America’s income gap stats


According to data released by the Social Security Administration, 23 Million Americans make less than $5,000 a year, while only 166 make more than $50 Million per year.  Some other data highlights:

  • 119,400 Americans make more than $1 Million per year
  • 81 Million Americans make less than $29,999.99 per year
  • 92.5% of Americans make less than $99,999.99 per year



This data paints a picture of the ‘real’ economy which is supposedly consumer driven.  Here’s another chart illustrating the income gap:

As an aside, in 2012 the average wage was $42,498.21, while the median one was far lower, ot $27,519.10.

But that is a broad average. Narrowing the data down, is what we have done in the chart below which shows that in 2012, the poorest 23.3 million working Americans, who earned between $0.01 and $4,999.99 at  an average net comp of $2,024.79, earned a total of $47.2 billion. And on the other end, we looked at the richest 2,915 Americans who earned $10 million or over in the past year, an average of $22 million per worker, and cumulatively, some $64.3 billion.

In brief: in the past year, the poorest 23.3 million Americans earned 36% less than the richest 2,915 Americans (and less than twice more than the richest 166). Needless to say, this excludes wealth from capital and asset appreciation, usually a benefit reserved exclusively for the latter; it also excludes the amount of taxes paid by either of these two income extremes.

Let’s be clear about the economic analysis.  While it is true there are many disenfranchised people at the poor end of the curve, this is a side effect.  Wealthy people don’t drive a consumer based economy, they don’t have the numbers.  Bill Gates can’t buy 10,000 pairs of shoes (well he could but why would he?) whereas 10,000 people will.  Also the rich have the tendency to save thus destroying capital or removing it from the economy, whereas the poor and middle class have the tendency to spend, thus increasing growth.  Finally, wealthy people have the tendency to create micro economies totally detached from the mainstream economy, such as by creating niche luxury items of no real value (Diamond skulls, $1,000 Caviar and Lobster pizza, etc.).

Assuming Bill Gates current net worth of $72 Billion, if a one-time tax was imposed on him, it would enable 5,000 start ups to receive $7,200,000 in funding.  Assuming 50% of funding was used for hiring, and assuming an average wage of $50,000/year, each start up could hire 72 people.  Combining all 5,000 start ups this is 360,000 people.  The 360,000 people now employed would spend their money and also create tax revenue for the US Treasury, as majority of tax still comes from the working class, not the rich (who utilize legal tax efficient vehicles to reduce their effective tax rate to as low as 10% or sometimes less).  Mr. Gates would still be left with $36 Billion.  If he lives for another 30 years (he’s currently 58 years old) he would need to spend $1.2 Billion per year in order to squander his fortune, assuming he has no more income.

The income gap represents problem of a dead economy.  Small business in the US are the largest drivers of new employment, and pay the greatest per capita share of taxes.

Further Reading: