Who are the 1%?
05-15-2012, 10:43 AM
#1
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Who are the 1%?
Pretty interesting article on the 1%. I work with a few people that qualify for the criteria below and I find the survey results to be pretty accurate.
Link to article
This has implications for the broader economy.
Link to article
In actual fact, the 1% look a lot more like “regular folk” than most of us really realize. According to the survey:
- 67% grew up in a middle class or poorer household.
- 85% made their wealth in their lifetime.
- 76% describe themselves as “Middle Class” at heart.
- 3% is the sum total of their assets that they inherited.
“This is the triumph of the Middle Class,” says Jim Taylor, Vice Chairman of the Harrison Group. “Even when older, the [One Percent] don’t lose the degree with which they see themselves as the repository of the Middle Class. That means hard work. That means the value of education. That means the value of family and luck.”
Indeed, it’s important to understand most of these “Middle Class” millionaires rose to financial prominence by striving to create a business or idea or product of excellence. The wealth was a byproduct, came to them suddenly and unexpectedly, usually through a liquidity event, such as a big bonus at a major company, or a private equity buyout of the firm they built from scratch.
It goes on to say that, based on a perception of being villified and shell-shock from the last decade of financial stresses, they are "circling the wagons" and hoarding cash, reducing equity investments and even disengaging from community and social events other than their tightest circle. - 67% grew up in a middle class or poorer household.
- 85% made their wealth in their lifetime.
- 76% describe themselves as “Middle Class” at heart.
- 3% is the sum total of their assets that they inherited.
“This is the triumph of the Middle Class,” says Jim Taylor, Vice Chairman of the Harrison Group. “Even when older, the [One Percent] don’t lose the degree with which they see themselves as the repository of the Middle Class. That means hard work. That means the value of education. That means the value of family and luck.”
Indeed, it’s important to understand most of these “Middle Class” millionaires rose to financial prominence by striving to create a business or idea or product of excellence. The wealth was a byproduct, came to them suddenly and unexpectedly, usually through a liquidity event, such as a big bonus at a major company, or a private equity buyout of the firm they built from scratch.
This has implications for the broader economy.
Why should the public care? Very simply. Investment doesn’t follow job creation; new jobs are the result of risk-takers making investments.
It gets worse. For those who perceive themselves as “Middle Class” at heart – repositories of all those hard working and family values that added greatly to our nation’s fabric – it is a great shock to suddenly be vilified as social villains. Their response, understandably, is to pull back, to become ever more emotionally isolated and withdrawn from the public arena, precisely when they are most needed to be engaged with society.
In Q1 of 2010, 62% of the One Percent surveyed felt it was “important for me to join in social events in my community.” By the same quarter in 2012, that figure had plummeted to 44%. These very affluent folk are so circling their wagons that even their interest in socializing “with people who have achieved a similar level of success as I have” has fallen from 75% to 67% during the same period.
[...]
It’s almost like, after several years of being blamed for all the ills in the nation, the One Percent are washing their hands of the rest of us, now too afraid to even be seen in public: 25% are “extremely/very concerned about being scorned for being in the top percent in the economy.” Cara David, Senior Vice President at American Express Publishing, warns against a nation where “success is not something you want to aspire to.”
It gets worse. For those who perceive themselves as “Middle Class” at heart – repositories of all those hard working and family values that added greatly to our nation’s fabric – it is a great shock to suddenly be vilified as social villains. Their response, understandably, is to pull back, to become ever more emotionally isolated and withdrawn from the public arena, precisely when they are most needed to be engaged with society.
In Q1 of 2010, 62% of the One Percent surveyed felt it was “important for me to join in social events in my community.” By the same quarter in 2012, that figure had plummeted to 44%. These very affluent folk are so circling their wagons that even their interest in socializing “with people who have achieved a similar level of success as I have” has fallen from 75% to 67% during the same period.
[...]
It’s almost like, after several years of being blamed for all the ills in the nation, the One Percent are washing their hands of the rest of us, now too afraid to even be seen in public: 25% are “extremely/very concerned about being scorned for being in the top percent in the economy.” Cara David, Senior Vice President at American Express Publishing, warns against a nation where “success is not something you want to aspire to.”
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05-15-2012, 11:17 AM
#4
This is the biggest problem with the perception that the 1% are this evil part of the population that has behaved unethically to attain their wealth and are cut throat to maintain it. In fact this type of the 1% is such a small percentage of the 1% that I would even say they are the 1% of the 1%. This country has always prided itself on the fact that anyone with a good idea and force of will can make something of themselves. Until recently these people were looked to as inspirations. Now, they are looked at as the problem by certain "leaders". Unfortunately when times are hard leaders always look for someone to blame for everyone elses hardships and it is usually those that remain successful, think about what Hitler did to the Jews. They were thriving while the rest of Germany was suffering because of their tight communities. This made it easy for Hitler to turn the general population on them instead of learning from them.
