life, especially early on, that determine the course of their futures. Do they have teenage pregnancy? Do they study hard in high school or trade school or professional school or engineering school? Do they have business intuition to start their own business? I think the indictment should be against the University-government complex which tricks young people into taking substantial debt to chase degrees in fields with no long term potential for high earnings.

eevilspock 9y ago
> is it morally wrong for the secretary in a medical office to be paid less than what the physician owner takes home in salary/dividends? To the extent that their differing roles are circumstances of birth and life, and that fairness is part of your morality, yes, it is. > Do they have teenage pregnancy? Do they study hard in high school or trade school or professional school or engineering school? Do they have business intuition to start their own business? Those are all circumstances of birth, be it nature or nurture. We have a strange notion of "deserve" in our society, that someone deserves more simply because they have a skill or circumstances that are in lower supply compared to demand. So physician skills are in shorter supply than secretary skills. But if they were shipwrecked on a desert island, and the secretary knows how to fish and keep them alive, suddenly he can command a greater share of income on that island. Arbitrary no?
- unethical_ban 9y ago
  Supply and demand is a strange notion? And yes, the secretary would suddenly have a valuable set of skills that would command more in terms of "wealth". Generous social safety nets are a compromise between "everyone gets the same because all inequality is wrong" and "If you're not doing something important you should die in poverty".