16 January 2012

Defining the world's richest 1%

A column at CNN Money reminds readers that even if they are not among the richest 1% in the United States, they may be in the richest 1% in the world.  You may be in this group (I am not).
It only takes $34,000 a year, after taxes, to be among the richest 1% in the world. That's for each person living under the same roof, including children. (So a family of four, for example, needs to make $136,000.)..

In fact, people at the world's true middle -- as defined by median income -- live on just $1,225 a year. (And, yes, Milanovic's numbers are adjusted to account for different costs of living across the globe.) In the grand scheme of things, even the poorest 5% of Americans are better off financially than two thirds of the entire world.
The sentiment is correct, of course, and many Americans need this kind of reminder.  But I would suspect the data as being a soft in several regards.  The first is the equating of "income" with "wealth."  There are many people with amassed wealth who have little current income; when I lived in Kentucky I often met old men from Eastern KY who lived on Social Security checks that would have represented several hundred dollars a month, but who owned parcels of land worth hundreds of thousands of dollars.

Secondly, the economist says the data are "adjusted for different costs of living," but that is an enormously complicated task - even just within a nonhomogenous country like the U.S. where a given income might represent "wealth" in one ZIP code but be marginal for living in another.

And finally, having a high current income may not place one "better off financially" than someone with a lower income living in a country with better health care and social safety nets.

Via Neatorama.


  1. Sadly, those parcels of land in Eastern Kentucky are worth exactly what someone is willing to pay for them. I've been trying to sell one at a loss for four years now.

    You can't eat land, but owning any that you don't live on will prevent you from qualifying for food stamps, no matter how many kids you have or how low your income is.

  2. Miss C, if your property is forested, you might consider monetizing the land by harvesting timber. This doesn't mean clear-cutting- it can be done selectively to actually enhance the woods and improve the quality of the remaining trees.

    In Minnesota, the university's agricultural extension service can provide low-cost surveys of tree types on a parcel and recommend which ones can be removed. Here in Wisconsin we resorted to consulting a private arborist, but you can even find grad students in Ag school who can give informed advice after a weekend of walking through your woods.

    The market for wood fluctuates with the housing market, so this might not be a good time to do the actual harvest, but conversely it might be a cheap time to hire an arborist for a consultation.

    If you've into long-range planning for children, the forestry service can provide (or plant) hardwood species (walnut) that will be worth $$$ in several decades (if noone finds them and steals them...)

  3. Oh, I wish. It's just a house. Banks won't lend money now to anyone looking in that price range.

  4. As Stan has quite rightly said, it's not really fair to compare across different nations - cost of living has to come into it. If you earned say $10,000USD per year but were living in Fiji or Kenya you would be considered VERY wealthy, but trying to live off that much while living in the US would be difficult and probably bordering on impossible...


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