I don’t feel rich. In fact, I know a lot of people who are richer than I am. Many of them live in my street; some of them work in my department. But when I take “the GlobalRichList test”:http://www.globalrichlist.com/index.php I come out well into the the top 1 per cent of earners in the world. That’s right, well over 99 per cent of the world’s population earn less than I do. Matthew Yglesias “wrote the other day”:http://yglesias.typepad.com/matthew/2005/03/superinequality.html about income distribution in the US and the psychological mechanisms that mean that people misperceive their own place in that distribution:
bq. This extreme inequality at the top does a lot to explain, I think, why you see a lot of people who make more than 85-90 percent of the population refusing to think of themselves as rich. Once you enter into the Rich Zone, you start coming into contact with people who are way, way, way, way richer than you are. If you run into somebody who has twice — to say nothing of 10 or 100 — times your earnings, it’s hard to think of yourself as rich. After all, you’re closer to making $0 and being out on the streets than you are to making what he makes.
And this is all the more true for the global distribution of income, where our place in the local distribution makes us radically misperceive our position in relation to the vast majority of humanity (my ex ante guess would have put me in the top 5 or 10 per cent — but the top 1 per cent!). My guess is that most active bloggers and journalists (in the developed world) are in that top 1 per cent also. One effect of this is that the blogosphere casually trades in assumptions about what is normal, where those assumptions are just a projection of what is normal for that top 1 per cent.
{ 36 comments }
lth 03.30.05 at 5:15 am
Right, let’s make some sense of this. First, if you earn £12000 per year, and that’s a touch over UK minimum wage, that still puts you in the top 10% in the world.
Also, can we have a discussion about relative costs-of-living? These kind of statistics are fairly meaningless without them, aren’t they? If I made £6000 per year in Uganda or wherever, I’m sure I could have a much better quality of like than I can manage on the same money in the UK.
Brett Bellmore 03.30.05 at 5:53 am
As long as you didn’t get sick, anyway. THEN you’d be in trouble.
I wonder how much longer it’s going to be, before the combination of radically different costs of living, and the potential of telecommuting, drives information workers in developed countries to move to some of the nicer 2nd world countries? I figure I could move to the Caribean, do my work over the internet, and save mucho bucks, as well as miss the Michigan winters. And I’d probably feel a LOT wealthier, being surrounded by all those poor people…
Matthew 03.30.05 at 6:09 am
Good post Chris. This is pretty eye-opening too, it places your household in the UK distribution.
http://www.ifs.org.uk/wheredoyoufitin/
I found it on the Lib Dems ‘Axe the Tax’ site, which calculates your local income tax burden if they had such a policy. That was less eye-opening than eye-popping.
http://www.axethetax.org.uk/localtaxcalculator.html
david 03.30.05 at 6:11 am
Are costs of living really that much lower in the third world? My impression is that if you live like a typical Ugandan, you can do so more cheaply in Uganda than you can in the US or UK. But if you live like a typical American or Brit, you can do so more cheaply in the US or UK than you can in Uganda.
So for instance: If you want to have a broadband internet connection, own a car, own lots of books, see lots of movies, have access to Comedy Central, eat hamburgers and steak and potatoes, etc., then you can do so more cheaply in the US than you can in Uganda.
But if you don’t mind living in a hut with a dirt floor, walking everywhere you go, eating very little meat, and providing your own entertainment, you can do so more cheaply in Uganda than you can in the US.
If all that’s right, then I’m guessing that Americans who are in position to earn the same amount of money whether they live in Uganda or Michigan, would prefer living in Michigan, even if their only goal were to be able to stretch their money as far as possible.
Matt McGrattan 03.30.05 at 6:16 am
lth is right – cost of living is definitely important. I’m just on the edge of the top 5% of earnings according to that scale – although that’s perhaps a little higher than I thought so the test is pretty interesting.
However, I barely have enough money left each month to do much more than eat, buy the occasional book, and socialise a few times. I certainly can’t afford to a) own a car (even a used one), b) buy my own house, c) take regular holidays or save any money.
By contrast, members of my wife’s family living in the Czech republic who earn less than 1/2 of what I do can afford to do all of those things.
There’s a huge disparity in what your money can buy you. For what it’s worth, if I moved back to Scotland, never mind eastern or central Europe, my standard of living would improve markedly.
None of that negates the main point though, that blogs are largely written by the financial ‘elite’ for the financial ‘elite’ if we calculate finances on a global scale.
