Why So Many Rich People Don’t Feel Very Rich

Note: The percentile of income you are in is the percentage of people making less than or equal to you. Eg., if you are in the 20th percentile, 20% of people make less money than you do.

The graph shown in the chart in this article shows the income for various percentiles.

http://economix.blogs.nytimes.com/2011/01/11/why-so-many-rich-people-dont-feel-very-rich/?src=me&ref=business

January 11, 2011, 8:00 AM
By CATHERINE RAMPELL

But there seems to be a broader fissure underlying this discussion: why don’t people at the 90th percentile of the income distribution feel particularly rich?

The answer is simple: because any Americans who are richer than this cohort are so much richer.

At the request of The New York Times, the Tax Policy Center estimated Americans’ income percentiles for households across American in 2010. The numbers were calculated by Rachel Johnson, a research associate at the center, and were rounded to the nearest $100. The chart below to see where these income breaks fall.

As you can see, for the bottom 90 to 95 percent of Americans, the income distribution is relatively flat. For an American household in bottom 30 percent of the distribution, a move upward of five percentiles (to the 35th percentile) would mean an increase in cash income of a just few thousand dollars. Same goes for a family at the 40th percentile, and at the 60th percentile.

But notice what happens on the right side of the graph, around the percentiles in the mid-90s, when the line suddenly kinks upward.

The line gets much steeper because at the very top of the income scale, the monetary divisions between percentiles grow much greater. Those in the middle earn a little less than people a few percentiles up from them, whereas those at the top earn a lot less than their counterparts in nearby, higher percentiles. For example, those who aspire to hop from the 30th percentile to the 35th percentile would need to increase their cash income by $4,000 annually (or by about 17 percent); those who aspire to hop from the 94th percentile to the 99th percentile would require an increase of $324,900 (or 171 percent).

In other words, at least in dollar terms, there is much greater inequality at the very top of the income scale than at the bottom or in the middle. Whether this translates to much greater differences in standards of living at the top is debatable, as an extra $1,000 for a poor family likely makes a much bigger impact on that family’s quality of life than an extra $1,000 for a wealthy family.

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