Economy Wealth & income inequalities in the US - what do the 1% own?

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It's not a surprised to anyone that the USA is a country rife with socio-economic inequalities. It has not always been like this. The rich have been getting increasingly richer compared to the rest of the population since the early 1980's (under Ronald Reagan) and the trend has accentuated further since the early 2000's. Nowadays 40% of the wealth is owned by just 1% of Americans and nearly 80% of all the wealth belongs the top 10%. It means that 90% of Americans have very little and can indeed be considered as poor by the standards of developed countries.

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Wealth vs income inequality

Income and wealth are not the same thing. Income is what people earn from their job, for example on a monthly or yearly basis. Wealth is the total money accumulated by a person or family over their lifetime and does not necessarily come from income. It can be inherited or result from capital gains from all sorts of investments.

The United States distinguishes itself by having the biggest inequalities of any rich country both for wealth and income.

If you look at the table for the income of the richest 1% on Wikipedia, you'll notice that some of the poorest countries in the world top the ranking (Malawi, Central African Republic, Mozambique), where the top 1% earn over 30% of all income. The USA are 13th worldwide, between Botswana and Iraq. The top 1% Americans earn 22.5% of all income in the country!

The EU country with the most income inequality is Romania (top 1% earn 15% of income), which is still a developing country. Among developed countries, the next after the US is Canada, where the top 1% earn 13.6% of income, then the UK (12.6%) and Germany (12.5%). Out of 116 countries listed, ranking countries from the highest income share of the top 1% to the lowest share, Northern, Western and Central European countries rank between the 71st and 116th position. That's also the case of Japan (93rd), Australia (102nd) and New Zealand (107th). The United States (13th) is ranked far outside the rest of the developed world.

Interestingly, the Netherlands, which has the second largest wealth inequality, is at the bottom of the list for income inequality (top 1% earn 6.2% of income), which shows that wealth and income inequalities are not necessarily related.
 
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How much do the 1% really own in each state?

I have made a table showing the share of income earned by the top 1% in each U.S. state based on data from the Economic Policy Institute. In 8 states they earn over 30% of all annual income, like in dirt poor countries like Malawi or the Central African Republic. The gap is in fact much worse than that in New York, Connecticut and Florida, where the gap between the 1% and the 99% is wider than anything imaginable in Africa.

I then recalculated the GDP per capita (in US$) of the 99% by state by deducting the percentage of GDP taken by the top 1%. (The original GDP per capita by state is from Wikipedia) By doing this, we see that most states fit nicely within the North and West European average. The GDP per capita of the 99% for the whole USA is in between that of the Netherlands and Austria. But a similar income in Europe and the US is not the whole story. Europeans (as well as Australians, New Zealanders and Japanese) enjoy far more benefits, such as free or very cheap healthcare, childcare, education from kindergarten to university, more paid holidays, maternity and paternity leaves, better public transports, less crime, and so on. So it's not just the income that matters, but the whole system.

North Dakota, Alaska, Delaware and Washington are actually the richest states for the 99%, with a GDP per capita similar to Iceland.

Without the Top 1%, Florida has a similar GDP per capita as Puerto Rico and the lowest of any US state, behind even Mississippi!

StateGDP per capita (2023)Share of the Top 1%GDP per capita of the 99%
New York108,38044.460,259
Florida65,39039.539,561
Connecticut91,76337.257,627
Nevada71,99032.748,449
Wyoming81,56431.256,116
Massachusetts103,34030.971,408
California96,22230.766,682
District of Columbia239,86130.4166,943
Illinois85,1112762,131
New Jersey83,81024.363,444
Texas81,13024.261,497
Washington97,80524.274,136
Georgia72,34022.655,991
Arkansas56,11522.543,489
Pennsylvania74,10921.758,027
Michigan64,27221.450,518
Tennessee71,19821.455,962
Missouri65,84721.251,887
Arizona65,0962151,426
Minnesota81,15020.964,190
Colorado85,81620.668,138
North Carolina71,29720.656,610
South Dakota77,0332061,626
Oregon74,49219.759,817
South Carolina58,39819.746,894
Utah76,48719.761,419
Alabama56,89719.345,916
Montana59,98618.948,649
Wisconsin70,72818.957,360
Ohio72,55018.659,056
Kentucky60,17018.449,099
Kansas74,96218.361,244
Rhode Island67,35818.255,099
Louisiana63,03118.151,622
New Hampshire78,28118.164,112
Maryland79,11117.865,029
Oklahoma60,38517.849,636
Virginia77,87517.764,091
Idaho58,85517.448,614
Indiana69,20317.357,231
Delaware89,7851774,522
Mississippi48,74416.440,750
Nebraska85,93116.371,924
Vermont65,27916.254,704
North Dakota94,81515.879,834
New Mexico58,71615.549,615
Maine63,26715.453,524
West Virginia53,93915.345,686
Iowa75,15514.764,107
Hawaii71,21513.761,459
Alaska86,90212.775,865
USA 79,60526.358,669


It's interesting that even the state where the 1% of the lowest share of GDP (Alaska at 12.7%) is still higher than any developed European country (just above the UK - the most unequal European country).
 
