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I don't remember the source, but there was a great article that discussed a similar topic and showed that the income inequality isn't really that skewed unless

by orijing 16y ago

I don't remember the source, but there was a great article that discussed a similar topic and showed that the income inequality isn't really that skewed unless you look at those making above some threshold (maybe top 0.1% of the population or so). For example, the average income for any percentile of the population is a fairly straight function until you hit around 99 percentile, after which there is a sharp discontinuity rising higher. This wasn't the original source but you can take a look here: http://elsa.berkeley.edu/~saez/pikettyqje.pdf http://elsa.berkeley.edu/~saez/pikettyqje.pdf (Excuse my Berkeley bias, but Emmanuel Saez has produced great works in this field). As you can see, the action is in the top 1 percentile, and the real action is in the top 0.01 percentile. In other words, those in the top 5 percentile do not feel rich because there are people who are much MUCH richer than they are, due to the discontinuity you can see. So those making 240k are only four times as rich (less, after taxes) as those making 60k despite being nearly 50 percentile away. In contrast, those making tens or hundreds of millions are two orders of magnitude richer than those making 240k despite being less than 5 percentile away. Plus, most of their taxes are in the form of capital gains on stocks and dividends. Crazy world, huh? This leads me to a different point, which is that politicians' focus on 250,000 as some threshold for "rich" masks the bigger inequality. In my opinion, those making 250k or so are hard-working households who mostly "deserve" what they earn as families of doctors, lawyers, engineers even; and that the real inequality manifests itself above the million dollar threshold. The reason I say that is, a family with decent opportunities, a strong work ethic (since youth) and a decent set of brains can reach those levels through just hard work and persistence, while getting above the 1 million threshold is either reserved for severe luck, entrepreneurship (also heavily influenced by luck), inheritance, or politics. So my point is that upper income people don't feel rich ('realize they're upper-income') because they are so close to those earning tens to hundreds of times more. In that context, all of us are in their shadows.

entangld 16y ago
I hate to rain on your parade... As you can see, the action is in the top 1 percentile, and the real action is in the top 0.01 percentile. It doesn't so much matter how people feel. It matters what the reality is. If you make 250k there are millions of people who make much less than you do. The top 5% in a country of 310 million is a lot of people. I'm not necessarily even favoring dramatically increasing taxes on the lower threshold of rich people, but I don't want to pretend like the life of a family that makes 250k+ and a family that makes 60k are very similar. This issue is about self-awareness, not "the other guys".
- brg 16y ago
  What are the significant differences between these two families that we shouldn't pretend to gloss over? I grew up extremely poor, my father making around 18k a year at the time he was required to provide his tax statements for a student loan. There were no high profile private schools in my area, and so I attended school with the children of doctors, lawyers, bankers, and the local newscaster. While they often had newer clothes, I don't think our childhood experience or family situation were much different. And now, when I look to start a family of my own, I cant see how having a family income of 4x that of my parents is going to induce any significant change. Perhaps if I make it to 10x my fathers wage I'll see these difference you speak of, but as of now I don't see them.
  - entangld 16y ago
    Well I have a friend who makes more in 1 day than I pay in rent. He talks about being broke all of the time, but doesn't mention the fact that he's always traveling, has bought 3 cars in a year and lives in a large house and he started and shut down a business within 1 year. He doesn't think he has money, but that's because he spends it. If he could afford those things, so can other people in his bracket. If he saved all of his money he might complain about his poor lifestyle, but for some reason he doesn't seem to realize that they're all choices. He could have easily bought a house half the size and price. It would stil be large. The article was right.
- orijing 16y ago
  Well, I didn't mean to say that the 60k and 240k families are "similar" but my suggestion was that they are much more similar (despite the 50 percentile gap) than the 240k is to someone 4 percentile above him. So it's relative similarity I'm referring to, if that makes any sense.
earl 16y ago
There's also cost of living issues -- $250K in sf is not the same as $250k in rural Wisconsin. My family all lives there, so based on my personal experiences, I'd wager that $250k in sf is about the same as $90k in rural-ish WI. My sister and her husband have three kids. They live on a 1/2 acre lot in a 4 bedroom 3 bath 2 car garage house for which their monthly payment on a 30 year amortizing mortgage is a little over $1300, including taxes and insurance. My gf and I are looking at homes. A medium quality 1200 ft^2 to 1500 ft^2 two bedroom one bath non tic with a deeded parking spot in mission / noe is going to cost between $750k and $950k; we're staring at about $5.5K/mo minimum between mortgage, hoa, taxes, and insurance. So owning the type of apartment that you would have a family in costs my sister maybe 1.5 * 1300 * 12 = $23,400 / year in pretax income while it will cost us approximately 1.5 * 5500 * 12 = $99,000 in pretax income. So there's no doubt that people making $250k in gross income are doing well, but it's not exactly like not worrying about the mortgage or having unlimited income, at least in sf. And while I'm well aware that I could live somewhere less expensive, this is, at least for now, where the type of employers that employee us are.