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05-15-2012, 11:29 AM
#5
I don't understand how his definition of the one percent is only 1.2 million people. One percent of roughly 300 million people in U.S. is 3 million in the top 1 percent. So arguably, all the numbers he is quoting are much lower when the complete american "1 percent" is represented.
Maybe he is using the top 1 percent from the report? But that would mean that 120 million people make over 100k? I think I'm getting to caught up on the little details.
Maybe he is using the top 1 percent from the report? But that would mean that 120 million people make over 100k? I think I'm getting to caught up on the little details.
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05-15-2012, 12:10 PM
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Having hovered myself with household income between 94th and 98th percentile I can say that the 1% is typically over on the other side of a vast abyss in in potential to earn income from the fruits of one’s own work. I respect sports and movie stars that make it through their own talent and measurable worth, those people also have very few tax loopholes to hide their wealth behind they pay their share and then some. I am loosing respect for those that do it in the business world excessively cashing in on the fruits of others labor and talents in ever escalating proportions of the total income also often guilty of trying to buy government for their advantage. And I have zero respect for vulture capitalist who really add no value to the economy especially the ones who think the solutions to Americas economic troubles is to buy the government and change the laws to make it even more skewed to favor vulture capitalist investors over real people with real Ideas talents and motivation while claiming they stand for less regulation and free markets and convincing people that is what they are doing.
I think allot of America is indeed suffering from Stockholm syndrome here.
Bob
I think allot of America is indeed suffering from Stockholm syndrome here.
Bob
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05-15-2012, 12:21 PM
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The only way to break that dynamic is to get rid of government's authority to write economic interventionist laws.
Starting with breaking the central bank's gov't granted monopoly. Which is how Andrew Jackson killed the First and Second banks of the USA. By re-introducing competition.
Starting with breaking the central bank's gov't granted monopoly. Which is how Andrew Jackson killed the First and Second banks of the USA. By re-introducing competition.
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05-15-2012, 01:34 PM
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If you buy a company you did not create, pay yourself handsomely for owning it run up the company credit cards to pay you dividends and management fees. Lay most the workforce off because somehow the company can no longer make a profit ultimately the company goes bankrupt with the federal government stepping in to help bail out the underfunded pension plan you were responsible for managing can you really consider yourself a contributor to the betterment of the economy, Creditors loose, employees loose, the American tax payer loses.
Also while you’re at it since you are the protected income class of private investor dealing in private equity investment the rules are written such that all the income you make is carry over interest taxed at the preferred long term capital gains rate with no social security or Medicare unlike the onterprenure who actually started the business or any of individual employees producing stuff or possessing the real talent however. The preferential tax treetment is still not enough, you want to make your contribution 0% and let just the underclass pay for the government system you bought.
Bob
Also while you’re at it since you are the protected income class of private investor dealing in private equity investment the rules are written such that all the income you make is carry over interest taxed at the preferred long term capital gains rate with no social security or Medicare unlike the onterprenure who actually started the business or any of individual employees producing stuff or possessing the real talent however. The preferential tax treetment is still not enough, you want to make your contribution 0% and let just the underclass pay for the government system you bought.
Bob
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05-15-2012, 04:01 PM
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I can't quantify how many private equity firms operate the way Bob is describing - and I doubt he can - but I can relate from personal experience how most of the ones I have dealings with work (with the caveat that PE is not my area of expertise).
They are profit-driven and generally look to pick up companies that are in one of three positions: either those in the early stages of growth, those that are still operating well but have stalled in their growth or those that were successful and are now floundering.
The most recent deal I was associated with involved a restaurant group that went public in the '90s, expanded too aggressively, began retrenching and losing money and was then taken private in a leveraged buy-out. The private equity guys closed unprofitable stores, improved the operations of the company, began focusing on core compentencies and many years later took the new restaurant group public in much better financial shape than when they first bought it.
That is (virtually) always the goal of a leveraged buyout: to turn the company around and sell it at a big profit. That doesn't always work out, of course. Even the wizards of Wall Street pick losers. Generally, though, when companies that are acquired by private equity fail, it's just an accelerated process: the same companies were probably going to fail anyway.
And don't forget about all the venture capitalists that are involved in funding start-ups like those in Silicon Valley, bio-med, alternative energy, etc.
Ironically, the movie stars and athletes Bob talks about are more like the 0.1%ers making multiple millions (or tens of millions) per year. I have no real interaction with those types, but I've been around the 1%ers since I was a cart boy at a private country club as a kid. Almost all of them fit the mold described here: middle or lower class upbringing and made their fortunes in their lifetimes - usually via invention or growing and then selling a business. These guys weren't "evil banksters," they were the guys that sold the "no smoking" and "exit" signs to every Marriott Hotel in the Southeast or who sold specialized infrastructure and sewage pipe fittings or who built a successful printing company and managed to sell before the "digital age" really swept through.
They are profit-driven and generally look to pick up companies that are in one of three positions: either those in the early stages of growth, those that are still operating well but have stalled in their growth or those that were successful and are now floundering.
