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Does Income Inequality Matter If There Is Social Equality?

Updated: 02/13/2021 by Financial Samurai 66 Comments

As we have see in 2020 with the tragedies that have befallen Black America, we have neither social equality or income inequality. African Americans still earn much less than white Americans and have lower net worths. We must fight systemic racism.

Over the past 30 years, only the top 20% of household incomes have shown any relative progress according to the charts below. You will know from my top income earners chart that the income level for the top 20% is roughly $80,000 a year and higher.

What’s most apparent is how well the top 1% have done. The chart below has the top 1% of income earners at roughly $1.8 million in 2007. This gels differently with the IRS study that puts the top 1% income level closer to $380,000. However, the point is that the top 1% has seen a doubling of their incomes in the past 20 years, while the rest have barely budged.

Does Income Inequality Matter Given We Have More Social Equality?

If you’re making $50,000 a year in Chicago and your friend, who is the same age, with the same work ethic and the same college degree makes $90,000, who cares? With a $50,000 income, you’ll still be able to afford a smartphone, drink the same beer at the local Irish Pub, rent the same one bedroom apartment on the Gold Coast, own the same LED TV, drive a similar car, go on the same two weeks vacation, and date the same women.

The life of a single man making 80% more is almost entirely the same. The only difference might be the accumulation of retirement savings if the higher income individual is disciplined. We know from many examples this is hardly a guarantee!

In fact, if you compare the top 20% income earner to even the bottom 20% income earner, how bad are things between individuals? Almost everyone has a working fridge, cell phone, TV, bed, shelter, access to public parks, libraries, running water, and clean air in North America, Europe, Australia, and Singapore. Pretty soon, everyone in America will also have access to basic free health care. Only the most destitute don’t have all the basic necessities. These are the people we must help out.

Despite all the social equality that we have nowadays, there is an ever increasing undercurrent of dissatisfaction exploding to the surface. I want to understand why.

Income Inequality Is Highest In Hong Kong

We only need to look at present day Hong Kong to see what happens when income and wealth inequality go too far.

The Wall St. Journal recently highlighted mounting attacks against Hong Kong Tycoons who take in at least 23 cents for every dollar spent. Billionaires such as Li Ka-shing and Thomas Kwok own the property market, supermarkets, telecom providers, and the transportation system. If you are a Hong Kong citizen, chances are high you are helping the rich get richer.

The combined wealth of the city’s billionaires is equivalent to more than 70% of Hong Kong’s GDP. While the #2 and #3 ranked countries by such measure is Lebanon and Russia with ratios of 33% and 25% respectively according to Welch Consulting.

The newly inaugurated HK Chief Executive, Leung Chun-ying is cracking the whip and has already spearheaded the persecution of Raymond and Thomas Kwok who control Sun Hung Kai Properties, the world’s second largest property developer. In an era where the rich and the politicians have worked so closely for so long, it is unprecedented that such billionaires are now being persecuted.

So what has happened to cause such a change in heart? For one, new leadership by Mr. Leung wants to change the status quo and make a name for himself. But, second and more importantly is the increasing wealth gap between the masses and the super rich.

Blood Nose Living Prices With Wages Not Keeping Pace

Hong Kong housing prices have risen 82% since late 2008, while incomes have stagnated for the past decade. At least here in the US, property prices have come off from its highs and real estate is more affordable than ever before. In Hong Kong, it takes US$1 million dollars to buy a decent 700 square foot one bedroom apartment in a high rise building in Central!

If you’re living at home with your parents after college because you can’t afford rent, can’t find a decent job, don’t have an adequate love life, and see the rich get richer, you are eventually going to revolt. You might decide to take to the streets and participate in a demonstration. Or, you might start a website publicly denouncing the rich and powerful.

Whatever the protest, you do so because you feel that life is unfair. Even though you aren’t starving on the streets like so much of the world’s population, you are unhappy. Its OK if the rich get richer if you too are getting richer. It’s not OK if the rich get richer and you don’t progress.

Tremendous income gains for the top 5% since the Vietnam War

Goodbye Mitt Romney

Mitt Romney could have the most sound economic policies that will create the most jobs ever. But who cares? Americans do not relate to Mega Millions Mitt. If Romney is elected, the public will be reminded of his wealth and success every single day. His success will make everyone miserable!

Instead, Obama will get re-elected because he’s positioned himself to be more like the middle class. The middle class out number the wealthy more than 20 to 1. The middle class determines who is in power. Mitt Romney is just too out of touch with the majority and his image consultants and campaign managers should be fired for doing such a poor job. Obama is going to give the majority what they want, even if it is by stealing from one group to give to another.

From now until year-end, all the empty promises begin! Time to pump us up guys and buy our votes! Remember, the way for us to get rich is to predict the future, make bets based on the future, and hope our predictions are true! This section is not about who is a better candidate. This section is about reality!

