Update on the 1%

Yesterday, I was walking along a corridor and overheard a conversation that stunned me. Two young adults were talking. One was lamenting that the job offer that he received that morning was for only $33,000. His friend shot back and said, "well, you are in the top 1%." The complainer responded with a vulgarity but the friend said--"No, I am correct. If you make over $32,400 you are in the GLOBAL top 1% of earners". I do not know the well informed young man but I assure you that he is correct. Hearing that, I though it was time to give an update on the top 1% here in the United States.

Very recently, using IRS data, 24/7 Wall Street published updated projections on America's top 1%. Of particular interest to me, was the information that they provided by state.

Here are top and bottom five states in terms of income to make the floor of the 1% in that locality:


 Rank        State              Minimum Income to Reach 1%       Average Income of 1%

   1       Connecticut                    $663,009                                      $2,178,625

   2       Massachusetts                 584,022                                        1,812,907

   3       New Jersey                       570, 745                                      1,509,794

   4       New York                          555,569                                      2,058, 789

   5       California                          526,427                                       1,690,208

   46     Kentucky                           288,860                                         752,547

   47     Arkansas                            268,412                                         992,874

   48    Mississippi                          265,138                                        648,830

   49    West Virginia                      259,702                                         533,534

  50     New Mexico                       256,208                                         643,395

Surprised? Probably not all that much by the state rankings. The issue to some would be the spread between what it take to make the 1% vs. the average household income among the 1% in that particular state. Number one, Connecticut, has hedge fund managers and other financial titans who pull the average up sharply. New York, at #4, also has many ultra high income households that pull the average up higher than #2 and #3, Massachusetts and New Jersey.

A key takeaway to me is that lumping all the 1% together is a big demographic mistake. If you barely made the cut in New Mexico at $260,000 and moved to Manhattan or San Francisco, you would be solidly middle class but not considered rich as you were at your original home. So, as is true of the real estate world, the 1% varies widely depending on location, location, location!

Tied in to the above statistics, I was able to pull income data from the Social Security Administration. Here is how some key numbers shake out:

Group                     Average Income      % of National Income

   .1%                       $2,757,000                       5.2

  1.0%                           718,766                      13.4

   5.0%                          229,810                      28.0

 10.0%                          118,400                      39.1%

Please remember that this is INCOME, not net worth. There are young billionaires in tech whose companies may not pay dividends yet who have relatively low incomes but vast wealth. Also, older citizens may control significant wealth but have stocks that pay low dividends and shield them from higher income taxes. When they do sell off assets, it is at tax-friendly capital gains rates.

As I have written before in MR, there has always been income inequality in countries that have free markets. Lately, with the recent run-up in equity prices, the skew to the top tier is getting more exaggerated.

By the way, the global top 1% control approximately half of the world's wealth (net worth). Count your blessings. Compared to the other 7.3 billion people on earth, most of us are doing pretty well.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.