5 ms·

I get that the "top 1% average" will be pulled up by extreme cases. But I'm surprised at the divergence in the graph between the 99th percentile and even the 95

by abeppu 6y ago

I get that the "top 1% average" will be pulled up by extreme cases. But I'm surprised at the divergence in the graph between the 99th percentile and even the 95th percentile. Even at the beginning of the period, the difference between the 99p and 95p looks larger than between the 95p and 25p. A mostly unrelated thought is how stable is the membership in each quantile bucket over time? This is maybe a tone deaf question, bc clearly income inequality is very extreme. But for a tech readership, especially those in startups ... One could earn near the 95p level most years, but when you finally liquidate stock that took you years to acquire, your income can jump up for a year. Similarly, if you're a high earner but you take a year away from work to travel and think, your income drops precipitously. If some fraction of the top k% in any given year were people with infrequent windfalls (selling real estate which appreciated over decades, inheritance, maybe legal settlements?), and some fraction of the lower quantiles is people who are temporarily not working ... then the income distribution is a combination of long term inequality between people, and variability across people's lifetime, which might be hard to disentangle.

PaulDavisThe1st 6y ago
Economic mobility in the US is the lowest or 2nd lowest among all OECD nations. I think this means that what anecdotal stories one can tell or find about economic mobility ("Look! Kid from poor impoverished rural town made big bugs as a software developer!" or whatever), the more important reality is that Americans do not move between quartiles or quintiles as much as people in other OECD countries, let alone as much as they like to imagine happens. [ Edit: as of 2020, the US is roughly middle of the pack for economic mobility among OECD nations, and was not lowest or 2nd lowest, but 4th lowest in 2012 ]
- deleted 6y ago
  [deleted]
- jandrewrogers 6y ago
  I would caution that "economic mobility" is a term of art that does not mean what most people intuit it to mean, usually conflating it with the ease of improving absolute financial position. You can easily improve your absolute financial position and still have "low mobility", and you can have "high mobility" while having minimal opportunity to improve your financial position. A limitation of economic mobility is that it is only comparable between countries with similar geographic/population size and with similar levels of wage compression. The US is an outlier in all three terms. Average people want the opportunity to significantly improve their financial position, and economic mobility doesn't measure that. As a country, the US outperforms most other industrialized countries at the former.
  - PaulDavisThe1st 6y ago
    Average people measure their financial position relative to others. Economic mobility precisely measures that.
    - jandrewrogers 6y ago
      Economic mobility doesn't measure relative financial position either. Economic mobility only indicates position relative to a (highly variable) income distribution within a country. A "high" income mobility does not imply high relative changes in financial position, nor vice versa. At the extreme, very small differences in relative income can make you "highly mobile" even though you've barely moved your relative financial position. This is seen in smaller industrialized countries with very compressed wage distributions. People in low mobility countries can have better financial outcomes in both relative and absolute terms depending on the mathematical distribution function, and do in practice. The term "economic mobility" is widely used to push misleading narratives precisely because most people don't understand what it measures.
- deleted 6y ago
  [deleted]
- woobar 6y ago
  What is the source of this claim? I see in this OECD report[1] the US is in the middle of the pack. [1] http://www.oecd.org/els/soc/1-5%20generations.png http://www.oecd.org/els/soc/1-5%20generations.png
  - abeppu 6y ago
    That chart is so depressing. 5 generations?! To "approach the mean income"?
  - PaulDavisThe1st 6y ago
    We have improved! You are correct. I was citing data from 2010-2012, when I was still wrong - we used to be 4th from the bottom.
- yjftsjthsd-h 6y ago
  > Kid from poor impoverished rural town made big bugs as a software developer! Freudian slip? Although if they make big bugs perhaps they won't make big bucks...
thewebcount 6y ago
It really gets strange at the top. Think of an engineer who has been working at a FAANG company for the last 10 years. They have a salary of $200,000. They're vested and get stock bonuses every year. They now have $1,000,000 worth of stock and they sell $500,000 to put a downpayment on a home in California. They're income for the year is now $700,000 putting them just about in the top 1% of income earners for the year[0]. But they're in there with Warren Buffett and Jeff Bezos, et al. Jeff Bezos is worth something like $140B or more, whereas the engineer is worth ~1.4M. (Probably less because they only own a portion of their house, but it makes the math easy.) Mr. Bezos is worth 10,000x what the engineer is worth. But a middle income person nearing retirement in the Midwest might outright own their house, which is worth $140,000. If they sell that house, that midwesterner is just in the top 10% of income earners (assuming their salary is modest). The engineer only has a yearly income 5x more than that person and their net worth is only 10x the midwesterner's. It's a really big difference in that last percentile! [0] https://www.investopedia.com/personal-finance/how-much-income-puts-you-top-1-5-10/ https://www.investopedia.com/personal-finance/how-much-incom...