Common Interests That Bind

Finally, I recently came back from a financial blogging conference. It was great to see everybody I’ve been interacting with for the past three years.

There were debt bloggers with negative net worths, student bloggers more than a decade younger, bloggers who were doctors and lawyers twenty years older, and bloggers who sold their sites for well over $5 million dollars. We completely straddled the wealth spectrum.

There was a balanced mix of women and men and good racial diversity between the Black, White, Asian, and Latino communities. We all stayed at the same Grand Hyatt Hotel, attended the same presentations, ate the same food, got wasted on the same alcohol, and danced at the same night spots. Rich or poor, we had the same opportunity to learn, mingle, and have a whole lot of fun! That’s what I call social equality!

What binds us together is our love of writing and building online communities. Nobody cares about your income.

Related: Your Chance Of Becoming A Millionaire By Race

Income Inequality Or Social Inequality?

Given the US has the highest correlation between effort, education, and wealth, why are we complaining? If someone studies harder, works longer hours, and takes more risks it shouldn’t come asa surprise if they make more money.

It would be more surprising if they made less than average! And even if they make lots more money, what does it matter if we have similar social equalities?

The reason why income inequality matters is because social equality has turned into a default setting where we all expect to ride the same bus, breathe the same air, access the same facilities, and have the same opportunities as our next brother and sister.

We’ve taken social equality for granted, as we probably should. I’m not going to treat you differently based on how much money you make. Are you? We now protest the different degrees of opportunity to get ahead.

As we learn from algebra, once we cancel out X on both sides, if what’s left still doesn’t equal then we’ve got to continue solving the problem. The real problem is, there will never be income equality so why bother trying?

Related posts:

Dear Minorities, Use Racism As Motivation To Achieve Financial Independence

U.S. Real Household Income By Race

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Finally, check out all the top financial products I’ve reviewed to help you achieve financial independence sooner. There’s no rewind button in life. Best we make the most of it!

Regards,

Sam

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Filed Under: Relationships

Author Bio: I started Financial Samurai in 2009 to help people achieve financial freedom sooner. Financial Samurai is now one of the largest independently run personal finance sites with about one million visitors a month.

I spent 13 years working at Goldman Sachs and Credit Suisse. In 1999, I earned my BA from William & Mary and in 2006, I received my MBA from UC Berkeley.

In 2012, I left banking after negotiating a severance package worth over five years of living expenses. Today, I enjoy being a stay-at-home dad to two young children, playing tennis, and writing.

Order a hardcopy of my new WSJ bestselling book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. Not only will you build more wealth by reading my book, you’ll also make better choices when faced with some of life’s biggest decisions.

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Comments

  1. spyguy says

    June 15, 2016 at 11:50 am

    I think you’re missing the point on social equality.

    There is a only a very tiny sprinkling of social equality near the top.

    Very few people are professional bloggers, so you’re getting a very skewed understanding of the population.

    There is no social equality for poor blacks, poor whites, poor asians, poor latinos, etc. People like us never see or interact with the lower classes. How could we? The conversations would be beyond disinteresting: we speak entirely different languages! Have you ever tried to listen to poor white or poor black southerners? They don’t speak English. People like us speak and write a language/dialect that is college-educated American. How many people are gonna read this blog that aren’t college-educated? How many people are gonna read this blog that aren’t high-school educated? Those are huge portions of America, and people like us are totally insulated from real contact with the lower classes.

    Now, I agree with your observation that $50k and $90k college-educated Chicagans are the same social class, so who cares about the income differences.

    But that example doesn’t illustrate the income inequality of the US. Your charts show the real income inequality, and it belies the total inequality of class or social status. It’s not the 1%, who are just doctors/lawyers/finance, basically professional-degreed employees. Those people are the exact same social class as engineers/doctors/lawyers/teachers/finance people who make $50k to $250k. They will marry each other, go to the same schools, and ride the same Ubers and buses and airlines.

    Understand the upper class is something like .1%. This class is not employed, it is capitalists who employ other people and/or capital. They are not defined by their profession or education. They transcend profession, education, religion and race. They are filthy rich. They probably never ride buses. They fly in private jets (not business class, which is for the $50k – $1M / yr regular employed people and mid-upper level executives).

    The lower class is like 2/3 of America. It’s people who aren’t college-educated, or are college-educated at state schools, trade schools, and community colleges. These people mix very little with the upper class, and not at all with the top .1% rich class. Yes, they have refrigerators and cell phones, but they have very little understanding of how to buy stocks, real estate, domain names, etc. They live within scripts/mental models that are much less accurate than the upper class, which are in turn much less accurate than the scripts/mental models of the truly wealthy top fraction of a percent.

    I agree that income inequality isn’t bad. But I couldn’t disagree more strongly with your assertion that social inequality is very low in the US.

