In the chapter that argued for why the 10 times rule was decided upon (as opposed to a 100x rule or a 2x rule), the author presented a graph of income on the y-axis and %tile on the x-axis, with 0% at the origin. Basically it was one more way of looking at income inequality, but it was instructive for this purpose.
The graph itself started out as a line which sloped gradually upwards as you moved along the x-axis, with a roughly constant slope. However, there was a drastic change around 98-99% on the x-axis, where the graph turned up virtually instantaneously and shot up vertically.
This transition was basically the point where the merely affluent were left in the dust by the truly wealthy. The inflection point was a result of the fact that the very wealthy don't make the bulk of their money through labor, but from the return on capital. Just before the inflection point, the top wages were about 10 times the minimum wage, thereby leading the author to promote a 10 times rule.
I believe the data used in this book are probably 10 years out of date by now, but the qualitative point certainly still holds. The very top of the income earners in the US don't make their money from their paychecks, but from capital ownership. So, it is possible to make $100,000 a year from your labor (maybe even twice that much), but much beyond that you have to make your money from a return on capital (in a very general sense). Making $100k a year is a lot, but it's not obscene like making $10 million a year.
Brett
At 02:07 PM 5/24/00 -0400, you wrote:
>Carrol Cox wrote:
>
>>Brad De Long wrote:
>>
>>> Wow. That people claim that "those with $100,000 annual incomes...
>>> are not themselves rich" shows how astonishingly wealthy this society
>>> has become... and how weird our perceptions are...
>>
>>Not at all. Consider the Swineherd in the *Odyssey* -- a slave. But
>>his position (his relative wealth) was not far from that of someone
>>making $100,000.00 today. Moreover, his present was pretty much
>>his future -- i.e., his present was not ruled by the future. The only people
>>
>>I know making this kind of money are my daughter and her husband --
>>and so far as I can determine, the "structure" of their lives bears more
>>resemblance to mine (or even to some of my friends who earn below the
>>poverty level) than it does to any of those in the Forbes 400. Have you
>>read Doug's piece on the distribution of wealth in the U.S.?
>>
>>It takes an awful lot of wealth -- probably more than anyone "earns"
>>-- to free one's present from the tyranny of the future. And that is the
>>tyranny which over 90% of the world's population have most to fear
>
>The border between the fourth and fifth quintiles of the income
>distribution in the U.S. in 1998 was $75,000; the bottom limit of the
>top 5% was $132,199. So it seems a good guess that $100,000 puts you
>at the 10th percentile, which isn't too shabby. Solidly "upper middle
>class," in the popular argot, I'd say.
>
>Doug