The Real Income Inequality Gap


People are always talking about the income inequality gap in America and the vast difference between the income levels of the very, very wealthy and the very, very poor. But let's face it, that's apples and oranges. Poor is poor, there's no two ways about it. Sure, you can be very poor, or just middle-class, "shoot, buying this $89 Metrocard is going to clean out my bank account till Friday" poor, but it ultimately amounts to the same thing: no money. The real income inequality gap, the Times Economix blog points out, is that "there is much greater inequality at the very top of the income scale" than at the bottom.

Take Brad Pitt. Compared to your average schlub, Brad Pitt appears totally rich. He was No. 30 on Forbes's list of the highest-paid celebrities last year and is worth an estimated $150 million. That's a lot of money! But compared to Mayor Bloomberg, who is worth $18 billion at last count, Brad Pitt is pathetically poor. Poor poor poor. If he felt like it, Mayor Bloomberg could probably come up with an offer that would make Brad Pitt actually consider working as his personal butler for a year. How do you think that makes Brad Pitt feel? Not rich, that's how.

When the 95th-percentilers think of their incomes in the context of what their richer neighbors are earning, this cohort doesn’t feel very rich. (Indeed, the gap between the rich and the very rich has been growing in the last few decades. Exactly why the gap has been growing is unclear, but has likely been influenced by a combination of tax policy, deregulation and technological advances that allow people to control more capital.)

It is perhaps no wonder, then, that so many people who are statistically rich call themselves “upper middle” or even “middle class.” They are much, much richer than lots of poor people, but also much, much poorer than some very visibly rich people. From their perspective, they truly are in the middle.

Brad Pitt, just a working stiff like the rest of us.

Why So Many Rich People Don’t Feel Very Rich [Economix/NYT]