    As a prime counterexample to the idea
    “The reason why income inequality matters is because social equality has turned into a default setting where we all expect to ride the same bus, breathe the same air, access the same facilities, and have the same opportunities as our next brother and sister. We’ve taken social equality for granted, as we probably should.”

    Look at Trump. He got started with what he calls a “small million-dollar loan” from his father.

    If everyone had that same social opportunity to borrow $1M to get started, the world would be a better place, and much more fair.

    It’s not that this is bad. It is good that papa Trump lent baby Trump $1M to start out.

    What is bad is that papa Trump and Uncle Sam DON’T loan $1M to every American to start out.

    People with your morality will often claim that people don’t like to see others getting the loan — which is false. We don’t like that everyone isn’t getting the loan. Trump isn’t bad for getting this loan. America is bad for creating and perpetuating structural inequality that deprives EVERYONE of getting this loan. It’s like when teachers ask if you brought enough cookies for everyone in the class. If you didn’t, then it’s wrong to eat the cookie. Eating the cookie isn’t wrong, what’s wrong is that you didn’t share with everyone.

    People like us do not have the same opportunities as Trump.

    We do not expect to ride the same bus as CEOs.

    We do not access the same facilities. Have you ever worked out at a gym or ate/drank with a super-wealthy person? The only times I have are at elite private universities, arts institutions, weddings, expensive clubs/restaurants. No poor uneducated people were allowed/present, except maybe to serve hors d’oeuvres and drinks.

    We clearly have massive inequality in social status, especially opportunities. You are blind to these inequalities, because you’re part of the tiny bubbles of pretty good equality near the top. Look at inequalities in conviction rates and incarceration rates between class and race that exist inside the US but not in other countries with fairer laws and more social equality.

    Reply
    • Financial Samurai says

      June 16, 2016 at 6:52 am

      I don’t think we all deserve to live like CEOs and have the same access. Is that what social equality means to you?

      I grew up in poorer countries in the world in the 1980s and 1990s (Zambia, Malaysia, Taiwan, Philippines) and studied abroad in India and China, and America is RICH compared to all of them. I also came from a middle class background and worked at McDonald’s as a teenager for $3.65/hour and drive for Uber as an adult today. I’m also a minority. Why do you think I’m “blind” to these inequalities?

      You can either look down on yourself and see the world as unfair. Or you can look up at yourself and see the world as full of opportunity. The choice is yours. There are too many Americans who only speak one language, who’ve never studied or lived abroad to gain perspective on how amazing it is to just live in America.

      Read: Spoiled Or Clueless? Try Working A Minimum Wage Job As An Adult

      Reply
  2. cantaloupe says

    October 6, 2012 at 1:04 am

    Can I ask where you got your stats about Hong Kong’s wealth being in the hands of the billionaires? The one that mentions Lebanon and Russia too. I’m curious because I’m living in the UAE right now and I’m wondering if they’re included in the stats. I’d be surprised if they let anyone know how much inequality there is. I know there’s definitely no Gini coefficient for the UAE, haha.

    Part of why there is so much inequality though, is that there is a huge amount of foreigners living here. And there is also huge upward mobility for everybody. But an American like me moving upward is way different than a Sri Lankan moving upward. And a Emirati moving upward is ridiculously different from me moving upward, let alone the Sri Lankan. And if anyone did a chart of the inequality over the past ten years, it would look absolutely ridiculous.

    I think if someone did a chart of the world’s wealth inequality, it would also look ridiculous.

    And I think that since 1979, the economy has become far more transparent and fluid and global. Which is going to cause some weird looking charts.

    Nobody is going to revolt against wealth inequality because the reality of it is not comparable to the chart of it or the stats of it. Can really you imagine hearing a story about revolts in Hong Kong against the billionaires?

    Reply
    • Financial Samurai says

      October 6, 2012 at 8:37 am

      Here’s the WSJ article: https://online.wsj.com/article/SB10000872396390444230504577615212739865968.html

      Reply
  3. Shilpan says

    October 3, 2012 at 8:27 pm

    I think Romney did an excellent job tonight with the debate. I can’t fathom that, with mounting national debt, and pathetic job market, this President has any qualification to remain in the Oval office.

    But, then again, I have a friend who is out of work for last 8 months yet he loves our President because he feels good about the promises. Too sad!

    Reply
    • Financial Samurai says

      October 4, 2012 at 1:51 am

      I think he did an excellent job as well. Alas, more people are dependent on gov’t, therefore Obama has more voters. Obama has the middle class, and Mitt has the upper class. The middle class outnumber the upper class 20:1. Mitt cannot win.

