
New data show that joining the 1% remains unsettlingly hereditary - Futurebot
http://www.economist.com/news/united-states/21715735-new-data-show-joining-1-remains-unsettlingly-hereditary-skipping-class
======
randyrand
So? Whats the issue? That's the point. I work hard to help my kids. They're
_supposed to be better off because of my work_. That's the reason many of us
get up in the morning. Dont take that away from me.

If my hard work wasn't reflected in the data, why would I work hard? Why would
I care about bettering my kids if it had absolutely no impact on how well they
would do?

Some people are acting like this is a problem. And to some small degree it is.
But the _opposite_ would be a _much_ bigger problem.

Of course, a good parent teaches their kids how to fish, not just gives them
fish. If anything this study just shows that successful parents are good at
teaching their kids to be successful.

~~~
gfody
I don't think anyone would argue that parents shouldn't be able to send their
kids to top universities. However, despite top universities accepting
significant quantities of low-income and minority students, those students
remain under-represented among the top earners; implying that it's your
parents money and not your elite education that ultimately determined your
earning potential.

I think a less contentious interpretation is that this data simply supports
the theory that intelligence is mostly hereditary. And that a predisposition
for intelligence can account for both the parents' as well as their
offspring's high earning potential.

~~~
candiodari
> I think a less contentious interpretation is that this data simply supports
> the theory that intelligence is mostly hereditary. And that a predisposition
> for intelligence can account for both the parents' as well as their
> offspring's high earning potential.

As someone with kids in kindergarden and grade school, it's rather visible
that 99% of the advantage 1% parents give kids is simply the will to do
anything at all. In most kids, there is no such impulse present at all, and it
is painfully obvious what the results will be, barring huge behavioral
changes. Or at least this is rather obvious in kids whose parents are doctors
or lawyers, something along those lines. Less so for kids with manager
parents, but still, I do think I see a difference in attitude.

It's not intelligence that's hereditary, it's the 1% more effort (usually more
like 100% more effort), that when sustained over 10 years will completely
overwhelm any innate intelligence advantage that may be present.

Yes rich parents also give kids more means to accomplish things and that
certainly also helps. No student debt, maybe even a house to live in ...
certainly helps (frankly, a way to opt out of our financial "services"
industry is what makes the difference). But this advantage is useless unless
the extra effort is also present.

------
MarkMc
This article seems to be missing an obvious point: The top 1% earn most of
their money from investments rather than salary. And since rich parents will
often give their assets to their children (in the form of trust funds or
inheritance) it's natural that the children will also be rich.

In fact, I'm surprised at how little advantage there is to having rich
parents. Someone whose parents' income is in the top 1% _and graduates from an
elite university_ has less than a one-in-five chance of staying in the top 1%.

~~~
daxorid
Studies of lottery winners show regression to the mean over generations. Self-
earners do not. What do you think the discrepancy's cause is, given your
hypothesis?

~~~
danharaj
A lump sum of money and an estate built around extracting wealth from economic
processes are two different things. The typical lottery winner doesn't have
the social connections or technical skills necessary to create such an estate
themself. Having money quite obviously is different from having investments.

If the lottery winning family does not focus on wealth accumulation, then
their wealth will regress towards the mean for their lifestyle. If the lottery
winner puts all their winnings in an index fund, that would be a good start to
creating such an intergenerational estate.

However, surprising perhaps to many people, not everyone is interested in
turning money into more money. People who try to make money, surprise, have
the skills, connections, and desire to do so. Of course, wanting to be such a
"self-earner" doesn't mean one has the means or the luck to become one.

The key point is this: if your estate is currently extracting wealth from
investments, odds are that you inherited that estate. Your family having money
in the past is a precondition of such a state, but it is not sufficient to
sustain it. Wanting to be the first generation of your family with wealth
extraction privileges does not mean you'll succeed and most such aspirants
fail.

------
taneq
I don't see why it's surprising. Unless you're exceptionally lucky as well as
exceptionally successful, it takes more than one working lifetime to amass
enough wealth to be in the top 1%, and so you will only get there if you
inherit some significant amount of wealth.