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Foreign-born multi-millionnaires and billionnaires

One thing to consider about the 1% in the US is that they are a rather international bunch. This is particularly true of the 0.1% - the ultra rich. Many of the richest Americans were not born Americans. Just naming a few: Elon Musk (South African), Sergey Brin (Russian), Rupert Murdoch (Australian), Pierre Omidyar (French), Jensen Huang (Taiwanese), Jan Koum (Ukrainian), George Soros (Hungarian). Forbes has a list of 92 U.S. billionaires who are in fact immigrants - 13% of all US-based billionaires.

I couldn't find the percentage of foreign-born people among the total top 1%, but it's surely significant too. Only 1% of Americans today were born in Europe, but they surely make up a significantly higher percentage of the top 1% US residents either by income or wealth. That's because Europeans who move to the US mostly do it if they can get a very good job there, be it as multinational CEOs or CFOs, Hollywood actors, startup founders, and so on. Otherwise they'd rather stay in Europe.

Of course it's not just Europeans, but increasingly Asians too. There is an increasing number of top US companies with foreign CEOs.

High-tech companies

  • Sundar Pichai (India), CEO of Google/Alphabet
  • Satya Nadella (India), CEO of Microsoft
  • Arvind Krishna (India), CEO of IBM
  • Safra Catz (Israel), CEO of Oracle
  • Shantanu Narayen (India) - CEO of Adobe Inc.
  • Antonio Neri (Argentina-Italy), president and CEO of Hewlett Packard
  • Elon Musk (South Africa), CEO of Tesla and SpaceX
  • Jensen Huang (Taiwan), CEO of Nvidia
  • Lisa Su (Taiwan), president and CEO of AMD
  • Sanjay Mehrotra (India) - CEO of Micron Technology
  • Eric Yuan (China), founder and CEO of Zoom Video Communications
  • Marc Benioff (Israel), CEO of Salesforce
  • Fidji Simo (France), CEO of Instacart
  • Ali Ghodsi (Iran), CEO of Databricks
Other companies

  • Albert Bourla (Greece), Chairman and CEO of Pfizer
  • Stefano Pessina (Italy-Monaco), executive chairman and largest single shareholder of Walgreens Boots Alliance
  • David Solomon (United Kingdom), CEO of Goldman Sachs
  • Ajay Banga (India) - CEO and President of Mastercard
  • Darius Adamczyk (Poland), Chairman (and former CEO) of Honeywell
  • James Quincey (United Kingdom) - CEO and President of The Coca-Cola Company
  • Ramon Laguarta (Spain), Chairman and CEO of PepsiCo
  • Laxman Narasimhan (India), CEO of Starbucks
  • Steve Easterbrook (United Kingdom) - former president and CEO of McDonald’s (2015-2019)

Why the US attracts so many foreign startup founders?

As of May 2022, 319 of America's 582 billion-dollar startups had at least one immigrant founder. That's 55% of them. But are are so many foreigners flocking to the U.S. to found these companies when they could just as when start them in their own country? That's what I am going to explain below.

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The US is is great country to start a company. It's easy to start a business. There are relatively few market regulations. The minimum wages are low and employees don't get paid holidays or maternity leaves, and little social security. The workforce can easily be overworked and can be fired very easily compared to Europe. Workers' rights are not really a thing, at least something employers can easily overlook. (If you don't know what I am referring to, please check the thread Can the US still be considered a developed country?) Taxes are relatively low, especially for the top 1% of earners - 2 to 3 times lower than in Europe! It's actually a paradise for company owners - and as close as hell as it gets in a rich country for most workers, although they wouldn't realise it as they are generally blissfully ignorant of the working conditions in the rest of the world and constantly reminded that they are "living the American Dream" in "the best country in the world", so that they don't complain as much as they should, just like lower caste Indians accept their fate passively, hoping for a better life in the next life.

No wonder foreign entrepreneurs have always loved the US! It's perfect if you want to get rich quick and aren't too worried about principles or human values! The whole system is made by the rich, for the rich, squeezing as much as possible from the rest of the population.

I am not saying that it's foreign entrepreneurs and CEO's who are exploiting the 99% bottom earners of US population. First, it would be fairer to say that they are exploiting that bottom 90%, as the top 2% to 10% still make decent earnings and may well be self-employed professionals (doctors, lawyers, writers), small business owners, or other people with decent jobs less likely to be subject to exploitation (professors, academics, engineers, high-ranking police and army officers, etc.). Secondly, foreign entrepreneurs and CEO's still probably make less than 10% of all bosses at American companies, and mostly at multinationals rather than US-centred corporations (like say, Walmart, Kroger, Target, Home Depot, Verizon, as well as most US airlines, banks and construction companies). It's the system that just attracts foreign opportunists, but overall rich Americans are still mainly the ones who oppress poorer Americans.
 