by orijing 16y ago

entangld 16y ago

I hate to rain on your parade... As you can see, the action is in the top 1 percentile, and the real action is in the top 0.01 percentile. It doesn't so much matter how people feel. It matters what the reality is. If you make 250k there are millions of people who make much less than you do. The top 5% in a country of 310 million is a lot of people. I'm not necessarily even favoring dramatically increasing taxes on the lower threshold of rich people, but I don't want to pretend like the life of a family that makes 250k+ and a family that makes 60k are very similar. This issue is about self-awareness, not "the other guys".

brg 16y ago
What are the significant differences between these two families that we shouldn't pretend to gloss over? I grew up extremely poor, my father making around 18k a year at the time he was required to provide his tax statements for a student loan. There were no high profile private schools in my area, and so I attended school with the children of doctors, lawyers, bankers, and the local newscaster. While they often had newer clothes, I don't think our childhood experience or family situation were much different. And now, when I look to start a family of my own, I cant see how having a family income of 4x that of my parents is going to induce any significant change. Perhaps if I make it to 10x my fathers wage I'll see these difference you speak of, but as of now I don't see them.
- entangld 16y ago
  Well I have a friend who makes more in 1 day than I pay in rent. He talks about being broke all of the time, but doesn't mention the fact that he's always traveling, has bought 3 cars in a year and lives in a large house and he started and shut down a business within 1 year. He doesn't think he has money, but that's because he spends it. If he could afford those things, so can other people in his bracket. If he saved all of his money he might complain about his poor lifestyle, but for some reason he doesn't seem to realize that they're all choices. He could have easily bought a house half the size and price. It would stil be large. The article was right.
orijing 16y ago
Well, I didn't mean to say that the 60k and 240k families are "similar" but my suggestion was that they are much more similar (despite the 50 percentile gap) than the 240k is to someone 4 percentile above him. So it's relative similarity I'm referring to, if that makes any sense.

earl 16y ago

There's also cost of living issues -- $250K in sf is not the same as $250k in rural Wisconsin. My family all lives there, so based on my personal experiences, I'd wager that $250k in sf is about the same as $90k in rural-ish WI. My sister and her husband have three kids. They live on a 1/2 acre lot in a 4 bedroom 3 bath 2 car garage house for which their monthly payment on a 30 year amortizing mortgage is a little over $1300, including taxes and insurance. My gf and I are looking at homes. A medium quality 1200 ft^2 to 1500 ft^2 two bedroom one bath non tic with a deeded parking spot in mission / noe is going to cost between $750k and $950k; we're staring at about $5.5K/mo minimum between mortgage, hoa, taxes, and insurance. So owning the type of apartment that you would have a family in costs my sister maybe 1.5 * 1300 * 12 = $23,400 / year in pretax income while it will cost us approximately 1.5 * 5500 * 12 = $99,000 in pretax income. So there's no doubt that people making $250k in gross income are doing well, but it's not exactly like not worrying about the mortgage or having unlimited income, at least in sf. And while I'm well aware that I could live somewhere less expensive, this is, at least for now, where the type of employers that employee us are.