What I find most interesting is the article's assumption that the biggest
predictor should be which college you go to, a perception which the 'best'
collages have spent millions of dollars to create.

~~~
edblarney
"Unless you're exceptionally lucky as well as exceptionally successful, it
takes more than one working lifetime to amass enough wealth to be in the top
1%, and so you will only get there if you inherit some significant amount of
wealth."

Not really. In terms of income, it's $500K/year.

If you go into certain kinds of banking from a decent school, and do well, you
can 'easily' earn that.

Again, this is 1% income, not assets of which I'm speaking.

But even then - if you spend 30 years in banking, and do well, you'll probably
be in the 1%.

If you were to say the top 0.05% - I think I might be more inclined to agree
with you.

Most of the 1% are not 'rich', they're really the upper bounds of 'upper
middle class' \- I'd say the 0.1% is where you can start calling yourself
'wealthy' in terms of economic class.

~~~
tabeth
I'm sorry, but you must be out of touch with reality.

Certain kinds of banking from a decent school? You mean an Ivy League or top
school with acceptance rates lower than 20%?

The reality is, you must be exceptionally lucky to have the circumstances that
get you into your so-called "decent" school that gets you into "certain kids
of banking" that allow you to "easily" earn 1% income.

~~~
tcbawo
I have worked in the finance industry. The people making 500K all have a
pedigree. Those who come from humble backgrounds are exceptionally rare.

~~~
edblarney
" The people making 500K all have a pedigree. Those who come from humble
backgrounds are exceptionally rare."

There are 3 million people in America earning more than $500K a year.

If any Ivy graduates 5K/year, let's say a nice round 10 Ivy Schools - that's
50K/year or 500K grads every 10 years.

That means it would take 60 years for the Ivies to produce enough grads to
make up that 3 million.

At a '20% of Ivy grads to 1%-er rate' \- you get only about 20% of those 3
million '1%-ers' as Ivy League grads.

Ergo - the clear majority of 1%-ers are not Ivy League grads. Not even close.

In banking, admittedly, it might be a little a higher ratio than other
industries.

~~~
mcguire
[https://mobile.nytimes.com/blogs/economix/2012/01/17/measuri...](https://mobile.nytimes.com/blogs/economix/2012/01/17/measuring-
the-top-1-by-wealth-not-income/?referer=)

Using data from 2010,

* ...estimated the threshold for being in the top 1 percent in household income at about $380,000, 7.5 times median household income, using census data from 2008 through 2010.

* But for net worth, the 1 percent threshold for net worth in the Fed data was nearly $8.4 million, or 69 times the median household’s net holdings of $121,000.

------
sporkenfang
It's serfs and masters, and it always has been. Since a few hundred years ago,
a creative/merchant/white collar class clawed their way a bit above the serfs,
but the gap between all of us and the 1% is still enormous. Sure there are
individual outliers between those two close lumps on the scale, and between
the very distant lump and the rest of us, but lest we forget, those that have
the gold make the rules.

~~~
gajjanag
> It's serfs and masters, and it always has been.

This is an excellent point, whose magnitude I have come to appreciate more
recently.

One of my favorite ruminations on the fundamental role that inequality plays
in civilized society comes from "Midnight Tides" by Steven Erikson:

"As they walked, Tehol spoke '... the assumption is the foundation stone of
Letherii society, perhaps all societies the world over. The notion of
inequity, my friends. For from inequity derives the concept of value, whether
measured by money or the countless other means of gauging human worth. Simply
put, there resides in all of us the un-challenged belief that the poor and the
starving are in some way deserving of their fate. In other words, there will
always be poor people. A truism to grant structure to the continual task of
comparison, the establishment through observation of not our mutual
similarities, but our essential differences.

'I know what you're thinking, to which I have no choice but to challenge you
both. Like this. Imagine walking down this street, doling out coins by the
thousands. Until everyone here is in possession of vast wealth. A solution?
No, you say, because among these suddenly rich folk there will be perhaps a
majority who will prove wasteful, profligate, and foolish, and before long
they will be poor once again. Besides, if wealth were distributed in such a
fashion, the coins themselves would lose all value - they would cease being
useful. And without such utility, the entire social structure we love so
dearly would collapse.

'Ah, but to that I say, so what? There are other ways of measuring self-worth.
To which you both heatedly reply: with no value applicable to labour, all
sense of worth vanishes! And in answer to that I simply smile and shake my
head. Labour and its product become the negotiable commodities. But wait, you
object, then value sneaks in after all! Because a man who makes bricks cannot
be equated with, say, a man who paints portraits. Material is inherently
value-laden, on the basis of our need to assert comparison - but ah, was I not
challenging the very assumption that one must proceed with such intricate
structures of value?

'And so you ask, what's your point, Tehol? To which I reply with a shrug. Did
I say my discourse was a valuable means of using this time? I did not. No, you
assumed it was. Thus proving my point!'"

