The topic of income inequality is a popular one. It is true that the bottom one-fifth of “income producing” households in America is accounting for a smaller and smaller percentage of the total income. Also, the top one-fifth continues to account for an increasing proportion of the income pie.
How can it be that as the media purports “the rich are getting richer while the poor are getting poorer?” [Actually most of the people in the press are confusing income with wealth]. America is supposed to be the land of economic opportunity. My data suggests that this is still the case. The variations between the top and bottom categories of income are real. But not all those who were in the bottom group 10 or 20 years ago are still there today. Nor are all of those who were at the top remain there today. There is a tremendous amount of socioeconomic mobility in our country. Even within one generation people tend to encounter this mobility by moving up or moving down. It is even more pronounced within the context of multiple generations. Most of the children of self-made millionaires do not repeat their parents’ success.
In terms of actual wealth [not using income as a surrogate for discussion] I have consistently found that at least 80% of America’s millionaires are self made. Also, in Stop Acting Rich, I found that about 1 in 4 (24%) reported that their fathers were blue collar workers [the largest occupational category to produce millionaires]. Nineteen percent were owners of small businesses; 4% were farmers. Conversely only 9% were senior corporate executives while 3% were physicians. Only 47% of their fathers and 40% of their mothers attended college.
About 1 in 3 millionaires paid for their college expenses. About 42% of the millionaires had a net worth of zero or less when they began working fulltime. Their median net worth was just over $600. Most (88%) reported receiving zero dollars the year prior to being interviewed from trusts, estates, gifts, etc. from relatives.
Self-made wealth is not a new trend in America. According to economist Stanley Lebergott, an 1892 study of millionaires found that 84% were first generation affluent! My research findings are also congruent with those of Professor Steven G. Horwitz, see article. He takes issue with those economists who tell us that “the U.S. is suffering from a widening gap between the rich and poor.” One’s membership today in the poor or rich category is not cast in cement like it is in many non democratic nations. As Horowitz states,” According to U.S. Treasury data, an astounding 86% of households that constituted the bottom fifth in 1979 had climbed out of poverty by 1988.”
The bottom fifth he refers to is composed of “newly formed households . . . recent high school graduates, new immigrants . . . taking their first steps up the income ladder.”
Given the current economic maalise you may be temporarily out of a job. But things will get better. And the trend long run favors those with high socioeconomic aspirations.