Why Equality Drives Entrepreneurship and Innovation
Coming at this question from my typical perspective: a business owner facing a national economy.
You run a mid-sized business selling high-quality furniture. You’ve developed a new chair that’s better than the other chairs on the market. (Think: the Herman Miller Aeron Chair.) Say you’re planning to sell it for $700. (You can’t sell it for much less, no matter the volume, without losing money.)
Would you rather be selling into an economy with wide disparities of income and wealth, or one that’s more equal?
Let’s build one of each.
Imagine a million-dollar economy with ten people in it.
Economy 1: Each person has an income of $100,000.
Economy 2: Two people earn $300K each, and the other eight earn $50K each.
In which economy can you expect to sell more chairs?
In which economy would you expect to see more innovators and entrepreneurs thriving?
This is not quantum physics.
Cross-posted at Asymptosis.
Does selling the chair for $700 provide part of the income for the people in our imaginary economies? Or is it built using magically externalized slave labor in some imaginarily decoupled separate economy? Does the $700 retail price point include a reasonable profit margin for a local retailer? Or does it result from rent extraction by the lone remaining office supply chain?
I kid of course and get your point. I have the same problem with the insane focus on costs at my fortune 20 technology employer. We keep whacking people’s pay and benefits and laying off the most experienced and skilled people – it’s not exactly a subtle or rarely noted phenomenon. I keep asking: “Who do these bozos think buys internet services, providing customers and clients to the enterprises we are trying to sell this stuff to?”
The firings will continue until we are all out of customers!
Well, it’s an office chair so you’re selling to businesses who deduct or depreciate it and may finance it from the savings of those making 300,000 so the Gini coefficient probably doesn’t matter much.
It may not be quantum physics, but the analogy is a bit off the mark. If 5% of an economy of 300M people can well afoord that $700 chair it doesn’t matter to the manufacturer or retailer that the other 95% sit on milk crate chairs. The high end of the market for what ever product is often more robust during a wide spread recession. Think this way. If you did make $750,000 annually for the past ten years even going “down” to $500,000 leaves plenty of financial security for that next big purchase. And the going down in salary phenomenon is less likely at the top of the pyramid. The manufacturer of $125 chairs mat be hurting, but have you noticed the rising value of upper end RE?
When people ask me how is business (selling hi-end sports cars) I point out to them that the rich are still rich. It’s the middle and lower income classes that are hurting.
i could use one of those…the cats tore all the stuffing out of mine…
@Jack: “If 5% of an economy of 300M people can well afoord that $700 chair it doesn’t matter to the manufacturer or retailer that the other 95% sit on milk crate chairs.”
Well it certainly does matter if 10% instead of 5% can afford that chair.
Say that nobody making less than $60K or $90K would would buy such a chair. Going from economy 1 to economy 2 cuts the number of potential buyers by 80%. I would think that as a manufacturer or retailer you would “care” about that.
“The high end of the market for what ever product is often more robust”
Is “robust” a technical term? Not sure what it means.
Will the $300K earners each buy five of your chairs to make up for the eight chairs not being bought by the $50K earners? I’m thinking there’s a declining marginal utility to chair ownership…
I think that in the more unequal society I sell the chair for $2,000. 😉 Maybe adding a few bells and whistles.
I think that in the more unequal society I sell the chair for $2,000. 😉 Maybe adding a few bells and whistles.
I think that in the more unequal society I sell the chair for $2,000. 😉 Maybe adding a few bells and whistles.
@Min:
Right. A more-unequal society incentivizes innovators and entrepreneurs to develop and market products that fewer people can afford, instead of mass-market products that many benefit from.
This hardly seems like a path to widespread well-being.