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It is striking that the United States has grown to become more unequal today than it was 200 years ago, in the heyday of slavery! Russia is also less egalitarian now that it was at the time of the Tsars and serfdom. The same is true for India, where inequalities now outdo those of the age of Maharajas. In contrast all other Western countries, even Canada (the most similar to the US in many ways), have become more egalitarian now than in the past. According to this chart France is the major country that has changed the most towards a more equal distribution of wealth in the last 200 years. In 1820, well after the French Revolution, the top 10% owned 60% of all income. Nowadays it's only half of that (just a bit over 30%).

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In case you are wondering why the chart shows that the top 10% of Americans earn 44% of all income in the country, while the chart in the first post of this thread showed that the top 10% had 79%, the reason is simple. The 79% is the share of accumulated wealth, while this chart here shows the annual income. Two different things.
 
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American CEOs earn in average 272 times more than their workers. For S&P 500 companies CEO's earn 324 times more in 2021. The U.S. simply has the highest CEO-to-employee pay ratio in the world and that gap keeps widening, according to Forbes, which states that 'CEO pay increased 31% over the last three years and median pay rose 11%'.

India has the second highest pay gap worldwide, with CEOs earning 229 times more than their employees.

The CEOs of a Fortune 500 company makes in average $14 million annually in the U.S., twice more than in the UK, which has the highest CEO-to-employee pay ratio in Europe.

Scandinavian countries are famous for their low pay gap between CEO and employees and that doesn't seem to affect their performance. A major company's CEO may "only" earn $1 million per annum - 14 times less than their American counterparts, while employees are also better paid for shorter hours, with more holidays and much better benefits.

Business.org has an interesting table comparing the salaries of CEOs of various firms to the average employee wage. For example we can see that Nike's CEO (John J. Donahoe II) earned $54,451,903 in 2021 while a Nike employee earned on average $30,877 per year. That's an insane 1763 times more! In other words one minute of the CEO's time equals 29 hours of work for an employee. On a different scale, Nike's CEO earns in one day what an employee earns in 5 years! The question is: is that justified?
 
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My wife is an immigrant and I'm the child of immigrants. But we've dramatically surpassed 99% of the population, foreign and domestic in a single-generation.

Nevertheless, from then to the top 0.1%, that's basically in another solar system. 0.1% are basically the Patricians of the world. The USA is just another country to them, and they probably have estates across the globe.

Our child has multiple citizenships, including Italian. We want to keep them in the swing of how even more successful people live.

The Saudis are a family that's truly a world power within and of itself. Their country is named after their family.

I think it is a natural impulse to favor family over others, because it is closer to your heart than even your tribe. Which becomes the bigger amorphous mass to the individual after family. Thus, to promote the family is a priority among all. So the drive of individualism is not necessarily selfish.

I think the top 1%-10% is the chort that best deserves their share of the wealth, if not more. Because they're the section that is most likely to have achieved it by mostly merit. The top people and poorest have to work the least.
 
My wife is an immigrant and I'm the child of immigrants. But we've dramatically surpassed 99% of the population, foreign and domestic in a single-generation.

Are you quite sure about this? It takes an annual income (not wealth) of at least $650,000 to reach the minimum threshold of the top 1% in America. It is even higher in the Tri-state area.

That was for earnings. When it come to accumulated wealth, it takes a minimum net worth (after loans, mortgages and other debts deducted) of $10,815,000 to crack the top 1% (that was in 2022, it's surely over $11m now).

In the US I would be in the top 2%, but the gap to reach the top 1% is too big.

The top people and poorest have to work the least.

Not sure about that either. According to this study on how much CEOs work in the US, they clock in on average 62.5 hours per week, while the average US employee works 36.4 hours a week. In other words, CEOs work 70% more than employees in average.

Another class of people in the top 1% are Hollywood actors (at least famous ones, who may earn several millions per year) and actors often work 80 to 100 hours a week! I have checked several websites and they all agree on this number.
 
I think the top 1%-10% is the chort that best deserves their share of the wealth, if not more.

I agree for the top 2 to 10%, but as it takes a minimum annual salary of $650,000 to reach the bottom of the top 1% earners and the average is closer to $825,000 per year ($68,750 per month), I am not sure it's always deserved. For the top 0.1% the average yearly earnings is over $3 million.

I think it is a natural impulse to favor family over others, because it is closer to your heart than even your tribe. Which becomes the bigger amorphous mass to the individual after family. Thus, to promote the family is a priority among all. So the drive of individualism is not necessarily selfish.