------
shados
If I buy a house, and give the house to my children when they retire (and they
either use it or sell it to get one they want to use), they'll never have to
pay rent, only taxes and maintenance.

They can use that money to invest, to take longer to pick better job, to train
and get better at what they do...and eventually they can take all of that, and
give it to their children who'll be even richer, and so on.

The only way to prevent this from happening is to ban inheritance, which would
be all sorts of bullshit.

~~~
Eridrus
There's not a whole lot of benefit to society of inheritances. Inheritances
mostly just distorts society and encourages a "fuck you, got mine" attitude

We should certainly be more aggressive about taxing inheritances since we are
very far from the point where people will stop working because they have no
desire for money.

~~~
twblalock
The inheritance tax is a tax on people who were too stupid to put their money
in a family trust or similar arrangement before they died. It's trivial to
avoid if you are the kind of person who has enough money to be subject to such
a tax. Increase the tax, and avoidance will increase as well.

~~~
hadfgdasf
You would be wrong, because you do not understand the estate tax system in the
USA. There are things like the generation skipping tax. All the significant
loopholes are covered, in terms of passing on wealth and avoiding any estate
tax.

That said, the estate tax is very low. The exemption is huge. The vast
majority of people who die in this country are just folks and they bury their
dead and they don't go through probate or have trusts. Maybe they have a
little life insurance if they are lucky.

~~~
pg314
Has anything changed on that front since 2013? Has the GRAT loophole been
closed?

[1]
[https://www.bloomberg.com/news/articles/2013-12-17/accidenta...](https://www.bloomberg.com/news/articles/2013-12-17/accidental-
tax-break-saves-wealthiest-americans-100-billion)

~~~
hadfgdasf
GRAT loophole is not just a "family trust," and it doesn't make estate/gift
tax trivial to avoid. It is ridiculous that it persists though.

------
laughfactory
Takes money to make money. Plus, if you grow up in the top 1% the way you see
the world, and the opportunities you're exposed to are dramatically different
to those in the bottom half... Or, really, even in the 80th-90th percentile.

~~~
peteretep
I was very expensively educated despite having lower-middle class parents (the
government paid). I worked at Pizza Hut during the holidays while classmates
went to private islands.

Simply put, if I had told my teachers I wanted to be Prime Minister one day,
they'd have told me I needed to enroll in debate club and study politics,
rather than laughing or doubting my ability. As a child at school, nobody ever
doubted or questioned that me and my classmates would run the world one day,
and lo and behold, many of my classmates at 33 are in positions of
considerable influence, power, and/or wealth. It is generally very very easy
to spot other people who went to expensive private boarding schools in social
and work situations.

~~~
havetocharge
Was this expensive education as helpful for you and other folks from the
relatively lower economic class as for private island hopping students (in
terms of career opportunities)?

------
marze
Hearing the "the 1%" all the time gets annoying.

The proper term is "the 0.01%".

~~~
eli_gottlieb
The really proper term is "the owning class": those for which money is
invested, to produce goods, which are then sold for a profit to make money.
This contrasts with everyone else, who uses labor to produce goods, which
makes wages, which are then spent to consume goods.

~~~
blisse
That definition makes a lot more sense, bar someone like Gates? Do you have
any links going in-depth more?

~~~
joe_the_user
Well, if you mention Bill Gates, you aren't mentioning someone who worked
their up from nothing. Rumor has it family connections helped Microsoft get
their deal with IBM but in any case: "He is the son of William H. Gates Sr.[b]
(born 1925) and Mary Maxwell Gates (1931–1994). His ancestry includes English,
German, Irish, and Scots-Irish.[17][18] His father was a prominent lawyer, and
his mother served on the board of directors for First Interstate BancSystem
and the United Way."

Which is simply to say the group of entrepreneurs who have worked their way up
from nothing is smaller than many people imagine - since people do generally
think of Gates as being in this group. And lots of Billionaires like to
portray themselves as coming from nothing.

[https://en.wikipedia.org/wiki/Bill_Gates#Early_life](https://en.wikipedia.org/wiki/Bill_Gates#Early_life)

------
credit_guy
I can't really trust this analysis if they think less than one quarter of the
Princeton graduates end up in the top 1%.