A related view: A more unequal society incentivizes innovators and entrepreneurs to to develop and market status, or ego-enhancement, goods, rather than real-utility goods — even enhancing their goods’ status appeal simply by raising the price, rather than by adding value. (You can argue that self-perceived status and ego-enhancement have real utility, but…)
Steve, My point is that the 5 or 10% portion of the general economy may be of sufficient size that many products flurish in spite of the more general conomic malaise. Think of it this way. GM and Ford require a robust general economy in order to sell the many cars that they manufacture. Most of the car companies have a similar need. Porsche, Ferrari and to a lesser extent BMW and Audi need only a robust upper class economy. Robust refers to that sector, or those people, who are continuing to enjoy good income and wealth even if not quite as good as it had been.
I don’t disagree with your thesis that equality drives the general economy to better performance. More people earning enough to participate actively in the earn and spend cycles keep the economic engine fueled up. The wealthy don’t have the same needs. They are more insulated from a general economic disruption. As such those who are wealthier than the 95% don’t see a need for economic recovery in the same light as your concept of equality. I point this out not as a criticism of your idea, but as recognition that the very rich will only see the need for economic reform when their personal econoomic circumstances warrant such a need.
The entire auto industry worldwide has sold fewer than 20m cars into the US in any given year. If 10% of the population needs a car and is creditworthy enough to get one, it’s far more than enough to keep that industry alive.
For a small business owner or manufacturer, even more so.
Nearly all businesses are hyperlocalized for this sort of reason. The theoretically addressable market is gigantic, much more than you can hope to manage even if you’re a fortune 500 company.
Jack:
Not to quiblle; but, it is 5 to 10% of 156 million taxpaying households which does shrink the market place somewhat. When we talk of that 5 to 10% we are discussing those who make > $180,000 or those who make >~$120,000. I would think you would dig deeper.
Min perhaps you sell two exclusively at Tiffany’s at $3500 each and import a knock-off version from China to sell eight at $100 each at Wallmart. No great innovation is required–just marketing–and because GDP growth is higher than selling 10 at $700, we can claim to be better off under Economy 2.
@PJR:
You’re confuting nominal (dollar) and real value.
In Economy 1 we have ten good chairs.
In Economy 2 we have two good ones and eight not-so-good ones (don’t work as well, don’t last as long…)
Which one results in more widespread well-being? (Call it, say, Gross National Utility.)
Which one results in more succesfull innovators and entrepreneurs (hence innovations)?
I don’t think you get it.
The oligarchs have all the money and power.
Middle management isn’t deciding to pay people garbage or lay them off.
Repeat after me: The oligarchs are doing just fine. They make their money in no-to-low risk interest-bearing accounts.
@Sisyphus:
I don’t know who here doesn’t get it, but yeah: as a group, they always preserve their wealth. Everyone else is subject to the whims of the market. That’s what this graph says to me.
Steve
it is apparently more like quantum physics than you thought. but let me help you out a bit. the rich can afford that Ferrari because the infrastructure is paid for by the people who buy chevrolets.
eventually the rich would run out of customers in the low wage economy, but not only are we eventually all dead, but meanwhile the rich are doing just fine selling to the “emerging” markets.
Jack
i think you are generally right. but i’d go a bit further.
it doesn’t take “equality” so much as it takes opportunity and a level of income sufficient to insulate even the poor from fear of want or dire exploitatioin.
give the people enough education and enough free time and they will innovate in ways you never thought of. and the economy will do just fine.
but when you have a society divided between “greed is good” and “tax the rich to provide welfare for the poor” you are on your way to Robespierre. the poor will be too poor to innovate, and the rich will be too dumb. it’s easier to spend their money on gambling and obvious “luxuries.”
more quantum physics:
in your “equalitarian” society you might sell more enron chairs. but would you sell more Lear Jets, yachts, fine china, broadway tickets, eco-vacations…?
and remember that ordinary people work making those high value things. and probably prefer that kind of work to assembly line work.. even making Aeron chairs.
there might be more to be said for inequality that you think.
i would agree that too much inequality may be a bad thing… when the poor can no longer live human lives, and the rich have more power than is safe for the rest of us. we may be at that point in America today, but simply calling for “more equality” is not the answer.
Sisyphus:
Were you over at Slate – “The Fray?”
