What it Takes to be Among the Super-Rich in 25 Countries

From Matt O’Brien’s Wonkblog column in The Washington Post comes an interesting look at what it takes to be among the top 1 percent of income earner in 25 mostly developed countries. (This is calculated after taxes.)

A few caveats regarding the results:

First, these numbers are for a person, as in you, but not you and everyone else you live with. So for a typical family of four, you’d have to multiply these figures by, yes, four to figure out what the top 1 percent make. Second, these are for after-tax income not including capital gains. That means if you live in New York, where city, state, and federal taxes can eat up half the highest-earners’ paychecks, you’d have to double these numbers. More than that, actually, since selling stocks, bonds, and real estate is income, and it’s a big part of the top 1 percent’s income—36 percent, to be exact—but it’s not included in the numbers here. And third, these aren’t in actual dollars, but rather in purchasing power parity, or PPP, dollars, which account for the fact that local goods and services, like, say, a haircut, are more expensive some places. In other words, you need to make more to live the same.

So in many of the world’s most developed economies — giants like China and India are conspicuously absent due to lack of data — you must make between $70,000 and $170,000 in PPP to be among the richest denizens. As the article explains, this fairly wide variation has a lot more to do with income inequality than the economic health or size of a country:

Look at Brazil. It has so much inequality that its top 1 percent make more than much-richer Italy’s do. Even then, though, it’s important to remember that not all after-tax dollars are created, well, equal. Would you rather make $151,000 in the U.S., where healthcare costs more and the safety net covers less, or $95,000 in Germany? It’s not as obvious as it sounds. Sure, you’d have less money to spend in the second case, but you’d also have less you’d need to spend on. That’s not to say that one is better than the other, just that you need to keep it in mind when you make these kind of comparisons.

As O’Brien helpfully reminds us, there is a very big difference between being in your country’s top 1 percent, and being among the world’s top 1 percent. If you make between $43,000 and $53,000 (depending on which measurements you use), you are better off than 99 percent of humanity, yet within the middle-class of the United States. This is not to make light of poverty in America or other developed countries, but rather highlights the vast extent of poverty in the world.

As the article aptly observes, “There’s nothing luckier than being born at the right time, in the right place, to the right parents”.

Indeed, so much of one’s fortune — both materially and in terms of a stable, fulfilling life — come down to random chance. While there will always be those that manage to climb out of the low and punishing circumstances they are born or otherwise thrusted into, the bulk of the human race is mired in conditions that restrict opportunities for advancement. Changing these deterministic factors — creating political systems, institutions, and economies that are accessible and allow humans to realize their potential — can go a long way to elevating most people out of poverty. One need not be in the top 1 percent to enjoy a satisfying and fulfilling life.

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