The most recent deal I was associated with involved a restaurant group that went public in the '90s, expanded too aggressively, began retrenching and losing money and was then taken private in a leveraged buy-out. The private equity guys closed unprofitable stores, improved the operations of the company, began focusing on core compentencies and many years later took the new restaurant group public in much better financial shape than when they first bought it.
That is (virtually) always the goal of a leveraged buyout: to turn the company around and sell it at a big profit. That doesn't always work out, of course. Even the wizards of Wall Street pick losers. Generally, though, when companies that are acquired by private equity fail, it's just an accelerated process: the same companies were probably going to fail anyway.
And don't forget about all the venture capitalists that are involved in funding start-ups like those in Silicon Valley, bio-med, alternative energy, etc.
Ironically, the movie stars and athletes Bob talks about are more like the 0.1%ers making multiple millions (or tens of millions) per year. I have no real interaction with those types, but I've been around the 1%ers since I was a cart boy at a private country club as a kid. Almost all of them fit the mold described here: middle or lower class upbringing and made their fortunes in their lifetimes - usually via invention or growing and then selling a business. These guys weren't "evil banksters," they were the guys that sold the "no smoking" and "exit" signs to every Marriott Hotel in the Southeast or who sold specialized infrastructure and sewage pipe fittings or who built a successful printing company and managed to sell before the "digital age" really swept through.
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05-15-2012, 05:14 PM
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Almost all of them fit the mold described here: middle or lower class upbringing and made their fortunes in their lifetimes - usually via invention or growing and then selling a business. These guys weren't "evil banksters," they were the guys that sold the "no smoking" and "exit" signs to every Marriott Hotel in the Southeast or who sold specialized infrastructure and sewage pipe fittings or who built a successful printing company and managed to sell before the "digital age" really swept through.
Bob
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05-15-2012, 05:32 PM
#14
I'm confused:
Are you in favor of a tax system that would raise rates on high incomes, or on the wealthy (or both)? There's some overlap, of course, but the groups are not identical.
If we're actually talking about the 1% income earners, then statistically speaking, they are not immune to risk.
Source: Income Mobility in the U.S. from 1996 to 2005
That's a fascinating study, by the way, well worth reading even aside from this particular discussion.
Are you in favor of a tax system that would raise rates on high incomes, or on the wealthy (or both)? There's some overlap, of course, but the groups are not identical.
If we're actually talking about the 1% income earners, then statistically speaking, they are not immune to risk.
The composition of the very top income groups changes dramatically over time. Less than half (40 percent or 43 percent depending on the measure) of those in the top 1 percent in 1996 were still in the top 1 percent in 2005. Only about 25 percent of the individuals in the top 1/100th percent in 1996 remained in the top 1/100th percent in 2005.
That's a fascinating study, by the way, well worth reading even aside from this particular discussion.
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05-16-2012, 09:41 AM
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Your basic "Joe the Restaurantuer" or "Joe the Hospital Administrator" or "Joe the Mid-stream Pipeline Guy" gets in over his head and - instead of the company he built going completely bust - it gets bought out by "turnaround specialists." Most of the time, they are not successful in the turnaround because the company was already failing and things still go bust.
Of course, because they were working toward a turnaround the whole time, they still get paid. The original owner that was running it in to the ground was still collecting a salary, too. Other times the private equity guys are successful and they make even more money.
Venture capital is a largely different ballgame. Those guys are mostly funding start-ups or providing capital where banks won't. They demand big returns on their money because a lot of their ventures never pan out: high risk, high reward.
I definitely think there is room for debate on things like capital gains and carried interest taxation and incentives for the financialization of the US economy, but the quality of the conversation goes in to the toilet when you get all flustered and just rant about misrepresentative caricatures.
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05-18-2012, 12:30 AM
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-Big increase in taxes for the majority of the population (assuming we're targeting the same revenue as current)
-Increases cost of goods. Will discourage non essential spending.
What is the advantage for those of us making under $250,000/annual?
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05-18-2012, 12:05 PM
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Today the poor already pay a bunch of taxes via corporate taxes, gasoline, etc.
The basics such as food etc have a bunch of taxes on them, rolled into the purchase price.
In fact this guy (a liberal), believes the real taxes today are relatively flat from poor to rich:
A flat sales tax would get rid of inefficiencies of the tax code and people would also directly pay for the cost of gov't every time they pull out their wallets. Instead with the payroll withholding tax people don't even touch the money they earn that goes to taxes - it goes straight to the gov't.
The basics such as food etc have a bunch of taxes on them, rolled into the purchase price.
In fact this guy (a liberal), believes the real taxes today are relatively flat from poor to rich:
A flat sales tax would get rid of inefficiencies of the tax code and people would also directly pay for the cost of gov't every time they pull out their wallets. Instead with the payroll withholding tax people don't even touch the money they earn that goes to taxes - it goes straight to the gov't.
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