About 50% of the top 1% in wealth are over 60. Having $2M saved up for retirement is not nearly as unusual as, e.g., having accumulated $2M before age 50.
Net worth distribution within the population of top wealth holders (assets > $2M; about top 1% of adult population): having $10M puts you in the 90th percentile (so, top 0.1% of total population) and $50M puts you in the 99th percentile (top 0.01% of total population).
See also Real Wealth: "Most of those in the bottom half of the top 1% lack power and global flexibility and are essentially well-compensated workhorses for the top 0.5%, just like the bottom 99%. In my view, the American dream of striking it rich is merely a well-marketed fantasy that keeps the bottom 99.5% hoping for better and prevents social and political instability."
Here is an interesting thought experiment:
ReplyDeleteIf the assets of the top 1% were confiscated and distributed equally to the other 99% it would provide each person with a one-time gain of $37,700 and make the wealth distribution approximately flat. How would you expect the nation's wealth distribution to change over the next ten or twenty years?
Any particular reason you draw the line at 99.5%? When I am banging down the M4 (or I-95), anyone driving slower than me is a slowpoke, and anyone going faster is just reckless ;-)
ReplyDeleteI am not sure that the "American Dream" means what you think it means. Consider Wikipedia's definition:
ReplyDelete-----------
The American Dream is a national ethos of the United States, a set of ideals in which freedom includes the opportunity for prosperity and success, and an upward social mobility achieved through hard work. In the definition of the American Dream by James Truslow Adams
in 1931, "life should be better and richer and fuller for everyone,
with opportunity for each according to ability or achievement"
regardless of social class or circumstances of birth.
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Nothing in there about having/needing $5mm in the bank . . .
Moreover, the phrase "lack power and global flexibility" needs some unpacking. Do professors at, say, Michigan State "lack power?" Not according to an sensible use of the word "power" in this discussion.
This reads like old fashioned Marxist, someone concerned about the false consciousness of the population --- all those imbeciles who think that a house, a steady job and life in the USA today are a pretty good deal, at least by the standards of what 99% of the people who have ever lived would say. Say it an't so Steve!
Do these statistics incorporate "assets" like pensions? That can make a significant difference (especially for people at or near retirement). Someone with $1M in an IRA at retirement may well be "worse off" than someone with a substantial defined benefit pension (especially if there is an associated health care package).
ReplyDelete99.5 is just an arbitrary value, as you can see from the last graph. But there is a qualitative difference between the 1% (as conceived by OWS) and the "real" 1% who are perhaps actually the 0.1% (or whatever). A lot of the 1% are older people near retirement who have simply saved all their lives on fairly ordinary incomes.
ReplyDeleteThe Real Wealth essay I link to was written by someone else but his points are well taken.
The American Dream is that you will have a better life then your parents did. This usually meant materially, which in an era of 3% compounding growth usually includes anyone who doesn't drop on the ladder precipitously. In our stagnant median income world it's fair to say that a majority of the population hasn't experience the American Dream since the 1970s.
ReplyDeleteIf we expand the American Dream definition to a better overall quality of life then it fails even more. The cornerstones of the traditional "good life" have been family, community, safety, and health. Advances in medical tech aside nearly of those things have declined as well. There are a wide number of reasons for these negative trends. However, I think wealth inequality is part of it. I've noticed the vast difference in social status and mate attraction between my younger poorer self and my older richer self (and I'm just talking about my 20s). I think wealth inequality decreases the % of men that are considered to have adequet social status for marriage, as well as being devastating to their self esteem. Finally, there is no denying that money buys political and cultural power that guides the lives we live, and wealth inequality assures that its guided in the way the oligarchs want.
Probably have to be somewhere north of the 0.1% before you can really be a baller.
ReplyDeleteI would not be so hard on the American Dream. I remember in the early eighties, people used to have running joke about senior citizens buying dog food for their own consumption. Food is so cheap that you no longer see this today. Smart phones, dvd's, micro waves and other endless list of inventions made life such much better today. An airplane trip used to cost an arm and a leg before the de-regulation. Now people hop on an airplane like they used to do a Grey Hound bus. You can get any information from the internet that you used to have to get with great pain and snail pace. If you have a cell phone, the long distance is free. You can buy stuff with a click of a button.
ReplyDeleteI could go on, but you get my point.
Only $2M? That's a big surprise. Steve's old house in Eugene would have been at least that in the better parts of SF or LA, and 4000 sq ft isn't so unusual anymore.
ReplyDeleteOr say both spouses have technical degrees and work hard, make 100-200. It's 2 M by 50 easy.
IQ goes a long long way, but the current incarnation of the free market is throwing away human potential and wealth like it was going out of style.
"...the way the oligarchs want..." The ultimate problem Steve has already named "creators vs rulers". Politicians and business elites especially in the US but everywhere else too are decidedly un-technical and ideological. Government by econ majors and lawyers = HELL.
ReplyDeleteDoes the stagnation or even fall in real income (due to globalization, tech advances, tax treatment, etc.) suggest that, it takes more and more aggregate IQ, up to a threshold (135 maybe), for each generation to do "well" relative to their contemporary peers (say top 1%, 5% in income or wealth) and "better off" than the previous generation? If so, it implies that one's children need, on average, higher aggregate IQ than the parents. Given the relentless force of regression to the mean, each generation needs to work smarter/harder than their IQ peers, marry spouses with higher IQs (with higher familial mean IQ), and educate their children to learn/work smarter/harder ways than their IQ peers, to stay ahead of the curve. Otherwise, each subsequent generation regresses toward the population mean in terms of IQ, income, and wealth. This is an extremely difficult thing to do, to avoid "shirt sleeve to shirt sleeve in three generation". Well-compensated workhouses (99-99.5%) may not sound all that good (but consider the < 99% alternative), but it is already an extremely difficult thing to keep up for 3 generations and beyond. Inheriting a a boat load of asset helps, but only if you use it to help yourself/children stay ahead of the downward current. Otherwise, it makes you/children lazy and any advantages it provides is wasted in no time.
ReplyDeleteIndeed. The rap-video image of a chauffeur-driven Bentley, private jets "Like a G6", a mansion with stables, etc... requires one to be in at least the top 1% of the 1%. But I agree with what David Kane and others are saying here as well ... Guys like Kruggy and Nim Chimpsky are in the power elite without any of this money. And the American Dream is alive and well for the middle class - even if they now must struggle to own a third SUV .... As the president says "at some point, you have enough".
ReplyDeleteRe: being in the power elite without the money. Krugman and Chomsky are fortunate to be able to trade in social currency instead of cash [the internet tells me that they are both worth about $2M, which by the numbers here is reasonable for successful men of their age]. The value of that currency, and consequently their power, dissipates the further out in their network that they get. I don't know that either of them could activate that social currency to actually get something done that required more than a handful of people to work on for a couple of months.
ReplyDeleteCash [the more the better] is much less idiosynchratic. Take a pile of it anywhere. Exchange it for local currency. Activate it to do your bidding. This is my take on Steve's power-and-global-flexibility comment. Krugman and Chomsky don't have this kind of universal power.
The wellness of the American Dream is an engineering problem. The wiki tells me that one facet of it is high median outcomes and another facet is having opportunities for stratospheric success. Insofar as social systems can enable one or the other of these but not both, people are clueless. Poor immigrants hope for the former. Entrenched middle classers are looking for the latter. I could stab at a couple of models and thresholds for 'wellness', but I wouldn't put any money behind it.