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I was hoping to see how much people earn in their lifetime. And how that changed over time. I was wondering the other day other how many years are high earners

I was hoping to see how much people earn in their lifetime. And how that changed over time. I was wondering the other day other how many years are high earners are actually earning a very high income. In-equality wise it is very different if people in the 2 percentile of income stay there for a decade or more or if they are in that income bracket only for a few years while doing a specific job and drop down to lower income again when they change their job. Assuming for instance an average work-life of 40 years (25-65), and anyone in the 2 percentile income bracket stays there only for 5 years, that means 16% of the population will be high-income at some point in their life (and stay there for 5 years), or up to 32% of households. This means that in this scenario up to a third of the population (maybe more if kids are taken into account?) would benefit sooner or later from an exceptional boost in disposable income. That picture would be very different if high-earners stayed high earners for a longer time as they would truly form an elite that is clearly separated in income wealth from the rest of the population. Obviously what you do with this income determines a lot about your actual wealth. So this is a different question than how absolute wealth is distributed. I would be very much interested in pointers towards data and/or studies about how runaway elite incomes actually are in different parts of the world.

Retric 5y ago
High income brackets are vastly higher incomes so people at low incomes (~30k) rarely reach that level. In 2020, the top 1% was $531,020.00 / year, that’s rare, 2% is $387,116.00 again a huge jump for most people. However, some people very briefly enter high income status via a windfall. But, even here it’s mostly people with high incomes rather than poor people winning the lottery etc.
- dlp211 5y ago
  That's household income. Top 1% individual income starts at $361k. To be in the top 10%, you need to make more than $125k.
brk 5y ago
I think that most high income earners stay at that stage for the majority of their career after reaching that level. While I know there are exceptions and odd examples, IMO people in general have little desire to take a large pay cut, so if you manage to get yourself to the point you are in the top 2% of earners, why would you step back?
- nend 5y ago
  If I had to guess, I agree most people probably continue to earn high wages once at that level. But I don't think it's a question of how often people decline high wages to take a lower paying job (although this obviously happens as well). It's whether they can continuously be offered high wages as their career continues.
  - lotsofpulp 5y ago
    At least part of that is probably a function of how hard the work is on one’s body. A hard labor worker with a high income in 30s/40s is presumably more likely to lose that income in 50s/60s/70s than a non hard labor worker (e.g. office job).
    - otnihoithiu 5y ago
      Highly paid, older office workers are first in line when layoffs happen. Those people then face age discrimination trying to get new positions. Can really derail your earnings.
      - lotsofpulp 5y ago
        Yes, there is dramatically increase probability of obsolescence for anyone after 50, but from my experience, the office workers tend to have a much better network to fall back on. Either way, one should definitely be investing in passive income sources for their 50s and up.
  - brk 5y ago
    Good point. In my experience, the higher earning potential can be maintained, though overall salary growth is lower, as you start to hit a bit of a theoretical earnings ceiling. Though, that is generally of limited consequence when you're at those levels. Another issue not addressed is lack of employment flexibility. If you are in the top 5% of earners, by extension you are likely limited to the top 5% of all available positions. Whereas someone with a more "mainstream" income can likely switch employers or industries, or even locations, with less impact (or maybe even positive impact, moving into a region with a better pay:cost-of-living ratio).
mdorazio 5y ago
For your second question see [1]. Average income tops out for most people around age 40 and they stay at that level for most of the rest of their main career. [1] https://www.bls.gov/news.release/wkyeng.t03.htm https://www.bls.gov/news.release/wkyeng.t03.htm
- otnihoithiu 5y ago
  Wow, you can clearly see the degree to which the housing recession damaged the lifetime earnings of gen Y.
dahfizz 5y ago
This data is pretty much what you're asking about[1]. In summary, people in the top income quintile have a 70% chance of staying there. In other words, less than one third of the top income bracket are "new" people every decade. 40% of people also escape the bottom income quintile every decade. Overall, the diagonal on the chart shows that you are pretty likely to stay in the same quintile over time, but there is still lots of mobility. [1] https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/2016-economic-commentaries/ec-201606-income-inequality-and-mobility.aspx https://www.clevelandfed.org/newsroom-and-events/publication...
- prennert 5y ago
  That was exactly what I was looking for. Thanks a lot!

Retric 5y ago

High income brackets are vastly higher incomes so people at low incomes (~30k) rarely reach that level. In 2020, the top 1% was $531,020.00 / year, that’s rare, 2% is $387,116.00 again a huge jump for most people. However, some people very briefly enter high income status via a windfall. But, even here it’s mostly people with high incomes rather than poor people winning the lottery etc.

dlp211 5y ago
That's household income. Top 1% individual income starts at $361k. To be in the top 10%, you need to make more than $125k.

brk 5y ago

I think that most high income earners stay at that stage for the majority of their career after reaching that level. While I know there are exceptions and odd examples, IMO people in general have little desire to take a large pay cut, so if you manage to get yourself to the point you are in the top 2% of earners, why would you step back?

nend 5y ago
If I had to guess, I agree most people probably continue to earn high wages once at that level. But I don't think it's a question of how often people decline high wages to take a lower paying job (although this obviously happens as well). It's whether they can continuously be offered high wages as their career continues.
- lotsofpulp 5y ago
  At least part of that is probably a function of how hard the work is on one’s body. A hard labor worker with a high income in 30s/40s is presumably more likely to lose that income in 50s/60s/70s than a non hard labor worker (e.g. office job).
  - otnihoithiu 5y ago
    Highly paid, older office workers are first in line when layoffs happen. Those people then face age discrimination trying to get new positions. Can really derail your earnings.
    - lotsofpulp 5y ago
      Yes, there is dramatically increase probability of obsolescence for anyone after 50, but from my experience, the office workers tend to have a much better network to fall back on. Either way, one should definitely be investing in passive income sources for their 50s and up.
- brk 5y ago
  Good point. In my experience, the higher earning potential can be maintained, though overall salary growth is lower, as you start to hit a bit of a theoretical earnings ceiling. Though, that is generally of limited consequence when you're at those levels. Another issue not addressed is lack of employment flexibility. If you are in the top 5% of earners, by extension you are likely limited to the top 5% of all available positions. Whereas someone with a more "mainstream" income can likely switch employers or industries, or even locations, with less impact (or maybe even positive impact, moving into a region with a better pay:cost-of-living ratio).

mdorazio 5y ago

For your second question see [1]. Average income tops out for most people around age 40 and they stay at that level for most of the rest of their main career. [1] https://www.bls.gov/news.release/wkyeng.t03.htm https://www.bls.gov/news.release/wkyeng.t03.htm

otnihoithiu 5y ago
Wow, you can clearly see the degree to which the housing recession damaged the lifetime earnings of gen Y.

dahfizz 5y ago

This data is pretty much what you're asking about[1]. In summary, people in the top income quintile have a 70% chance of staying there. In other words, less than one third of the top income bracket are "new" people every decade. 40% of people also escape the bottom income quintile every decade. Overall, the diagonal on the chart shows that you are pretty likely to stay in the same quintile over time, but there is still lots of mobility. [1] https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/2016-economic-commentaries/ec-201606-income-inequality-and-mobility.aspx https://www.clevelandfed.org/newsroom-and-events/publication...

prennert 5y ago
That was exactly what I was looking for. Thanks a lot!