A 1 percent for your thoughts.

October 14, 2011 11:18 AM

How much money do you have to make to be in "the top 1 percent", in world terms?

All this talk about the evils of "the 1 percent" has got me thinking. I have a sneaking suspicion that I and probably everybody I know are actually in this 1 percent, but I can't prove it.

Here's how far I can get: there are 7 billion people in the world. Therefore, "the 1 percent", if you're speaking in world terms, means the richest 70 million people.

So here's my question: what is the annual income of the 70 millionth richest person in the world? I assume that anyone who makes more than this is "the 1 percent".

This question could also be asked and answered based on net worth rather than income.

posted by crazylegs to Work & Money (25 answers total)

Global Rich List
posted by Perplexity at 11:20 AM on October 14, 2011 [3 favorites]

I'm pretty sure that the OWS people are talking about the richest 1% of Americans.
posted by theodolite at 11:23 AM on October 14, 2011 [11 favorites]

Monkeying with Perplexity's link, an annual income of US $47500 puts you in the top 1%.
posted by These Premises Are Alarmed at 11:24 AM on October 14, 2011 [1 favorite]

I and probably everybody I know are actually in this 1 percent, but I can't prove it.

There are 37.9 million millionaires in the world. According to this. I would infer from this that the balance of your 70,000,000 have net worths between $500,000 and $1,000,000. Which is not a lot of money in the grand scheme of things.

Something to keep in mind is that net worth and income are not normally distributed but rather skewed on both ends of the distribution. In other words, the great majority of people will be clustered somewhere around the median net worth (or income).
posted by dfriedman at 11:24 AM on October 14, 2011

Eh. "Skewed on both ends of the distribution" is not what I meant. But you get the point.
posted by dfriedman at 11:25 AM on October 14, 2011

Response by poster: Premises - I came up with $46,925. Do you think that site is dependable?
posted by crazylegs at 11:28 AM on October 14, 2011 [1 favorite]

That site uses data from an academic paper called True World Income Distribution, 1988 and 1993: First Calculation Based on Household Surveys Alone.

It looks like it gets cited pretty frequently. I couldn't find anything newer.
posted by Perplexity at 11:31 AM on October 14, 2011

Premises - I came up with $46,925. Do you think that site is dependable?

I don't think so. Some of the data that site is using are quite stale. They're using 25 year-old World Bank data and assuming a world population of 6 billion, for instance.
posted by mr_roboto at 11:32 AM on October 14, 2011

Premises - I came up with $46,925. Do you think that site is dependable?

It's probably dependable, but it's relatively meaningless. The average income is very low in terms of US dollars, but you need to consider what you can buy with that income. 40000$ dollars a year doesn't go very far when you're paying for your wife's cancer treatment. You've got to look at standard of living, among other things.

The 1% discussion refers specifically to America, where the top 1% have reportedly shown increased net worth during a period in which everyone else has suffered, widening the gap between the richest and... everyone.

Being in the top 1% globally is all well and good, but you're going to find that there is still an absolutely astronomical disparity between you and the world's ultra rich. On a global scale, it's not even 1% with all of the wealth. Meaning, as compared to America, globally there's actually a larger gap between the ultra-rich and everyone else.
posted by Stagger Lee at 11:34 AM on October 14, 2011 [13 favorites]

It's definitely a relative thing. Yes, absolutely the OWS folks are talking more about 1% of Americans, and for what it is worth their message in this regard is importation. That is not to say that global wealth distribution is also a major, or not more major, problem/issue. But, while intrinsically related, it may be best to treat the two issues as separate. Yes, you are very likely to be in the top 1% globally, and defiantly within the top 10% but that would then push the 1% American folks into something like the top .001%.
posted by edgeways at 11:35 AM on October 14, 2011

From Suzy Khimm over at the Washington Post:

As it turns out, the bottom 99 percent of the United States doesn’t make the top 1 percent of household incomes worldwide — but it comes surprisingly close. Branko Milanovic, lead economist for the World Bank research group, sent me this comparative analysis based on household income or consumption surveys worldwide, adjusted for purchasing power differences. Those at the 34th percentile of income in the United States are at the 90th percentile globally, and those at the 50th percentile in the United States are at the 93rd percentile globally. Even the very poorest Americans — those at the 2nd percentile of income in the United States — are at the 62nd percentile globally.

