I was hoping to see how much people earn in their lifetime. And how that changed over time.
I was wondering the other day other how many years are high earners are actually earning a very high income. In-equality wise it is very different if people in the 2 percentile of income stay there for a decade or more or if they are in that income bracket only for a few years while doing a specific job and drop down to lower income again when they change their job.
Assuming for instance an average work-life of 40 years (25-65), and anyone in the 2 percentile income bracket stays there only for 5 years, that means 16% of the population will be high-income at some point in their life (and stay there for 5 years), or up to 32% of households. This means that in this scenario up to a third of the population (maybe more if kids are taken into account?) would benefit sooner or later from an exceptional boost in disposable income.
That picture would be very different if high-earners stayed high earners for a longer time as they would truly form an elite that is clearly separated in income wealth from the rest of the population.
Obviously what you do with this income determines a lot about your actual wealth. So this is a different question than how absolute wealth is distributed.
I would be very much interested in pointers towards data and/or studies about how runaway elite incomes actually are in different parts of the world.
This data is pretty much what you're asking about[1].
In summary, people in the top income quintile have a 70% chance of staying there. In other words, less than one third of the top income bracket are "new" people every decade.
40% of people also escape the bottom income quintile every decade.
Overall, the diagonal on the chart shows that you are pretty likely to stay in the same quintile over time, but there is still lots of mobility.
For your second question see [1]. Average income tops out for most people around age 40 and they stay at that level for most of the rest of their main career.
High income brackets are vastly higher incomes so people at low incomes (~30k) rarely reach that level. In 2020, the top 1% was $531,020.00 / year, that’s rare, 2% is $387,116.00 again a huge jump for most people.
However, some people very briefly enter high income status via a windfall. But, even here it’s mostly people with high incomes rather than poor people winning the lottery etc.
I think that most high income earners stay at that stage for the majority of their career after reaching that level.
While I know there are exceptions and odd examples, IMO people in general have little desire to take a large pay cut, so if you manage to get yourself to the point you are in the top 2% of earners, why would you step back?
If I had to guess, I agree most people probably continue to earn high wages once at that level.
But I don't think it's a question of how often people decline high wages to take a lower paying job (although this obviously happens as well). It's whether they can continuously be offered high wages as their career continues.
At least part of that is probably a function of how hard the work is on one’s body. A hard labor worker with a high income in 30s/40s is presumably more likely to lose that income in 50s/60s/70s than a non hard labor worker (e.g. office job).
Highly paid, older office workers are first in line when layoffs happen. Those people then face age discrimination trying to get new positions. Can really derail your earnings.
Yes, there is dramatically increase probability of obsolescence for anyone after 50, but from my experience, the office workers tend to have a much better network to fall back on.
Either way, one should definitely be investing in passive income sources for their 50s and up.
Good point. In my experience, the higher earning potential can be maintained, though overall salary growth is lower, as you start to hit a bit of a theoretical earnings ceiling. Though, that is generally of limited consequence when you're at those levels.
Another issue not addressed is lack of employment flexibility. If you are in the top 5% of earners, by extension you are likely limited to the top 5% of all available positions. Whereas someone with a more "mainstream" income can likely switch employers or industries, or even locations, with less impact (or maybe even positive impact, moving into a region with a better pay:cost-of-living ratio).
If you are in the top 5% of earners, you have the ability to save enough money so you can switch to whatever level of employment you want. Someone with a more "mainstream" income barely or never saves enough money to have the kind of security to just try out other employers or fields or regions.
I am willing to bet a top 5% earner would be able to land a top quintile job just by asking people in their network.
> If you are in the top 5% of earners, you have the ability to save enough money so you can switch to whatever level of employment you want.
I’m skeptical. My peers and I are in the top 1% of earners. We cannot save enough money to just opt out of our 1% incomes. Real estate is too expensive. (Bay Area)
I suspect many people in the top 5% are wage slaves as much as anyone else and have very little available in terms of viable options to continue the same lifestyle.
I’m in the top 1% but I still live in a 400sqft inlaw unit. Real estate is very expensive where you get those high incomes.
I suspect many people in the top 5% of earners aren’t my age though (30) and have generational wealth going on if not wealth from buying their home a long time ago when things were cheaper.
That was exactly my motivation of asking this question. If you have a substantial disposable income available year-on-year, you have the option to decide whether to just pay-off your mortgage and then work in something of high personal value, but potentially with lower pay closer to the median. This will still leave you with considerable disposable income compared to your median-income peers at that point.
Alternatively, so I thought, high earners could continue to optimize for high pay to afford more luxuries.
My expectation was then that a considerable amount of high-earners would choose to trade income with work they value personally. Triggering social mobility by allowing someone else to take their place.
Reading these threads, I am thinking now that maybe this is not so much relevant. If it is true, as others have suggested, that high-earners have more chances to get into positions that are well paid almost by default, than the choice for high earners is not between high income or valuable work. They can do both, because even when they start working for an NGO or take government position, their income would be expected to be high.
I was wondering the other day other how many years are high earners are actually earning a very high income. In-equality wise it is very different if people in the 2 percentile of income stay there for a decade or more or if they are in that income bracket only for a few years while doing a specific job and drop down to lower income again when they change their job.
Assuming for instance an average work-life of 40 years (25-65), and anyone in the 2 percentile income bracket stays there only for 5 years, that means 16% of the population will be high-income at some point in their life (and stay there for 5 years), or up to 32% of households. This means that in this scenario up to a third of the population (maybe more if kids are taken into account?) would benefit sooner or later from an exceptional boost in disposable income.
That picture would be very different if high-earners stayed high earners for a longer time as they would truly form an elite that is clearly separated in income wealth from the rest of the population.
Obviously what you do with this income determines a lot about your actual wealth. So this is a different question than how absolute wealth is distributed.
I would be very much interested in pointers towards data and/or studies about how runaway elite incomes actually are in different parts of the world.