      Reply
  4. charles@gettingarichlife.com says

    October 3, 2012 at 12:50 pm

    Hong Kong has 0% tax on capital gains and no natural resources but per capita is very wealthy. The rich get wealthy due to having their money in several buckets (real estate, stocks, bonds, commodities, cash etc.) that doesn’t correlate, although 2009 was a rare event.
    If you look at the biggest gains in the wealth for the rich in America it coincides with the stock market boom that started in the 80s. By having more wealth spread around the top earners are able to capture the gains in various investment vehicles. The middle class tend to rush in late then get slaughtered. Look at this stock market rally, the quietest in history as the average investor has sat out of it.
    My friend and his wife in the bay area is middle class making 200K a year with some equity in a condo, they are trying to buy a house in the $1.1 million dollar range in a neighborhood with good schools and are facing 20+ offers and outbid by more than a 100K. He’s frustrated as hell, makes Hawaii look as cheap as Idaho.

    Reply
  5. AverageJoe says

    October 3, 2012 at 7:01 am

    Per usual, the comments here are nearly as good as the piece.

    A friend and I were having this discussion at lunch yesterday. I believe that feeling uncomfortable about the state of equality/inequality is a good thing. We have discussions that fuel change. The yelling/screaming/demonizing end of the political spectrum (Washington) is where nothing gets done.

    Interesting facts about Hong Kong. I’d read about some of the inequality there, but never knew that the top had a 70% strangle-hold on the wealth in the city!

    Reply
    • Financial Samurai says

      October 3, 2012 at 8:13 am

      Yep! But, at least HK has a flat tax of only 15% and a BUDGET SURPLUS!

      A small country/city is easier to manage than a big nation like the US. Singapore is the same.

      Reply
      • Rich In The Heart says

        October 4, 2012 at 7:44 pm

        By that same token, States can more easily manage themselves for most of their needs as opposed to the larger Federal gov’t, no?

        Reply
  6. Financial Samurai says

    October 2, 2012 at 8:13 pm

    The Presidential bet? Yeah, got about $10,000 on Obama. Should be good!

    Reply
  7. Daniel says

    October 2, 2012 at 5:43 pm

    I suppose I shouldn’t be surprised by this blog post, maybe a little dismayed though. Though it is not the only work on the subject, I highly recommend the book “The Spirit Level” by Wilkinson and Pickett

    It doesn’t really matter if we’re all getting richer, the damage is done when one group soars impossibly high over the other groups (i.e. the US, UK, Singapore etc.). The book I’ve mentioned does an excellent job outlining the effects and it’s pretty ugly.

    We all have an amazing amount of comfort in our modern lives, even those who live on 20k a year. However, you’ve ignored some simple psychology here, status anxiety is ever prevalent in modern society (Alain de Botton outlines this in an excellent book called, you guessed it, “Status Anxiety”.

    You have some keen observations in your blog, I suggest testing those observations now and then by holding them up to the scrutiny of other people’s work and ideas.

    Reply
    • Financial Samurai says

      October 2, 2012 at 6:27 pm

      I’m sorry you have status anxiety. Know that all are created equal and you have as much right as the next person.

      Reply
      • Daniel says

        October 2, 2012 at 8:09 pm

        You bring dishonour to your Prefecture with that response.

        Seriously, read something that may not match your views. Maybe you’ll grow.

        Reply
        • Financial Samurai says

          October 2, 2012 at 8:11 pm

          Just have confidence in yourself Daniel. You can do it! Or not.

          Reply
  8. Darwin's Money says

    October 2, 2012 at 1:15 pm

    I don’t think there’s social equality without some rough income equality. i.e. at the extremes, people with low income, never, ever socialize with high income earners. They live in different towns and parts of the city, their kids don’t go to the same schools, and they don’t have the same social patterns.
    On the flipside, income inequality is a good thing. It motivates people to want to better themselves which is what made America great. By going too far down the road of redistribution, Obama’s turning too many millions of Americans into takers instead of doers.

    Reply
    • Financial Samurai says

      October 2, 2012 at 8:13 pm

      Why are we talking about extremes though? And is it really important that a really poor person gets to socialize with a really rich person? I don’t get it.

      Reply
      • Darwin's Money says

        October 3, 2012 at 4:55 pm

        Why not talk about extremes when your article is in absolute terms? You stated an absolute which I refute. And on “The real problem is, there will never be income equality so why bother trying?”… The reason income inequality matters is throughout history, when the equation becomes too lopsided, it has resulted in violent revolution – dozens and dozens of times. This is just human nature. What do you think the Arab Spring was? There’s no reason to believe it couldn’t happen here. While I don’t think Obama’s taking the right approach by flat-out redistributionism, I would also agree if we took it to the other extreme and say, lowered taxes on the rich even more while leaving the same tax burden on the rest of the country, we could certainly see violent unrest. The Occupy movement started to go in that direction, but the country wasn’t fully behind them (yet). Give it a few more years of 16% real unemployment, youth unemployment over 25% and who knows?