You are correct that Economy 1 is best for innovation, entrepreneurship, and outcomes. Yet in Economy 2 (the one with the two ostentatious status symbol chairs and eight strong-as-cardboard knock-offs) gross receipts from new chair sales are higher and the new chairs “average” a higher (mean) market value. Businessmen will tell us this proves that Economy 2 is best overall, economists will provide supporting data and theory, and politicians generally will say any desire for something else reflects failed commie-pinko thinking. Isn’t that about right?
Steve
“robust” is a quasi technical term. technical people use it to mean you get the same result under a wide range of conditions.
in this case, however, jack appears to mean “buoyant” or maybe just “healthy.” a robust general economy would be where most everyone is doing better than they did last year. a robust upper class economy would be where rich people are doing better than they did last year. over the short run it is by no means impossible to have the latter without the former. it may even be possible over a long run. you’d have to ask the egyptians.
“Would you rather be selling into an economy with wide disparities of income and wealth, or one that’s more equal?”
—The author’s story does not describe how innovation actually develops. New technologies are not advanced by having a viable mass market pricepoint, but by addressing niche customer demands. In fact, many technologies do not have applications for the everyday consumer/general market.
The author also has a flaw in his imagined economies excercise since it’s focused on one specific product. Let’s assume that he’s right, that Economy 1 better supports high-end seating (a big assumption). However, an individual making 100k a year is not the target consumer for a 130k car, the price of the first Tesla Roadster. So, if you were interested in getting society off of petrol based vehicles and selling electric vehicles, Economy 2 better supports the shift. And the profits made by selling to the wealthy individuals goes to support the development of far cheaper versions, which the other members of Economy 2 can better afford. This is exactly the progression that computers, disk drives, cell phones, GPS systems, and digital cameras went through (just to name a few). If I were selling anything but high priced, image conscious seating, I would want the target to best emulate the market that technologies actually developed and not where there was equal income distribution.
The author’s story does not describe how innovation actually develops. New technologies are not advanced by having a viable mass market pricepoint, but by addressing niche customer demands. In fact, many technologies do not have applications for the everyday consumer/general market.
The author also has a flaw in his imagined-economies-exercise since it’s focused on one specific product. Let’s assume that he’s right, that Economy 1 better supports high-end seating (a big assumption). However, an individual making 100k a year is not the target consumer for a 130k car, the price of the first Tesla Roadster. So, if you were interested in getting society off of petrol based vehicles and replacing them with electric automobiles, Economy 2 is the only one that can support the shift. And the profits made by selling to the wealthy individuals goes to support the development of cheaper electric cars, like the Tesla S, which the other members of Economy 2 can better afford. This is exactly the progression that computers, disk drives, cell phones, GPS systems, and digital cameras went through (just to name a few). If I were selling anything but high priced, image conscious seating, I would want the target market to best emulate the environment that technologies actually developed in and not one where there was equal income distribution.
PJR –
However, in the real world, what we have is 30 years of great stagnation followed by the greatest downturn in 8 decades.
In economy 2, the 8 find their income declining to, say, $25 K, while what they used to have and every bit of new growth now go to the 2 at the top.
Except that they too are now widely differentiated, because one of them has, through neither skill not effort, captured 80% of the gains.
JzB
The outcome of this experiment is constrained in an odd way. The question is not what is best for the economy or for progress or government revenues, but what is best for the producer of a single, high-end consumer good. I don’t care what is best for the producer of a single, high-end consumer good. His/her sucess is her/his own problem.
This is too much a case of picking the winner by picking the constraints.
Different problem with Kevin’s response, by the way. It’s unearned assumptions, rather than constraints, that he injects into the discussion. He is essentially saying that development and production of goods and services works best if the target market looks like the market in which the goods are produced. I can’t think of a single reason that would be true. He also merely assumes that having an unequal distribution of income frees up resources for innovation. I recognize that as a favorite claim on the right, but that’s no reason to accept it as a given. How ’bout some evidence?
