Rich, Richer, Richest

While doing a little research relevant to a discussion going on in comments I stumbled across the eye-catching graphic above in this article by Peter Coy at Bloomberg. Note that the graphic illustrates wealth not income. What does your net worth need to be to qualify as rich (the 1%), richer (the .1%), or richest (the .01%)?

The threshold for being in the top 0.1 percent of tax filers in 2012 was wealth of about $20 million. To be in the top 0.01 percent—that’s the 1 Percent club’s 1 Percent club—required net worth of $100 million. Of course, even $100 million is a pittance to Bill Gates, whose net worth, according to the Bloomberg Billionaires Index, is nearly 800 times that.

There are about 1.4 million rich households, 140,000 richer households, and 1,400 of the richest households and among them they hold just about 40% of U. S. wealth.

That’s an enormous concentration of wealth but even that doesn’t tell the whole story. If you only look at the 14 richest people in the United States, a list that includes such worthies as Bill Gates, Warren Buffett, Larry Ellison, Jeff Bezos, Mark Zuckerberg, and Sergey Brin, their combined net worth is around $250 billion which peels a little less than one of those percentage points away from that richest .01 percent in favor of the richest 1% of the richest.

So, here are a few facts about the rich.

1. It is true that the richest 10% of the 1% hold more wealth than the balance of the 1%. Not by a lot, but it’s true.
2. It is not true that the richest 1% of the 1% (the richest) hold more wealth than the merely rich (99%-99.9%).
3. The merely rich hold nearly as much wealth as the richer and the richest household put together.
4. Numerically, how the rich get their income is pretty different than how the richest do. Most of the rich get their income from wages (as opposed to interest, dividends, or royalties).
5. At least a third of the rich have boosted their incomes via rent-seeking.

My off-hand guess is that most of the richer and richest tend to be in the tech and financial sectors. The top earning entertainers and sports figures tend to be in the “richer” category although I just happen to know that the highest-compensated actor has a net worth of around $150 million.

One more point: when I talk about excessive compensation, I’m talking about the compensation derived from rent-seeking.