Upper-income people still don't realize they're upper-income

Consdier any family of two engineers in silicon valley. If they graduated from college and joined successful companies, after a decade or so they will be making over 150k each, for a family income of 300k.

But yet they still work 50+ hours a week each, maybe 60 if they are checking email at nights and on the weekends. How have their lives changed between the interview and now? Not much. Meals are still prepared at home or work. Weekends most likely still mean riding bike or going to a movie. Any talk of family causes worry about taking time away from the career or delaying their hopes to be founders. Vacations disrupt work schedules, and the catching up afterward cause more headache then they are worth.

This level of wealth is different than what we hear about from the days of robber barons or Mad Men. Its even different than what anyone images when they prepare for undergraduate school. There is no luxury lifestyle with a condo downtown and home in the country. There are no two hour martini lunches. There are no personal chefs or nannies. You don't spend more time in leisure than at work. You always spend more of your time doing something you wish you could delegate, but you do it because you know it has to get done.

And maybe that is because wealth is very transient in tech. In five years your 100k+ job could be just as easily gone as become a 200k job. But more likely I would think that in tech high income comes with higher responsibilities. More wealth means more work, not less. And that is not about to change.

Perhaps this is the same in all sectors consistently creating new wealth; bio, pharma, engineering and tech. If so I think it is not surprising to see that families in the 200-500k range don't think they're wealthy when their current income level crosses a certain mark, because it has little immediate, and maybe little permanent, affect.

I don't remember the source, but there was a great article that discussed a similar topic and showed that the income inequality isn't really that skewed unless you look at those making above some threshold (maybe top 0.1% of the population or so). For example, the average income for any percentile of the population is a fairly straight function until you hit around 99 percentile, after which there is a sharp discontinuity rising higher.

This wasn't the original source but you can take a look here: http://elsa.berkeley.edu/~saez/pikettyqje.pdf (Excuse my Berkeley bias, but Emmanuel Saez has produced great works in this field).

As you can see, the action is in the top 1 percentile, and the real action is in the top 0.01 percentile.

In other words, those in the top 5 percentile do not feel rich because there are people who are much MUCH richer than they are, due to the discontinuity you can see. So those making 240k are only four times as rich (less, after taxes) as those making 60k despite being nearly 50 percentile away. In contrast, those making tens or hundreds of millions are two orders of magnitude richer than those making 240k despite being less than 5 percentile away. Plus, most of their taxes are in the form of capital gains on stocks and dividends.

Crazy world, huh?

This leads me to a different point, which is that politicians' focus on 250,000 as some threshold for "rich" masks the bigger inequality. In my opinion, those making 250k or so are hard-working households who mostly "deserve" what they earn as families of doctors, lawyers, engineers even; and that the real inequality manifests itself above the million dollar threshold. The reason I say that is, a family with decent opportunities, a strong work ethic (since youth) and a decent set of brains can reach those levels through just hard work and persistence, while getting above the 1 million threshold is either reserved for severe luck, entrepreneurship (also heavily influenced by luck), inheritance, or politics.

So my point is that upper income people don't feel rich ('realize they're upper-income') because they are so close to those earning tens to hundreds of times more. In that context, all of us are in their shadows.

From a statistical standpoint, it'd be interesting not to talk, as the article does, in terms of raw percentile, but based on region, normalized by the cost of living index.

A couple making $250k in Medford, OR would probably be considered fairly well off, but in NY, NY that would not take you very far at all.

"upper-income" is way too broad of a term

If people really want to compare, then they should rank their wealth as a percentile.

ie. instead say, your income is in the 20% percentile (meaning you have more annual income than 80% of other people in the nation)

It's probably a nice problem to have but I cannot imagine working at a job that paid me $250k a year, I'd keep asking myself how the hell I am worth that much - I'd put 10% of it as cash in a safe and open it once in awhile and freak-out just looking at it.

To talk about the average income in Manhattan is nonsense. Big parts of Manhattan are untouchable by someone making less than several million a year. Other large parts are populated by families dependent on food stamps. There is no "average" neighborhood in Manhattan. As a statistician, the writer has to know that was a straw-man argument.

"but only 6 percent say that they personally pay too little." (in taxes).

No one is stopping people who feel this way from writing a check to the government. They'll take your money just fine.

First some facts: The upper 5% of the population pays 75% of all federal revenue, even though they only account for about 25% of the GDP Almost 60% pay no income tax The real US tax rate is already one of the highest in the world The corporate tax is #2 to Japan

Now the ramifications are that the US is already seeing a capital flight out of the country and that trend will only pickup until the Tax Code is fixed.

We should have a flat tax and a VAT.

The two assertions, taken alone, are not contradictory. If Joe makes $250,000 a year, he may think that he pays too much in taxes, but that the entire portion of society that makes over $200,000 pays too little. It could be that he thinks that only the top 0.1% pays too little, and everyone else pays slightly too much.

Also, what is "upper-income"? Is that the top 50% of earners? The top 1%?