Oligarch = interest bearing account? I’m not so sure. Widly comfy rich folk, yes. Oligarch? No. Bankers get rich on bonuses, bets and bailouts. Oil guys? On oil prices, royalty avoidance, tax treatment – lots of manipulation. Government contractors? C’mon, you know that one. Rich comfy folk and oligarchs may share interests in tax policy and the like, but they aren’t the same people.
“He also merely assumes that having an unequal distribution of income frees up resources for innovation. I recognize that as a favorite claim on the right, but that’s no reason to accept it as a given. How ’bout some evidence?“
—Emerging technologies, in whatever sector or industry, develop in similar phases with respect to scientific/engineering effort. Who funds an innovation’s early stages, before optimum components and designs are determined? Look at past examples. Before Intel made general use microprocessors, it custom made chips for companies who were willing to pay a premium. Well before a commercial market existed for routers, Cisco targeted specific institutions who could afford to be early adoptors. Niche customers with financial means, not the mass market, funded further development of these technologies. This is the reason Tesla brought a 130k car to market before a 50k car, as this must be a perplexing order for you.
“He is essentially saying that development and production of goods and services works best if the target market looks like the market in which the goods are produced.”
—No, that is not my take. Technologies develop in economies that have great wealth disparities, as we have observed in the United States. Incredible developments have been achieved in MEMS, router, cell phone, microprocessor, and digital camera products in the past few decades. How has this nation witnessed such progress in a period of record wealth inequality if the author’s premise is correct? Given history, I would rather emulate an economy where incredible innovation has actually occured rather than the author’s hypothetical one.
Kevin
while i don’t think radical equality is a very good idea, the extreme inequality we are seeing in the world today is not good either. the poor are pushed below a level of decency that they had in the stone age, and the rich are dangerous and disgusting.
the “incredible innovation” you are describing is mostly in military tools of domination and plastic toys they give us to take our minds off them stealing our birthright.
What’s that expression? “‘Anecdote’ is not the singulare of ‘data'” or something like that. You are providing a story, rather than evidence. And, of course, since you don’t have evidence, you offer a bit of sniping at the end.
Sorry, but teh way this stuff works is, you provide evidence that is general in nature in order to claim “that’s the way it works”. What you’ve done is to provide a very small number of examples and then merely claim those examples amount to general evidence. I’m sure you feel that they do, because they support your view. That’s a good argument for the scientific method.
Similarly, you have identified the US as a source of innovation and then claimed that the thing about the US that leads to innovation is a large income disparity. If you are right, then it ought to be possible to line up countries by income disparity, and find that those on the top of the list also lead in innovation. If it doesn’t work out that way, then it might just be the case that some other factor, like a high level of literacy or good infrastrucutre or the rule of law or high school football account for the high level of innovation here.
So far, not even a nice try. You are very far from showing what you claim to show.
This is my second try:
Kevin,
The expression that applies to your response to me is “‘Evidence’ is not the plural of ‘anecdote'”. You have offered a number of examples but they do not amount to evidence of a general case.
You have claimed that the US is a source of innovation because of its disparity in income. If that’s the case, then we should be able to line up countries by income dispareity and find the most innovative countries at the top. Bulgaria should, by your claim, be just about as innovative as the US. So should Cameroon.
Another problem with your claim is that the distribution of income in the US is now at the most extreme it has been in several generations. If your claim were true, we’d find a slump in innovation between the Gilded Age and the Second Gilded Age. We don’t.
Emulating an economy in which incredible innovation occurred would be a great idea, but you sort of have to figure out what factors are responsible for the innovation and emulate those, instead of just picking factors you like. You are far from making the case that wealth disparity enables innovation. If you had picked the right factor, then Iran and Cambodia would be roughly as innovative as the US.