        Reply
  9. Mat says

    October 2, 2012 at 12:29 pm

    I think it would surprise a lot of people how many business owners do not have a college education, and some not even high school education. You do not need a college education to earn wealth, but as a child you are told that if you do not go to college you can not be successful in the business world.

    Reply
  10. Hiro says

    October 2, 2012 at 11:02 am

    College education is a privilege, not a right. I think we take it for granted. I’m pretty sure there are many hardworking Americans out there with a vocational degree, with little student loan, make more money than ‘a college graduate’.

    Reply
  11. Financial Samurai says

    October 2, 2012 at 9:40 am

    There is no justice to the CEOs walking away with millions for doing nothing, underperforming, and driving a business to the ground I 100000% agree! It’s absurd, and I would feel embarrassed.

    When corporate greed by PG&E killed my friend’s wife and my credit score, the CEO still made $7 million plus. WTF?! It’s an outrage!

    We must depend on nobody but ourselves. I hope this blog and others like it can help empower readers!

    Reply
    • Rob says

      October 5, 2012 at 2:21 pm

      Agree again the paradox of choice, simply too many options for any reasonable person to be able to understand. I even wrote a short blog post about

      Reply
  12. Jason Clayton | frugal habits says

    October 2, 2012 at 6:06 am

    Interesting discussion and graph… In 1973 the US Government decoupled the US dollar (federal reserve note) to Gold. Since then the FED has been free to print as much money as desired.

    I see from the graph, that this is also when income equality began to deteriorate. I believe this is because money created by the Federal Reserve goes into the pockets of the top 1% (less than 1%). Everyone else gets a nice dose of inflation and keeps them stuck in their current class since inflation eats up any wealth increase in their savings.

    In my opinion, this is the real issue facing our country. It is not Democrat or Republican, but the engine behind both parties. The Federal Reserve.

    Reply
    • Financial Samurai says

      October 2, 2012 at 8:06 am

      Good points on moving off the gold standard then and the gap widening.

      Inflation helps anybody with assets, b/c by definition their assets are inflating. This is why renting for life is not that great a proposition.

      Reply
  13. Mike says

    October 2, 2012 at 5:52 am

    Honestly, I think a large part of it is that people seem to think wealth=happiness, when they really just need the bare minimum.

    Reply
    • Financial Samurai says

      October 2, 2012 at 8:06 am

      You’re probably right… and I’m trying to point out that “the bare minimum” has risen A LOT in the past 100 years. We’re all much better off now and have so much more social equality.

      Reply
  14. Mike Hunt says

    October 2, 2012 at 2:31 am

    Sam, so what do you think will happen with the fiscal cliff coming up on Jan 1st? Kick the can on all aspects?

    -Mike

    Reply
    • Financial Samurai says

      October 2, 2012 at 8:07 am

      No fiscal cliff will happen. I might write something about it, but I’ve got a 58 post backlog and it is getting ridiculous!

      Reply
  15. Kim@Eyesonthedollar says

    October 1, 2012 at 7:51 pm

    You’re right that inequalities in pay don’t matter that much if you have what you need. It is cheap to live in our area, but if I made the same money in San Francisco, I’d live in a tiny house without much stuff. It’s all a trade off. If you want to feel richer, find a job you can do anywhere and move to the boonies.

    Reply
    • Financial Samurai says

      October 2, 2012 at 8:10 am

      Yep. The thing is, you’ll come to SF and make more for the same job. Higher incomes are what drive higher prices here.

      Moving to the boonies to write online is a good idea! But, I love SF and the buzz of bigger cities. Honolulu one day though!

      Reply
  16. Untemplater says

    October 1, 2012 at 7:50 pm

    Wow and I thought property was expensive in San Francisco. That’s crazy that the property prices in HK have risen that much. I can’t imagine the impact that has had on families.

    The US certainly would be a different place if the middle class disappeared and we were left with only the super rich and the very poor. Hopefully there will continue to be more jobs to strengthen the middle class and keep more families out of foreclosure and bankruptcy.

    Reply
  17. Financial Samurai says

    October 1, 2012 at 7:41 pm

    I donno, I think one learns a lot in college. Put it another way. If you were an employer, wouldn’t you want someone to have a college education?

    20-somethings don’t care as much as elders. They are too bullish on their future to vote.

    Reply
  18. Fed up and unsubscribed says

    October 1, 2012 at 7:01 pm

    I’m going to take issue with the fact that you think people will not vote for Mr. Romney simply because he is rich. Maybe you’ve been hanging out with PF people for too long because from my point of view, Mr. Romney’s character has more to be desired than that of Mr. Obama. Why is Mr. Obama not running on the successes of his administration? Because he can’t. Mr. Obama has done more to trash our economy than any outsider could have ever done. About 12000 pages of new regulations are published every month since the start of his administration, strangling small businesses and stopping would-be entrepreneurs. That’s why he has attacked Romney’s wealth, an alleged “bullying” incident from the 1950s and the dog on the roof of the car; he has nothing else.

