Who are the 1% Do they pay their fair share? What do they even contribute?
The 1%. The insanely rich. The boogeymen. The income earning unicorn of the United States. The headline and campaign slogan maker. But who are they?
Who Are They?
To qualify for the 1% club you must be in a household that makes $485,000 in income per year. If you work a nine to five job that is a lot of income. But do these people work a nine to five job? The majority of these earners are in health, finance or manufacturing. More specifically these are doctors, investment bankers or small business owners. None of these professions work normal hours.
The average person in the Unites States works 33 hours. Doctors average 60 hours per week, small business owners 50 hours per week and investment bankers 90 hours a week. That’s almost twice as many hours for doctors, three times as many hours for investment bankers and one and a half times as may hours for small business owners.
What DO the 1% Contribute?
A common mantra you’ll see is that we need to make them accountable for past discrepancies and have them pay their fair share. Based on a pure hours worked it would seem that the above professions contribute almost exactly double what an average American does. Adjust the household income with this multiplier and these professions would earn between $120,000 (two individuals in one household) and $240,000 (single earner). Compare that to the median wage in the U.S. of $63,179 and the 1% make two to four times as much as your average American on an hourly adjusted basis.
So why do they earn so much? The U.S. operates on capitalist principles. Those that have high in-demand skills are rewarded more. Doctors and investment bankers easily fall into this category – doctors require 9-12 years of schooling with investment bankers requiring at least 6 years with high earners in the 1% almost always requiring senior level tenure, a status usually accompanied with 10 years of experience. But what about small business owners? Why are they rewarded? Often times they don’t even require a degree. In this case they are being rewarded for the risk they have taken on by opening a business. In addition, the average small business in the U.S. employs 57 people. Society has rewarded these small business owners for employing their fellow citizens.
If you’re not in the 1% are you willing to spend up to a decade in school and work double the number hours of the average worker in the U.S.? Have you created 50 or more jobs in your lifetime? I’m not and I haven’t.
Fatih Guvenen and Greg Kaplan, “Top Income Inequality in the 21st Century: Some Cautionary Notes,” NBER working paper, April 2017.