Not even a nice try.
run
When one is talking about the top 5% or income nearing family $200,000 or more then one is talking about multiple vehicles and plenty of consumer goods. Multiple homes is more liekly limited to the top 1% or 2%, though the 5% can certainly enjoy a vacation or two during the year. As I had said, a comfortable upper middle class is all many economic activities need in order to prosper. Timex is looking for a factory or five filled with workers earning a steady check. Rolex needs only a few executives in one factory or another. We live in multiple economies and we all aspire to reach the upper reaches of the stronger economies.
kharris
excellent point.
i’d add that there was a time when America, the land of equality, was the land of opportunity. And a very innovative place, or so I heard.
But we don’t want to go crazy with this. A lot of the “bigger” innovation was made more possible by the accumulation of unequal wealth.. something called capitalism. kind of thing that makes it hard for me to be an ideologue.
Except that most of the bigger innovation was made possible by big governemnt spending, not capitalism at all — the space program, for example. Note how reduced growth in Govt spending at all levels has corresponded to the great stagnation.
http://jazzbumpa.blogspot.com/2011/01/government-spending-and-great.html
I’m all for capitalism, when regulated properly.
But what we have now is trans-nationa mega-corporatism, a very different animal which can’t be regulated at all.
JzB
“…but when you have a society divided between “greed is good” and “tax the rich to provide welfare for the poor” you are on your way to Robespierre.” Coberly up stream a bit.
I think you are offering a false equivalence if you are describing the current state of socio-political ideological differences in America. There is very little, maybe none at all, evidence that those to the progressive side of the ideological continuum are demanding taxing the rich for the purpose of “providing welfare for the poor.” No, the rich are only being asked to pay their fair share of the tax needs that operate the government. Mililtary spending, highway and bridge construction and maintenance, support for educational excellence, etc. All of those activities benefit the rich and more likely to a greater extent than they do the poor. Taxes are not wealth transference. Taxes are the means by which we support the activities of the government. What evidence is there that the government is supporting the spoor to a greater extent than it may be assisitning any other defineable group of Americans?
The reactionary right wing, which lately encompasses all of the Republican Party and some of the Democrats have used lies and deception to promote the idea that the rich have too many demands put upon them and that the rich benefit all others. To a far greater extent the rich live off of the work of the poor and the working class. Certainly the middle income sector of Americans pay a far greater share of their income to the government than do the wealthiest Americans. The rest is bull shit.
jazz
you won’t get much argument from me on either of those points. just started out here objecting to an over simple idea about the virtues of radical equality. then i had to point out that radical inequality wasn’t so good either.
i do suspect, a little, that that government spending innovation was made possible by the capitalist development… otherwise you get big government spending on golden statues of the dear leader.
i think we may have a problem here of too much. back in the day “too much” government spending would have probably been bad for “the economy.” as there was not much very useful that government could spend on. this may be the model that Republicans carry around in their heads.
then for a time government spending was very useful and important. and it still might be. but meanwhile we have got “cut taxes… get rich.” and the concentration of wealth is about as useful to the economy as it was in the time of Louis XVI.
not that Louis’ money didn’t help out those thirteen colonies.
Jack
mostly i agree with you.
but i have been hearing lately from the progressives who do indeed seem to want to tax the rich to provide welfare for the poor… without ever thinking about much of anything. this makes it hard to explain to the rich that their money is needed to make it possible for them to keep on making money…as you point out.
Ignor such a message. Focus on what you know to be the more serious problem to our social and economic circumstances. That is the capitulation of the political class to the demands of the One Percent. In fact there has become too great an over lap between the political class and that One Percent that seeks to control all the rules of both economic and social life. One of the greatest weaknesses of many progressives is their inclination to make the other side’s argument when they think thjose that they generally agree with have gone too far. Have you ever seen a Republican apologize for even the most absurd comments of any one of their own? Eisenhower may have been the last one to warn Americans about the dangers of the monied classes.
I don’t see in the data that innovation is encouraged by income disparities. OECD has provided data on patents per capita that you can find in this study that attempts to explain innovation: http://graphics.eiu.com/PDF/Cisco_Innovation_Methodology.pdf Note that the most innovative countries by this metric are Japan and Switzerland, followed by Sweden, Germany, and the Netherlands. The US ranks 8th, barely ahead of Finland, of the 37 countries. The study accounts for 93 percent of the variation through indices of direct innovation inputs (like R&D spending and education) and the innovation environment (like low interest rates and intellectual property rights).
