Monday 21 November 2011

Who are the 1%? Part two

You can slice the population up in numerous ways when it comes to determining who is in the top 1% and who isn't. (Can a grammar nazi let me know if that should be "who" or "whom").

I prefer to look at the entire population, and then calculate the top 1%.

Others prefer to look at just those paying income tax, which reduces the pool quite considerably - especially now that the lowest income tax threshold is being raised considerably.

You can also use families to do your calculations.

I've used individuals because of the language being used in this debate. Take this quote from Wikipedia:

The protesters' slogan We are the 99% refers to the growing difference in wealth in the U.S. between the wealthiest 1% and the rest of the population. 

Note the last 5 words - "the rest of the population". When you say, "the rest of the population", to me, that means everyone. It means my kids, who are too young to be working (and earning). It means my parents in law, who are retired and on the pension. It means my sister in law, who was a stay at home mum for a few years after her kids were born, and therefore wasn't earning. It means a relative, who went gallivanting off overseas for a few years, doing the hippy thing and existing on the sniff of an oily rag. The quote does not say, "all those earning over $20,000 per year".

A document that has been quoted as a distant source for all this discontent is this CBO report on trends in household income. It's worth a read. Here's some points:

  • Due to the IT revolution starting in the 1990s, workers with better educations and skills earned a lot more money than those with poor educations and low skills
  • An increase in foreign born workers has put downward pressure on the wages of low skilled work
  • The entry of women into the workforce has increased the inequality between families. It's obvious that if both parents are working in one family, and only one is working in another, then there will be inequality between the two.
  • Well educated, highly skilled people tend to marry the same type of person. If both of them work, they will make a lot more money than a poorly educated, lowly skilled couple.
  • For those at the top, a lot of their income came in the form of capital gains during the stock market boom. ie, those that invested their money made more money. Those that invested nothing made nothing. 
  • Changes in the media and sports industries saw a boom in payments to actors and athletes - but there's not as many of them as you might think
  • employees in the financial and legal professions made up a larger share of the highest earners than people in those other groups. The authors concluded that their findings are most consistent with the theories that technical changes have enhanced the value of certain skills and that the increasing scale of corporate and financial activity has raised the value of corporate executives and financial professionals, rather than that weak corporate governance has led to excessive compensation.
  • An alternative study found that nonfinancial executives, managers, and supervisors made up the largest subgroup of the highest-income households, accounting for 31 percent of the top percentile. Medical professionals were the second largest occupational category, making up 16 percent, while financial professionals accounted for 14 percent and lawyers for 8 percent.
What do I make of all this?

Get a job at Macquarie Bank and invest your money. Marry someone else who works at Macquarie Bank.

But ignoring the bankers for a second, let's think about the sorts of people who have climbed into the 1%. They're just as likely to be people who started early at Google and Apple, the engineers who took a punt on working for Skype, the Dilberts who came up with the idea for Angry Birds and Twitter and a whole host of IT gadgets and software. They're the doctors who invented new surgical tools and techniques, like better knees and hips and pacemakers and hearing aids.

Do you really think that the people who invented Angry Birds, who are now probably in the top 0.01%, are really that evil and nasty? Are they to blame for the calamities of the world? And why do you want to take their money off them? If you want to some cash, invent your own stupid game and take it to market.


Anonymous said...

"Who" is correct.

Your friend
The grammar nazi

Anonymous said...

"Get a job at Macquarie Bank and invest your money".

Yes, but don't invest it in Macquarie Bank shares - buying a yacht or playing the pokies would be a better "investment" if Macquarie Bank's share performance this year is any guide.