Technically speaking, only a small minority of Americans are in the top 1 percent globally: Just those at the 92nd percentile and above are part of the richest 1 percent on earth.

If the CPI and associated figures are correct, that 92nd percentile starts at about $164,000 (as of 2009).
posted by zombieflanders at 11:35 AM on October 14, 2011 [7 favorites]

If the CPI and associated figures are correct, that 92nd percentile starts at about $164,000 (as of 2009).

Is that household income or personal income?
posted by mr_roboto at 11:37 AM on October 14, 2011

Household.
posted by zombieflanders at 11:38 AM on October 14, 2011

The real problem here is that "the 99%" and "the 1%" haven't really been defined all that well even within the terms of the movement. Do we mean the top 1% of income earners or top 1% of personal net worth? The two have a lot of overlap, but they're far from the same thing. I mean, I'm a good bit above the median in terms of income, but way below zero in terms of net worth thanks to six-figures in student loans and no assets to speak of. Where do I fit? Certainly not in any definition of "1%," but depending on which definition you use, my "natural class loyalties" can go in different directions.

But yes, even murky as the definition is, the general understanding is that the OWS movement is talking about percentiles in the US, not globally.

Also, don't believe that Global Rich List site. It says that there are only 107,565 people in the world that make $250,000 or more. Considering that the top 1% of income in the US starts around there, meaning there are at least 1.5 million people who make that much it's off by more than an order of magnitude.
posted by valkyryn at 11:38 AM on October 14, 2011 [4 favorites]

There are 37.9 million millionaires in the world. According to this. I would infer from this that the balance of your 70,000,000 have net worths between $500,000 and $1,000,000. Which is not a lot of money in the grand scheme of things.

But the question is about annual income. There are many people who have a low or even zero annual income but are very rich. For example, people often enjoy the luxury of spending their family's earnings. Just because their name doesn't appear on the paychecks doesn't mean they aren't rich. You have to decide whether you meant net worth or income or something else.

Also, do you mean individuals or households? A lot of income figures are based on households, which is skewed since different households have different numbers of people. However, individual figures are also skewed since a single person with no dependents making $50,000 is going to feel a lot more rich than a married sole earner with children making $50,000.

Also consider that when you're including the entire world, down to the most remote villages in Asia and Africa, you're talking about places where people may be living in housing that's been passed down for centuries and is essentially rent- and mortgage-free. So to compare their "incomes" with those of Americans may be comparing apples and oranges.

Of course, the above source having to do with the period of 1988-1993 can't possibly be representative of the present. Soviet communism fell in the middle of that time period! Since then, countries like China (which has 20% of the world's population) have moved from centrally planned economies to freer economies, leading to many millions of formerly poor people no longer being poor. Now, that one example may not technically be about the top 1% of anything, but it's an example of how outdated 20-year-old income statistics are.

Those are just a few of the many problems with trying to pin down concepts like "the top 1%" or "the rich" worldwide. And as others have said, none of this has to do with the American rhetoric about America's "top 1%."

It helps to clarify your concepts before you go looking for statistics.
posted by John Cohen at 11:40 AM on October 14, 2011 [2 favorites]

From 2010's Global Wealth Report, published by Credit Suisse:

To be among the wealthiest half of the world, an adult needs only USD 4,000 in assets, once debts have been subtracted. However, each adult requires more than USD 72,000 to belong to the top 10% of global wealth holders and more than USD 588,000 to be a member of the top 1%. The bottom half of the global population together possess less than 2% of global wealth, although wealth is growing fast for some members of this segment. In sharp contrast, the richest 10% own 83% of the world’s wealth, with the top 1% alone accounting for 43% of global assets

posted by Jairus at 11:44 AM on October 14, 2011 [4 favorites]

Also, don't believe that Global Rich List site. It says that there are only 107,565 people in the world that make $250,000 or more.