“You are providing a story, rather than evidence. And, of course, since you don’t have evidence, you offer a bit of sniping at the end.”
—-You obviously have no experience working in a high tech organization. I suggest you look up “technology s-curve” to learn a rudimentary concept about the ‘evidence‘. Engineering managers, whether they work for a national laboratory or a profit seeking tech firm are concerned with the ‘story‘ on a daily basis. Deciding which technologies to incorporate into a product has a great deal to do with what phase it’s in (or guessed to be in).
“What you’ve done is to provide a very small number of examples and then merely claim those examples amount to general evidence. I’m sure you feel that they do, because they support your view. That’s a good argument for the scientific method.”
—I guess universities, research laboratories, and high tech firms out there are all being misled. You should tell them that concepts like component innovation and early adoptors are all, in your expertise, mythological. They’ll get a chuckle. Technologies progress and mature in similar phases or patterns and do not depend on a more equal distribution of wealth to do so. High tech firms organize and create strategies to take advantage of these phases (i.e. when to bring a product to market, designing space for a sensor for a space flight 4 years into the future). However, due to kharris, we now know they work in a paradigm that isn’t real.
“You have claimed that the US is a source of innovation because of its disparity in income. If that’s the case, then we should be able to line up countries by income dispareity and find the most innovative countries at the top. Bulgaria should, by your claim, be just about as innovative as the US.”
—I never said that, but reading comprehension isn’t your forte either. I did claim that the U.S. is a great source of innovation and its disparity in income distribution does not prevent or limit its technological developments, despite your argument. Bulgaria actually has a much more equal distribution of income compared to the U.S. (GINI of 28.2 vs the U.S. GINI of 41). You’re either claiming that Bulgaria is better at developing technology or we’ve discovered another concept that you have trouble grasping.
“You are far from making the case that wealth disparity enables innovation. If you had picked the right factor, then Iran and Cambodia would be roughly as innovative as the US.”
—Unequal distributions of wealth in a society does not prevent technological development and the United States proves it. The author’s claim that equality in wealth drives innovation is not supported by actual developments in technology, like disk drives, computer memory, copy machines, cell phones, etc. Shake your fist at the sky all you want, but this occurred even with the large gap between the poor and the wealthy.
Iran and Cambodia are really great examples of nations embracing free enterprise. If you want more assistance in learning about how technologies develop, let me know.
“i’d add that there was a time when America, the land of equality, was the land of opportunity. And a very innovative place, or so I heard.
But we don’t want to go crazy with this. A lot of the “bigger” innovation was made more possible by the accumulation of unequal wealth.. something called capitalism. kind of thing that makes it hard for me to be an ideologue.”
Coberly,
The U.S. is still an innovative place, a pretty good one too. The common argument made by those studying society and innovation is that technological progress helps create wealth inequalities since it makes certain types of jobs obsolete, that it allows highly skilled workers to command premium pay, and that it creates technological barriers that prevent the poor from becoming the highly skilled worker (e.g. poor children are less likely to have a computer at home). However, the author and his supporters, like kharris, offer a far different argument that confuses cause and effect. If innovation is better in societies with more equal income distribution, does progress somehow skip unnecessary steps in their ideal setting? If the U.S. spread wealth better, would robots have replaced factory jobs sooner and would ATMs have displaced all bank tellers instead of just the portion they do today?
Their position leads us to some very crazy conclusions.
Kevin
sorry to say that i mostly agree with you. sorry, because i think you were unnecessarily nasty to kharris. and also because i think you are standing too close to the “problem” to see why folks are worried about it.
my own feeling… feeling, don’t ask for “evidence”… is that the US is a good place for innovating plastic toys and war technologies. not so good at innovating for quality of life. and my theory about why this is so is “concentration of wealth” in the hands of people who are essentially bureaucrats… business or government. If people had “enough” and enough time I suspect they would turn out to be innovative about the things that matter to them.
i wouldn’t have much use for an aeron chair.