    As for why the rich get richer, the cronyism of Mr. Obama’s administration has been breathtaking, literally and figuratively. Billions of tax dollars have been funneled to so-called “green” companies only to have them default on those loans, leaving the American people hanging. “But he saved GM!” The hell he did. GM still went bankrupt. The bailout only changed who got paid (the unions) and who was hung out to dry (the bond holders).

    So I identify with the man who gives to his church, gives to those who don’t have as much, and doesn’t brag about it. I do not identify with the political opportunist who doesn’t even take care of his own family members, specifically his half-brother George Obama.

    Reply
    • Financial Samurai says

      October 1, 2012 at 7:31 pm

      I know it’s tough to accept that a Republicans will not get the White House for the next 4 years, but you’ve got to get over it, otherwise you’re not going to have the right mindset and make the right investment decisions.

      It all comes down to MATH. Which candidate can trick, cajole, convince, the middle class to vote for them.

      Cya!

      Reply
  19. Rich In The Heart says

    October 1, 2012 at 6:03 pm

    I just love how the CBPP can put out the chart that you have posted on this article (the income-gains.jpg?fit=1456,9999 one in the middle).
    Let’s compare 1947 to now using 1973 dollars? Why not compare it to 2000 dollars instead, since that is one of the most recent wars?

    And in all honesty, if the middle class does get to determine who is in power as you postulate (and I concur, since it’s the largest portion of the US population), then they’d be better off voting for neither Democrat nor Republican. But that’s just IMHO.

    If there is no inequality with earnings, then what would there be to strive for (that’s not coming from a “Republican” standpoint, that’s coming from having lived in the trenches … literally). We would then be a nation that would become lazy enough for the rest of the world to overtake in a decade or two.

    Reply
    • Financial Samurai says

      October 1, 2012 at 7:45 pm

      You don’t think the Democrats are more inclined to spend, spend, spend and redistribute wealth? I think so, which is why those who need help are better off w/ Obama at the margin.

      Reply
      • Rich In The Heart says

        October 1, 2012 at 8:16 pm

        Actually, I don’t truly know who’s worse with the overspending. Granted if you look at the fact that Congress and the Senate make the spending decisions primarily, it looks like the Democrats follow the spend, spend, spend to redistribute wealth (https://en.wikipedia.org/wiki/File:Federal_Debt_1901-2010.png).

        Granted unless Congressional makeup changes, the presidential position will be almost irrelevant at this point.

        Reply
  20. Virginia says

    October 1, 2012 at 2:47 pm

    Here in the DC area, $50k vs. $90k could get you significantly different housing. I’d estimate a person making $50k could probably afford a home around $150k and a person making $90k could afford a home of approximately $270k. This would translate in either a significantly longer commute for the person making less money, or living in an area with more crime and poor schools. Both of these things could hurt the chances of upward mobility for their children (not spending time with their parents and poor education). I’m not concerned about income inequality so much as I am concerned about people’s ability to climb upwards economically.

    Reply
    • Financial Samurai says

      October 1, 2012 at 7:44 pm

      Are you concerned about the person making $50,000 that s/he won’t be able to climb upwards economically?

      I don’t worry about someone making $50,000 who wants to make more or find a spouse.

      I worry about the person making $25,000 or less, or someone from a family who makes that amount.

      Reply
  21. Miss T @ Prairie Eco-Thrifter says

    October 1, 2012 at 12:40 pm

    I am from Canada and I think it is insane what Americans have to pay for education. It is almost criminal. No wonder people are in so much debt.

    Reply
  22. TB at BlueCollarWorkman says

    October 1, 2012 at 12:12 pm

    Well here’s something cool — usually when a blog post is a little long, I skim it. But dang it, I read this whole thing! It was really interesting! You know, income equality won’t happen, and I”m not asking for that. Everyone having the exact same possessions wont’ happen (unless some people get into massive debt), and I’m not asking for that either. What I am asking is that a dude who works full time doing a needed job and service to people make enough money that he can adequately feed and clothe his wife and girls. Some months are pretty tight, not because we’re busy eating out or getting wasted, but because I just don’t always get paid enough. We’re not as unequal as that crazy Hong Kong example you mentioned or Russia or anything, so that’s good. And most AMericans actually do have food, clothes, and cable TV…so we should maybe lay off complaining a bit and get to work and get to voting on good people in office…but it would be nice if my wife and I didn’t have to worry about making ends meet sometimes even though I work full-time plus have sidejobs.

    Reply
    • Financial Samurai says

      October 1, 2012 at 7:43 pm

      Think about how we are vs. 20+ years ago. I think more people as a whole are better off. Some just don’t feel that way b/c they are constantly being bombarded by people who are even more better off!