I agree in principle, but after a certain threshold of wealth, getting 'even more money' does not add to the family's well being or happiness. Once people have say $100 million and can afford everything they ever dreamed of and live a life of indecent luxury for several generations, what good does it do to add even more? Yet many top CEO's earn more than $100 million per year. Here is what I have found combing various sources (Yahoo Finance, AFL-CIO, The Motley Fool, Equilar). The highest paid CEO's in 2022:

  1. Elon Musk, Tesla: $23,500 million
  2. Robert Scaringe, Rivian Automotive: $2,290 million
  3. Jeff T. Green, The Trade Desk: $834 million
  4. Tim Cook, Apple: $770.5 million
  5. Peter Rawlinson, Lucid: $575 million
  6. Jensen Huang, NVIDIA: $561 million
  7. Zig Serafin Qualtrics International: $540 million
  8. Reed Hastings, Netflix: $453.5 million
  9. Leonard Schleifer, Regeneron Pharmaceuticals: $452.9 million
  10. Marc Benioff, Salesforce: $439.4 million
  11. Tom Siebel, C3.ai: $343 million
  12. Satya Nadella, Microsoft: $309.4 million
  13. Robert A. Kotick, Activision Blizzard: $296.7 million
  14. Peter M. Kern, Expedia Group: $296 million
  15. Ariel Emanuel, Endeavor Group Holdings: $294 million
  16. Hock E. Tan, Broadcom: $288 million
  17. Sue Nabi, Coty: $283 million
  18. Joe Bae (co-CEO), KKR: $279 million
  19. Tomer Weingarten, SentinelOne: $275 million
  20. Alex Karp, Palantir Technologies: $264 million
  21. Sid Sijbrandij, GitLab: $263 million
  22. Stephen Schwarzman, Blackstone: $253 million
  23. David M. Zaslav, Warner Bros. Discovery: $246 million
  24. Safra A. Catz, Oracle: $239.5 million
  25. David Baszucki, Roblox: $232 million
  26. Sundar Pichai, Alphabet: $225 million
  27. Andrew R. Jassy, Amazon.com: $212 million
  28. Stephen Scherr, Hertz Global Holdings: $182 million
  29. G. Mike Mikan, Bright Health Group: $180 million
  30. Patrick P. Gelsinger, Intel: $177 million
  31. Barry McCarthy, Peloton Interactive: $168 million
  32. William R. McDermott, ServiceNow: $165 million
  33. Michael Levitt, Core Scientific: $160 million


That's just the people earning over $150 million per year. I am sure I could get a longer list if I searched more as each website has names not mentioned on the others.

Now why would the CEO of Rivian Automotive earn over 2 billion annually when the company is not even profitable (net income -6.75 billion in 2022!) and the stock has lost 5 times its value (from $129 to $25) from the company's IPO in November 2021? Lucid Group's stock is also close to 10x lower than its peak and the company is also losing 1.3 billion per year. How can they afford to pay its CEO $575 million? That's nearly half their total annual losses! A good CEO would work for free until his company become profitable again. This just looks like someone who wants to siphon off as much money as he can off investors (including stock holders) before the company goes bust. :confused:

So do these people all deserve their astronomical salaries? Of course not!

One good illustration of why American CEOs are widely overpaid is to compare similar American and European companies. Peter M. Kern, the CEO of Expedia (not Eupedia, it's not a typo ;)) earns $296 million, while Glenn D. Fogel, CEO of Booking.com (based in The Netherlands) earns $30 million, just one tenth! Yet Booking.com is the bigger company of the two with a market cap of $113 billion and net profits of $3 billion in 2022. Expedia has a market cap of $15 billion (7.5 times less) and net profits of merely $352 million in 2022 (10 times less than Booking). In fact Expedia's CEO earns almost as much as the whole's company's net profits! In contrast, Booking's CEO earns only 10% of the company's profits. It's not just that American companies overpay their CEOs in comparison to the rest of their personnel, but also in relation to their net income. In other words American CEOs are taking away with them a good chunk of the money that should go to stockholders. So that's not even fair to the company's real owners (i.e. the stockholders).
 
Note that I have updated some of the posts above.

Here is another explanation as to why the Top 1% is so rich in the U.S. Most developed countries have a progressive income tax rate, meaning that the more someone earns, the higher their tax rate is. The US has its own unique system, in which the tax rate effectively decreases for the rich earning more than $220,000 per year. In fact, the super rich whose income is over $11 million annually only pay a 25% tax, which is less than someone earning $83,000 per year, and a whole 10% lower than someone in the Top 2% earning $220,000 per year.

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Interestingly even Republicans and the majority of the rich (although maybe not the ultra rich) don't see this as ideal and would prefer high tax rates on top earners.

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