Jack
i believe the domination by the one percent is a very serious problem indeed. i also believe that the people who call themselves progressives these days are contributing to that domination by essentially accepting the framing that “money is the measure of all things” and offering “tax the rich” as the only answer they can think of.
by all means we need to tax the rich… it only to pay for the things they bought… but when that’s your only answer, you haven’t got an answer.
as for the Republicans not apologizing… i think what we are seeing is the triumph of the Big Lie. just keep saying it. ignore the arguments. ignore the failures. just keep repeating the Big Lie.
but as i think you must suspect by now, the Democrats are in on the game.
Jack:
That may be the larger picture; but the point is, the tax paying population is not 300+ million. It is ~156 million and the starting income is coser to $180,000. The 9 tenths of 1% start at ~$500,000. http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=1393&topic2ID=150&topic3ID=160&DocTypeID=1
I do definitely agree the $180,000 to $200,000 is firmly entrenched in the Middle Class Income bracket.
well, maybe this thread is dead.
where steve went wrong i think was in leaping from “only sells two aeron chairs” to “therefore less innovation..” i would imagine there would be plenty of room for innovation selling to the eight who needed a less expensive chair.
and where kevin goes wrong, i think, is in assuming that the kind of innovation he sees in high tech product development in an “unequal” society is either the only way innovation can take place, or that it provides anything of real “good” to humans.
i am not a great believer in civility, but i can’t help wondering if people mastered their impulse to be nasty if it would give them a chance to think a little more deeply or at least broadly.
I do definitely agree the $180,000 to $200,000 is firmly entrenched in the Middle Class Income bracket.
In what country would that be? Monaco? Here in the U.S., an income like that puts you firmly in the top 5%.
http://en.wikipedia.org/wiki/Household_income_in_the_United_States
Harm:
When it takes $48,000 for a family of 4 just to get by, they are not middle class. The biggest deception being sold to people today is just such that they are middle class. Time to update your perspective. http://www.epi.org/publication/bp224/ “What We Need to Get By.” Another way to look at this is what was considered rich when they created the AMT.
“that in 1967 there were a total of 155 individuals with incomes over $200,000 who did not pay any federal income taxes; twenty of them were millionaires.” http://hnn.us/articles/11819.html “How the AMT Came Into Existance“
I am not going to figure out what this means in terms of income today; but, $200,000 annually was rich in 1967 and it is not rich today and it is Middle Class today. Have you missed all of those articles which carefully defines the stagnation and decreasing household income for the vast majority of people since the late seventies. Dr. Elizabeth Warren certainly pointed it out in “The Coming Collapse of The Middle Class.” Even President Bush gave us a pretty good idea of who was rich in income by how he calculated the 2001/2003 tax breaks which targeted 1% (~1 million taxpayers) with 31% of those tax breaks going to those making >$500,000. What Hoover would not or could not do, Bush did and targeted the high income households with a significant portion of the tax breaks.
A large part of the wage earning population is being left behind. “Understanding Mobility in America” Tom Hertz http://www.americanprogress.org/kf/hertz_mobility_analysis.pdf Or pick up any of those other Mobility studies and they all pretty much document the same thing or the sliding backwards of the population. Many peopl have a greater chance of slipping backwards than climbing to the next rung on the mobility ladder.
15% of the population lives in poverty which is up from 11 or 12% during Clinton. Hosehold Median Income down 2.3% in 2010 from 2009. http://www.census.gov/newsroom/releases/archives/income_wealth/cb11-157.html Child Poverty Rate is ~23%. Household wealth plunged 39% for families. ~32% of all families headed up by women (no husband) live in poverty.
There is more which supports my contention.
Harm:
Moreso, my contention is the category shifted leaving many behind and will continue to do so.
…”who will buy?”…China
…”who will buy?”…China
…”who will buy?”…China