      Reply
  23. JimL says

    October 1, 2012 at 8:15 am

    Beyond providing a safety net, no one should be favored. Our current system feeds the extremes on both sides. You can’t have huge tax breaks and also have massive social programs that can’t be supported in the long run. Romney is not the answer, but Obama is worse as spending is an even greater problem.

    We as American’s have created this problem. We all want the other guy to pay, but are not willing to sacrifice what is important to us.

    Reply
    • David M says

      October 1, 2012 at 8:31 am

      “We all want the other guy to pay, but are not willing to sacrifice what is important to us.”

      That is the American Way!!

      Reply
    • Financial Samurai says

      October 1, 2012 at 7:40 pm

      Obama really is going to spend us to oblivion. The trick is to be on the side where the spending goes!

      Reply
  24. retirebyforty says

    October 1, 2012 at 8:12 am

    I think income inequity matters much more to a family than a single male. You’re right that being a single guy is easy and most guys can afford a similar lifestyle. A family with kids need much more income to be secure. College cost keep increasing and we need to save for that too.
    Hong Kong sounds like they have some problems to solve. Property price is still rising that much? It’s already super expensive, right?

    Reply
    • Financial Samurai says

      October 1, 2012 at 7:39 pm

      I use single person b/c everybody is at least a single person. Not everybody is married or has family.

      But, if two people making $50,000 join forces, I don’t see a big deal of them only earning $100,000 vs. $180,000 by the other couple. Life doesn’t change.

      HK is ridiculously expensive!

      Reply
      • Hugo B says

        October 29, 2012 at 6:40 am

        But you’re assuming that both people continue to work after marriage. What if the couple decides to have children, and then what if one parent needs to stay home to take care of them?

        And yes I agree HK is freakin crazy expensive!! I would know, I’ve lived there haha

        Reply
        • Financial Samurai says

          October 29, 2012 at 9:37 am

          Is it not a choice to have children? With such a big event, I think most couples weigh the decision carefully!

          Reply
  25. Holly@ClubThrifty says

    October 1, 2012 at 7:51 am

    Lol, love your article. I also have to agree about the upcoming Presidential election. I am certainly not one to be envious of another person’s success but I hate Mitt Romney. Most people that I know do. There is something comical about hearing someone who inherited extreme wealth constantly lecture everyone about how they should work harder. He reminds me of Gina Rinehart. I cannot stand her for the same reason.

    Reply
    • Financial Samurai says

      October 1, 2012 at 7:38 pm

      I got a good Gina Rinehart quote for an article coming up. Should be fun!

      I don’t hate Mitt, I just know he will not win and have 5 figures of my own money betting on that fact.

      Reply
      • Holly@ClubThrifty says

        October 2, 2012 at 6:04 am

        Gina Rinehart has enough money to literally change the world. She probably has enough money to literally end world hunger…at least for a certain amount of time. Instead, she prefers to hoard it like a miserable old cow…even at the expense of her relationship with her own children. I hate to be harsh, but I’m going to guess that she will have a front row seat in hell.

        Reply
  26. Eddie says

    October 1, 2012 at 7:44 am

    Hi Sam!
    Like you said, some income inequality is fine and needs to exist. Longer hours generally mean bigger pay – not always true though, but could be the difference of the same job being performed by two different people.

    I just find it that middle class is becoming less and less. If things continue, one day we could see the elite/rich and the lower class. Like Will said, to politicians middle class doesn’t matter anymore.

    Education is a great indicator of the separation and income inequality. The average salary goes up 3-5%, yet the inflation hovers roughly around 3%, the education gets more expensive every year, on average tuition’s are raised 5-7%.

    It’s tough, but there’s always a way I believe.

    Reply
    • Financial Samurai says

      October 1, 2012 at 7:37 pm

      Good thing we have stuff like Khan Academy, which provides free education for all!

      Reply
      • Rob says

        October 5, 2012 at 2:12 pm

        On the polictions thingy one thing to keep in mind, money buys access, try meeting with you senator or congressman as a non donor won’t happen.

        Reply
  27. K says

    October 1, 2012 at 7:11 am

    I agree withthe premise that even the lowest 20% in america are still socially equal with the rest of society. However, I don’t think you can single out Mitt Romney as being so wealthy that he is out of touch. At “only” $11M net worth, Obama is still pretty rich, well above the amount of money that most americans can imagine. The difference is that his $1 billion in personal assistants at the white house (compared to $50M for the royal family) comes from the taxpayers. Romney has been successful and spends his own money however he chooses. Again, I agree with the premise of your article, but didn’t know why you had to bring politics into it. Almost any candidate is so rich to be “out of touch.”

    Reply
    • Financial Samurai says

      October 1, 2012 at 7:37 pm

      I don’t think an $11 million net worth is obscene at all for the President of the Free World. It’s quite normal, and even pedestrian imo.

