Income Disparity in America

By Floyd SaundersAuthor of Figuring Out Wall Street

and Family Financial Freedom

“Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our

passions, they cannot alter the state of facts and evidence . . .”

– John Adams

Income in America

Income class Defined as

Poverty Level/Working Poor

A family of four with income sufficient to cover bare essentials working a mimimum wage jobs

Working Class

Lowest end of middle class, blue - collar, paid by the hour, lower levels of education

Lower-Middle ClassLower level, white-collar workers, mostly college educated

Upper-Middle ClassHigh-level, white-collar jobs, typically with graduate degrees

The Top 10 percent

The top end of the upper Middle class, working professionals. Doctors, lawyers, corporate management and small business owners.

The Five Percent Excutive corporate management, small business owners and professionals

The One Percent

Largely inherited wealth and wealthy investors. Only 1.9% of small businesses have incomes over $250,000. 50% of that are high income investors.

Income in The American Economy

Increased Productivity =

Higher Incomes

Right?

Productivity

Productivity increases continued even during the 2008-09 recession

So did wages increase with productivity?

Pre-Tax Income 1979 to 2007

Incomes for 90% of

Americans have

remained flat or fallen during the era of the

“Bush Tax cuts”.

$250,000 or More

$150K to $250K

$24,500

$24,501 to $32,500

$32,501 to $60K

$60K to $100K

under $15K

$100K to $150K

Looks likes wages have not increased with increased productivity

If Trickle Down Economics and Tax Cuts Worked

“Job Creators” would expand jobs and the economy would grow, creating more tax revenues.

Then personal income would increase right?

Let’s see, what happened. . .

Changes in After-Tax Income

Most of the income gains occurred at the top, so where are the jobs?

Personal Income

Total Personal Income dips and then recovers in the recession of

2008-09

So, how is that trickle down approach working for 90% of Working Americans?

No so good, 90% of Americans, 133 million families saw incomes decline by 4%.

Wealth and Income in America

• 83% of U.S. stocks are owned by 1 of the population

• The Top 10% earn 50% of the national income

• The Top 1% own two times of the wealth compared to 15 years ago.

• 66% of income growth between 2000 and 2007 went to the top 1%.

• The # of millionaires increased 16% in 2009 to 7.8 million This is not a bad thing by the way.

Except for wealth does not trickle down

Small Business Millionaires?

50% of the top income earners are in fact investors and hedge fund owners.

Less than 2% of small business owners have incomes over $250K

How is Your Standard of Living?

• The bottom 50% own less than 1% of the wealth• 61% of Americans live from paycheck to

paycheck in 2011, 49% in ‘09 and 32% in ‘08.• Personal bankruptcy increased by 32% in ‘08 to

1.4 mm• 43 million American use food stamps, mostly the

ederly, children and the working poor. 59% are White, 27% are Black

• 45% have less than $10,000 saved for retirement

• 36% contribute nothing• 24% postpone retirement by at least a year.

Land of Opportunity?

Personal Income

• Is your personal income growing?

• Staying the same?

• Or in decline?

An expanding middle class is essential to economic growth

Personal Income

2008 Recession

U.S. Household Income

Updated 9/28/2010

Average Income By Family

Bottom 90% of incomes in America averages $31,244

Forbes 400 richest Americans

US Income of Top 1%

While 90% of Americans have seen their incomes decline by 4%, incomes of the top 1% have grown significantly every year,

except for 2008-09.

Income Disparity in America

“Growth becomes more fragile” in countries with high levels of inequality like the United States - Jonathan D. Ostry of the International Monetary Fund

US Income Distribution Top 1% vs. 90% Average Income 1917 to 2009

Fun (or not so Fun) Facts

A rising tide does not necessarily lift all ships.

• Forbes 400 richest Americans have a combined net worth is $1.7 trillion– or the combine yearly household income of

more than 64 million Americans.• Between 1979 and 2007

– the top 1% of households doubled their share of pretax income

– while the share of the bottom 80% fell. (CBO)

1. Spend Less Than You Make

2. Pay Yourself First

Two Rules to Live By

What Happens When You Honor Rule #1?

• Honor Rule #2: Pay Yourself First

You Spend Less Than You Makeand have some for saving and investing

What Happens When You Violate Rule #1?

• Borrow Money

• Credit Card

• Balance of $5,000 at 17% Interest

• Minimum Payment

• 81 years to pay off the balance

You Spend More Than You Make

How Much Money Could You Earn If…

Pay Yourself First

At Age 65

5.00%Rate of Return

$420Save $15 everyday for one month

$15Coffee/hot chocolate & snacks

Saved $15/day until you were 65?

$1,000,000

Reference Material

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