Salient to Investors:
Luck, not hard work, is overwhelmingly why the rich are rich and the poor are poor. Our peer average income is set by forces beyond our control and far more than by our own choices.
The CBO says the top 20 percent get 50 percent of the national income versus 5 percent shared by the bottom fifth of households. The top 10 percent controls 70 percent of the wealth.
Samuel Bowles and Herbert Gintis say that 50 percent of variation of wealth and 35-43 percent of variation in income is due to the relative wealth and income of parents.
Parents who were educated are far more likely to educate their children.
Michael Greenstone and Adam Looney at Brookings say the median wage of the average American male has declined by $13,000 since 1969, mostly due to plummeting earnings by those with a high school diploma or less.
Evan Soltas says that if your father didn’t graduate high school, you are 8 times more likely not to graduate high school – a 22.2 percent chance versus 2.9 percent chance for children whose fathers did graduate.
Linda Loury at Tufts says half of all US jobs are found through family, friends, or acquaintances.
Miles Corak and Patrizio Piraino say as many as 40 percent of men end up working at the same company where their father worked at some point versus 70 percent among the top 1 percent in income distribution. Corak says this helps explain why the relationship between the earnings of parent and child is even higher at the top end than it is across the population at large.
One-third of successions between CEOs in US publicly listed companies involves an incoming CEO related by blood or marriage to the old CEO, the founder, or a large shareholder – bad news for the share price says Francisco Perez-Gonzalez at NBER.
America’s inequality is extreme but so is the world as a whole. In both Manhattan and Sierra Leone, the wealthiest fifth make 40 times more than the lowest fifth.
The Center on Budget and Policy Priorities says the bottom fifth of Americans pay 19 percent of their income in taxes, while the top 1 percent pay 33 percent of their income in taxes – a 14 percent gap versus the daddy gap – how much your relative income is related to your parents’ position in the income ranking – of around 40 percent.
Branko Milanovic says two-thirds of total global inequality can be explained by geography.
80 percent of your income as an adult compared to the global average can be explained by where you were born and to whom you were born.
At any level beyond the local, differences in income due to inequality of opportunity dwarf those from inequality of effort or talent.
Read the full article at http://www.businessweek.com/articles/2013-04-22/how-did-the-worlds-rich-get-that-way-luck#r=rss
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