by abeppu 6y ago

PaulDavisThe1st 6y ago

Economic mobility in the US is the lowest or 2nd lowest among all OECD nations. I think this means that what anecdotal stories one can tell or find about economic mobility ("Look! Kid from poor impoverished rural town made big bugs as a software developer!" or whatever), the more important reality is that Americans do not move between quartiles or quintiles as much as people in other OECD countries, let alone as much as they like to imagine happens. [ Edit: as of 2020, the US is roughly middle of the pack for economic mobility among OECD nations, and was not lowest or 2nd lowest, but 4th lowest in 2012 ]

deleted 6y ago
[deleted]
jandrewrogers 6y ago
I would caution that "economic mobility" is a term of art that does not mean what most people intuit it to mean, usually conflating it with the ease of improving absolute financial position. You can easily improve your absolute financial position and still have "low mobility", and you can have "high mobility" while having minimal opportunity to improve your financial position. A limitation of economic mobility is that it is only comparable between countries with similar geographic/population size and with similar levels of wage compression. The US is an outlier in all three terms. Average people want the opportunity to significantly improve their financial position, and economic mobility doesn't measure that. As a country, the US outperforms most other industrialized countries at the former.
- PaulDavisThe1st 6y ago
  Average people measure their financial position relative to others. Economic mobility precisely measures that.
  - jandrewrogers 6y ago
    Economic mobility doesn't measure relative financial position either. Economic mobility only indicates position relative to a (highly variable) income distribution within a country. A "high" income mobility does not imply high relative changes in financial position, nor vice versa. At the extreme, very small differences in relative income can make you "highly mobile" even though you've barely moved your relative financial position. This is seen in smaller industrialized countries with very compressed wage distributions. People in low mobility countries can have better financial outcomes in both relative and absolute terms depending on the mathematical distribution function, and do in practice. The term "economic mobility" is widely used to push misleading narratives precisely because most people don't understand what it measures.
deleted 6y ago
[deleted]
woobar 6y ago
What is the source of this claim? I see in this OECD report[1] the US is in the middle of the pack. [1] http://www.oecd.org/els/soc/1-5%20generations.png http://www.oecd.org/els/soc/1-5%20generations.png
- abeppu 6y ago
  That chart is so depressing. 5 generations?! To "approach the mean income"?
- PaulDavisThe1st 6y ago
  We have improved! You are correct. I was citing data from 2010-2012, when I was still wrong - we used to be 4th from the bottom.
yjftsjthsd-h 6y ago
> Kid from poor impoverished rural town made big bugs as a software developer! Freudian slip? Although if they make big bugs perhaps they won't make big bucks...

thewebcount 6y ago

It really gets strange at the top. Think of an engineer who has been working at a FAANG company for the last 10 years. They have a salary of $200,000. They're vested and get stock bonuses every year. They now have $1,000,000 worth of stock and they sell $500,000 to put a downpayment on a home in California. They're income for the year is now $700,000 putting them just about in the top 1% of income earners for the year[0]. But they're in there with Warren Buffett and Jeff Bezos, et al. Jeff Bezos is worth something like $140B or more, whereas the engineer is worth ~1.4M. (Probably less because they only own a portion of their house, but it makes the math easy.) Mr. Bezos is worth 10,000x what the engineer is worth. But a middle income person nearing retirement in the Midwest might outright own their house, which is worth $140,000. If they sell that house, that midwesterner is just in the top 10% of income earners (assuming their salary is modest). The engineer only has a yearly income 5x more than that person and their net worth is only 10x the midwesterner's. It's a really big difference in that last percentile! [0] https://www.investopedia.com/personal-finance/how-much-income-puts-you-top-1-5-10/ https://www.investopedia.com/personal-finance/how-much-incom...