The Rich (Updated)

I’ve finally read a post on another blog which uses the term “the rich” in a way that I believe to be accurate and the blog is, of all places, Firedoglake. Ian Welsh writes:

Most rich people get most of their money from investments – also known as unearned income.

That is exactly right but, unfortunately, Ian doesn’t continue his analysis to tell us how many households fit that description.

It isn’t the top quintile, the top 20% of households. That’s people making $97,000 or more and most people making $97,000 or thereabouts are professionals and managers who live off their salary or wages just like most people who earn half that much annually. There are even a few blue collar workers who make $97,000 a year.

It isn’t the top 1% of households. That’s people making $315,000 or more. Many doctors of medicine, some lawyers, and even some government workers make this amount. For example, the Chicago Chief of Police makes about that much. According to Chicago Magaqzine, the CEO of WTTW, the Chicago Public Television station makes that much, as does the president of the Art Institute of Chicago and Michelle Obama, in her job as Vice president for community and external affairs, University of Chicago Hospitals.

To be in that rarified zone you’ve got to be in the top .1% of income earners, somebody like a professional athlete or a top executive in a Fortune 500 company, and there are about 150,000 of them all told. Many income earners in this group are Wall Street professional, yes, the same people who earned billions in commissions by packaging and selling subprime mortgages. And people in that income bracket are doing very, very well, indeed, doing better all the time.

One of these days I’ll write that post explaining how specific government policies and practices put in place over the last 50 years or so and technological advances have worked synergistically to make this so.

Note that I’m not disagreeing with Ian on this: I don’t think we should be making policies that primarily benefit people in that income bracket but I think that we need to be very careful if we readjust our policies so that our targets aren’t the vast majority of Americans who are making much,much less.


One final word of caution: “The rich”, by my judgment, are those who are in the top 1% of income earners and who derive the preponderance of their incomes through unearned income. We certainly wouldn’t want to characterize somebody who made, say, less than $35,000 a year, his or her entire income, from unearned income as rich. It’s both how much you make and how you make it. I haven’t been able to nail down the exact number of people who fit this description but I suspect it’s very, very few.

8 comments… add one
  • Interesting post!

    I haven’t been able to nail down the exact number of people who fit this description but I suspect it’s very, very few.

    What about things like pensions? Some of the “Rich” get “pensions” such as use of corporate owned aircraft, large annual payments, etc. while most normal people get considerably less than that.

  • Non-money income certainly complicates the picture. I have long thought that total compensation plans should be taxed rather than merely money wages (presumably at a lower overall rate).

    My main point in this post is that I think that practically everybody defines “the rich” wrong and, when you define it correctly, their number is much small than one might think, rendering many “soak the rich” tax reforms “soak the upper middle class”.

  • I agree Dave, and consider cost of living as well. Someone making six figures in one part of the country is probably poorer in a real sense than someone making 5 figures in another part of the country.

  • PD Shaw Link

    I think the Democrats are pretty clear that they want to tax “the upper class.” When Rangel was asked what this meant, he said anybody making over $150k. Like Andy says, wide disparties in cost-of-living is going to make that number look different in different parts of the country.

    But I think Rangel also wants to repeal the alternative minimum tax. That seems an odd from the working class standpoint, but it probably eliminates some of the regional disparity arising from cost-of-living issues. (In theory someone making $150k in a high cost area of the country is going to pay more for taxes and other deductable expenses)

  • That’s the old Congressional standard: anybody who makes more than a Congressman is in the upper class.

    I’d characterize such people as being either upper middle class if they derive most of their income from wages or salary or upper class if they derive most of their income from rents, royalties, and dividends.

  • Richard Gardner Link

    The highest paid folks in my town work for a financial firm that advises many pension funds. But number two is surprising – it is the crane operators for the ILWU – the longshoremen. The local port has 12 crane operators (the highest paid in the union), last I heard, and their official wage is about $220k/year. But since they work around the tides and ships’ schedules, the often work 16-18 hour days and with double-time make well over $300k (still working roughly 2000 hours/year = 40 hours/week x 50 weeks). By comparison, most GP MDs working for an HMO here make about $200k (Dentists make more).

    After a 2 year apprenticeship in the longshoreman’s union (they are mostly hired out of the union hall for specific jobs, monthly employment, not full time), they are making 80K. Not bad for a 21-year old whose father (or uncle) sponsored him into the union (about 25% lottery, 75% sponsorship).

    I find it amazing what some union members make, by restricting supply. BTW, this isn’t a extreme high cost area.

  • That’s an excellent illustration of exactly the point I was making, Richard. Thank you.

    And you make another important point: job,s trades, or professions that can restrict supply are also, coincidentally, a jobs, trades, or professions that can command high wages.

  • Oddly enough, if I were doing a formal definition that would only be part of it. CEOs who make 80 million dollars are clearly “rich”. So are many folks on wall street whose income is primarily bonusses. I’m not quite sure how to definite it, but something like “market position” would be in there – if you’re a CEO you get paid that much no matter what your performance (same with Wall Street they gave out record bonusses for 2007 to folks who bankrupted their companies).

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