All right, kidding aside (although the above observation is serious),
statistics about the earnings of the graduates are very unreliable. I never
disclosed to my Alma Mater how much I earn, and I guess most people don't
disclose that either. How then do they figure out how many of the graduates
are in the top 1%?

~~~
harryh
statistical sampling

~~~
credit_guy
Statistical sampling works if the sampled people answer your question. It also
helps if you can find the contact of the samples to begin with. Now, here's
some ways the statistical sampling can be substantially biased: people who are
still repaying their student loans are in Princeton's database, and they can
be contacted; those who didn't take loans (the rich kids) are not, so negative
bias. Opposite: Princeton alumni with kids, who hope to get their kids into
Princeton, donate. So they are in a database, and they end up in the
statistical sampling. This is positive bias. Back to negative bias: some
Princeton graduates end up unemployed (generally not because they are
unqualified, but because of burnout/depression/family problems). Do you think
they are in the mood to answer the phone and disclose their (non-existant)
current income?

In principle you can correct for a known bias. You can correct for several,
but the more adjustments, the more noise in the estimation.

Now back to my original remark: do you honestly believe only 23% of the
Princeton graduates are in the top 1% of the earners?

~~~
erubin
does the survey check a few classes or a large sample?

Between folks still in graduate school, in their early careers, people who
have left the workforce to have kids or pursue lower paying jobs because they
have financial security, you might end up with a smaller group than you expect
putting in all the hours to make top 1% income.

------
jwatte
And it's even worse in the 1% of the 1% circles, which are the real
"aristocracy" that can tell politicians what to do. (Note: there are 30,000
people who are top 1% of top 1% in the US!)

------
kevinwuhoo
Upon reading the title I thought it would some kind of genetic study (maybe
something like a genome-wide association study) on joining the 1%. Imagine
23andMe adding that to their panel.

~~~
S_A_P
Not quite sure why this was down voted. This was my initial take as well. I
was thinking, where did this widespread DNA test happen amongst the 1%? I
guess maybe clarifying the thought would not have the downvotes?

------
KboPAacDA3
What shall we do about it, comrades?

~~~
eli_gottlieb
Seize the means of production.

------
pitaj
I want to see this data over time.

------
ameister14
This is why we should have a 95% inheritance tax on assets over $1 million
dollars outside special case like family owned businesses and a family home.

~~~
douche
I cannot disagree more heartily. $1 million is really not that much money. I
would immediately start squirreling hard currency away in the walls or burying
mason jars of it in the back yard if idiocy like that were made law.

~~~
ameister14
$1 million dollars is what many people earn in a lifetime of work. I wouldn't
describe it as 'not really that much money.' It's the same size as the loan
Trump got from his father. It's certainly more than most people can save.

If you earn a huge fortune, I would prefer that it be gone from your family in
a maximum two generations of mediocre management. Otherwise we risk hereditary
fortune and power.

------
jondubois
I think it's terrible how universities reduce a student's achievements down to
a single number (GPA) when there are so many factors involved.

When I was at university, some students didn't have to work to earn money and
they could focus on their studies 100% - That gave them an unfair advantage.

I worked for the second half of my studies and there was an obvious, sudden
decline in my grades.

------
niceperson
I don't think it is a problem, and I think that letting people keep what
they've earned is only proper.

The real reason this is happening now is that now the way to get rich is not
to produce seomthing, but rather to bully people into making you rich.
"riches" through pull, not work.

That just shows the moral bankruptcy of our age.

------
cylinder
Who cares who is in the top 1%? You're all missing the point. We should strive
to provide decency to all people, and decency doesn't require being rich. The
best societies can be monarchies or even oligarchies. Stop obsessing over the
super rich!

~~~
234dd57d2c8dba
Sshhh dude you're going to ruin the facade. People need to keep believing
money will make them happy so they will endlessly consume cheap junk. What if
they start doing things like living with less and making their own stuff???

------
VeejayRampay
In line with the core ideas Thomas Piketty lays out in Le Capital au 21ème
Siècle. I like to think it's gotten better, but being born rich is still the
easiest road to being wealthy later in time.

------
Animats
To make this even more effective, the current Congress wants to repeal the
"death tax".

------
comstock
Does anyone have a list that reflects this? It doesn't seem to be the case in
the Forbes 400:

[https://en.m.wikipedia.org/wiki/List_of_members_of_the_Forbe...](https://en.m.wikipedia.org/wiki/List_of_members_of_the_Forbes_400)

But perhaps that's biased?

~~~
toyg
1% of 319m US population is 3.19m.

400 people are the 0.00000001%.

~~~
arwhatever
It makes me so angry that only 3.19m people are in the top 1%. We have got to
do something about this.

~~~
toyg
Are you suggesting we should follow the example of that notorious UK minister
who wanted all schools to be above the average? I'm all for that.