Yeah, that can be completly disregarded. The Congressional Research Service just released figures that say that--in the US alone--there are 94,500 millionaires paying lower tax rates than more than 10 million middle-class taxpayers. If that's just people that pay lower tax rates than the middle class, I think it's safe to assume that the number of millionaires is even higher, and that the number of people making a quarter of that is significantly more than that.

Also, FWIW, a quick check for personal income would have that 92% US/1% global at about $88,000.
posted by zombieflanders at 11:47 AM on October 14, 2011 [1 favorite]

Also, FWIW, a quick check for personal income would have that 92% US/1% global at about $88,000.

Is that by currency exchange rates or purchasing power parity?
posted by mr_roboto at 11:49 AM on October 14, 2011

I would also like to know the same info for just the US? Who are the 1% in the US? What are their annual salaries, or their net worths? Is the non-working wife of a millionaire wall street banker in the 1% or no?
posted by tylerkaraszewski at 12:01 PM on October 14, 2011

I would also like to know the same info for just the US? Who are the 1% in the US? What are their annual salaries, or their net worths? Is the non-working wife of a millionaire wall street banker in the 1% or no?

If you define it by income, it would have been a household income of 350k in 2005 based on 2006 census data. I am unaware of reliable data on net worth.
posted by Lame_username at 12:14 PM on October 14, 2011

The real problem here is that "the 99%" and "the 1%" haven't really been defined all that well even within the terms of the movement.

The 1% doesn't refer to any of the options you list. It refers to the top 1% of Americans possessing 40% of the wealth. This roughly equates with the Forbes 400, and is (partially) about how those of the F400 ilk control the government, finance, and law enforcement.
posted by rhizome at 12:37 PM on October 14, 2011

The 1% doesn't refer to any of the options you list. It refers to the top 1% of Americans possessing 40% of the wealth. This roughly equates with the Forbes 400...

How could it possibly? 1% of Americans represents over 3 million people. Far more than 400.

Anyway, crazylegs was unambiguous about wanting a global perspective.
posted by mr_roboto at 12:43 PM on October 14, 2011 [1 favorite]

Mod note: Folks, this needs to not become a debate about the OWS issue generally -- MeMail to OP if you have sidebar discussions you'd like to have about the general issue.
posted by jessamyn (staff) at 4:20 PM on October 14, 2011

For example, people often enjoy the luxury of spending their family's earnings.

Usually, people with inherited wealth are living on the interest of the capital that comes to them via a trust or other investments. Sometimes they also receive some sort of salary for sitting on a family foundation. And sometimes, they make money based on residuals or royalties or stock dividends. Most aren't sitting around, like Scrooge McDuck, with piles of ducats in the basement. Family trusts wouldn't last very long if the beneficiaries could get their hands on the capital.
Case in point: Paris Hilton. She came into her trust, got it yanked by Conrad Hilton, but actually made money from her tv and movie deals and especially--her perfume line.. But once again, she's not liquid.
I'm not defending Hilton, but she's a useful example of how this works. Most people in the top 1% might have combined household wealth in the gazillions, but that's not ready cash, sitting in a vault.
posted by Ideefixe at 4:44 PM on October 14, 2011 [2 favorites]

From an academic perspective this is a tricky question to answer. The data quality is just poor. Someone who has tried to look at this seriously is Xavier Sala-I-Martin, the reference would be Sala-I-Martin, Xavier. "The World Distribution of Income: Falling Poverty and … Convergence, Period." Quarterly Journal of Economics (May 2006): 351-397. If anyone wants a copy let me know. (its actually a really impressive piece of scholarship, if you ask me).

I have put one relevant graph here, sorry if its hard to see. It does show the US income distribution and the world income distribution on the same scale, it number of people on the y axis and log dollars on the x axis. To answer your question you would want the total area under the world curve starting from the right-most corner which sums to 70,000. Taking a wild guess, and trying to adjust for the logs in my head I am going to say $65,000?
posted by shothotbot at 6:19 PM on October 14, 2011 [1 favorite]