      $250 million is a whole other stratosphere. Of course both are wealthier than average. Mitt just doesn’t know how to pander to the middle class, hence he will lose.

      Reply
  28. William @ Drop Dead Money says

    October 1, 2012 at 7:00 am

    Good points, Sam. As Warren Buffett pointed out: the super-rich have K Street, the row of lawyers paid ridiculous amounts by the billionaires to “ensure” that new laws only suit their interests. The middle class no longer has access to politicians, because they don’t matter any more (rub thumb and forefinger together).

    This may or may not be a part of it, but here’s a microcosm. The presidential debate is being held in Denver Wednesday night. The talking heads make it sound like this is great for our city, but is it really? I-25, our main artery freeway, is being shut down for 5 hours for a 10 mile stretch.

    Over rush hour.

    Why? Why are middle class people so totally inconvenienced? Politicians and billionaires have limousines with special privilege access, not unlike the Communist Party brass had in Soviet Moscow, so none of these restrictions affect them.

    That’s not social equality.

    So the notion that the rich people will tolerate social equality with their income inequality doesn’t look realistic. Just like Obamacare and the laws repealing telemarketing explicitly exempts politicians. Just like the rich are allowed to stash money in other countries to evade taxes and our laws conveniently allow that.

    For us, though, it doesn’t help to whine and complain. The questions we ask are:

    (a) how can I invest in it if it’s going to make obscene money?
    (b) what can I do within these circumstances to come out ahead?

    There’s always a way. Those who focus on the negative get just that, while those who look for the opportunities will find them…

    Reply
    • David M says

      October 1, 2012 at 7:39 am

      I absolutely LOVE your (b) what can I do within these circumstances to come out ahead?

      That is one of the KEYS to life!!!!!!

      Reply
    • Financial Samurai says

      October 1, 2012 at 7:34 pm

      Exactly. Accept the facts about politicians and who will ge relected, and invest according and get rich yourself!

      Reply
    • jaykimball says

      October 4, 2012 at 11:13 pm

      Speaking of K Street lobbyists, last week I heard veteran investigative reporter and Pulitzer Prize winner Hedrick Smith, speaking on “Who Stole the American Dream?” He talked about the destruction of the middle-class – how it happened, and what to do about it. It explores the rise of corporate lobbying, and social engineering that moved wealth from the middle-class to the corporate elite. I posted a video of that talk, here:

      The US Gini Index – a measure of inequality – is at an all time high, in the ranks of Rwanda and Uganda.

      Reply
  29. David M says

    October 1, 2012 at 6:53 am

    Some level of inequality is absolutely fine – like you said, “If someone studies harder, works longer hours, and takes more risks it shouldn’t come to a surprise if they make more money.”

    However, I am starting to worry that we are going to far in America – one thing that I am really starting to worry about is the cost of college education and the debt students are graduating with.

    Salaries go up 3% a year but the cost of education goes up 10% or so – compounded over the last 30 plus years. Thus, it is so much more difficult to “earn your way thru college” now than it was in the past. I worked about 15 hours a week during the school year and 50 hours a week during the summer and thus was able to graduate without much debt.

    However, now you can work a lot but you still are likely to pile up a lot of debt and thus paying off that debt and being able to have a comfortable life is getting more and more difficult. Especially for people taking lower paying jobs like school teachers and other similar jobs.

    Reply
    • Chris says

      October 1, 2012 at 4:22 pm

      Haha funny you say that. I went to one of the cheapest schools in the country! I got out in 4 years for a grand total of $19,104.50 which includes dorms/meals first 2 semesters. I was able to work my way through having 2 or 3 jobs at any given time. In 5 years tuition+fees have increased from $1,578 to $2,175 and that isn’t including living, textbooks, etc. It’s still very managable, and I was fortunate to live right down the road from this university, but you can see how fast its shooting up while our minimum wage has stayed the same!

      Reply
      • David M says

        October 1, 2012 at 4:29 pm

        My first year of college tuition was $5,100. However, it increased by 15% the next year. 15% when salaries went up 3%! And this was in 1985 – the tuition this year, $21,504!!!! I think that is MUCH higher than inflation.

        Maybe a finance major can determine the compound increase over the year!!!!

        Reply
    • Financial Samurai says

      October 1, 2012 at 7:33 pm

      Good thing we’ve got good public schools like UC Berkeley, Michigan, W&M, Virginia, Wisconsin etc that are much cheaper that private schools!

      Reply

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  1. The State Of The Union Address 2015 Cheat Sheet | Financial Samurai says:
    January 25, 2015 at 5:00 am

    […] grown in value. But I do wonder whether income inequality really matters as much given there is much more social equality nowadays. I do hope my children and my nieces and nephews grow up where they have a level playing […]

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