Chris 03.30.05 at 6:24 am
How depressing that the very first comment should be one of minimization and denial. Here’s some purchasing-power adjusted figures:
bq. Global economic inequality has grown relentlessly over the past decade — to the point where the citizens of the high-income economies, 15.6% of the world’s population, now have 81% of global income, while the poorest 20% (living below the World Bank’s $1/day international poverty line) have about 1/3 percent and the poorest 46% (living below $2/day) about 1¼ percent of global income. These poorest 46% of the human population, 2.8 billion persons, are extremely poor: They can, on average, buy about as much per person per year as can be bought with $537 in a typical rich country or with $134 in a typical poor one.
and
bq. The poorest 1.2 billion persons, the 20% living below $1/day, can buy about as much per person per year as can be bought with $338 in a typical rich country or with $85 in a typical poor one.
Both those quotes come from Thomas Pogge’s paper “Testing our Drugs on the Poor Abroad”:http://www.etikk.no/globaljustice/papers/GJ2003_Thomas_Pogge_Testing_Our_Drugs_on_the_Poor_Abroad.doc . More detailed figures are (for example) at section 4.3.1 of his “Moral Universalism and Global Economic Justice” in his “World Poverty and Human Rights”:http://www.amazon.com/exec/obidos/tg/detail/-/0745629954/junius-20 (which everyone should read). [You can “search inside” on Amazon for “$483” which will get you to p.97, the relevant page.]
des von bladet 03.30.05 at 6:36 am
When you say “everyone should read” a book priced at $29.95, does that include the 1.2 billion presons living on less than $1/day?
If it was me, I’d be spending my sub-dollar on the subsistentest food (very little) money could buy…
(This would be a frivolous nitpick, except that it is in fact precisely the point you started from.)
Chris 03.30.05 at 6:39 am
Good point Des. By “Everyone” I meant of course “Everyone who reads CT” … and most of them are in the top 1 per cent.
des von bladet 03.30.05 at 6:57 am
On the Interweb nobody knows you’re a commune of lesbian eco-warriors practicing sustainable slash and burn agriculture in the Amazon jungle and communicating with the outside world via a TCP over avian carrier network, isn’t it? (It is a particularly little-known fact that “Linus Torvalds” is the nom de plume of one such.)
But I, for one, regularly print out posts from the Timber and post them on the Chateau walls to tease the peasants, many of whom are most certainly not in the top 1% of global income.
(This will gain further in effectiveness once our generously-sponsored literacy programme gets up to speed, of course. Rumours that this is in fact the entire motive for our generous sponsorship of this such literacy programme may or may not be vigorously refuted.)
Matthew 03.30.05 at 8:11 am
My comment didn’t appear, so assuming it wasn’t deleted I’ll repeat it.
This shows you where you fit into the UK income distributin, which is quite eye-opening also.
http://www.ifs.org.uk/wheredoyoufitin/
I found i through this Lib Dem sites, which tells you how much less or more you’ll pay under their proposed local income tax than the council tax. I found it rather eye-popping.
http://www.axethetax.org.uk/pages/taxcalculator.html
Chris 03.30.05 at 8:23 am
Matthew, your comment is there but for some reason that I can’t understand WordPress has put it in a queue awaiting moderation (I can see it, but others can’t!). It also tells me that there are no comments awaiting moderation from me! Just another software glitch I’m afraid.
dave heasman 03.30.05 at 8:34 am
This little calculator is all right as far as it goes, but it ignores the effect of accumulated generational wealth. If my grandparents had been able to give me a zero-interest loan to put down on a house when I was 21, and could do it because their grandparents had done it for them, then my position in the top 9% of UK incomes wouldn’t seem so damned precarious and I wouldn’t be frantically loading 20%+ of my income into a pension scheme.
john b 03.30.05 at 8:35 am
I think David may be wrong. Certainly, I know people who live on similar amounts of cash-money in London and Bombay; the Bombayites are substantially more disposably wealthy.
Consumer electronics cost a little more in developing countries; telecoms services cost a lot more. Everything else is cheaper, since it can be done locally by locals for local wages.
The exceptions are places like DRC and Somalia, where you need to hire a dozen men with guns to protect you and there are (few/no) shops…
reuben 03.30.05 at 8:43 am
I wonder how much longer it’s going to be, before the combination of radically different costs of living, and the potential of telecommuting, drives information workers in developed countries to move to some of the nicer 2nd world countries?
Brett, I’ve got a mate who’s done just that, and he’s the envy of us all. He took his geeky computer skills to Buenos Aires, while continuting to do contract work for UK-based firms (who he never deals with except via telephone or online). Even working only about 25 weeks a year and travelling extensively, he is able to maintain a far higher living standard than what he had in London.
And since he lives in BsAs, unlike, say, Uganda, the facilities and services available to him are pretty much indistinguishable from those in North America and Western Europe.
Sigh.
reuben 03.30.05 at 8:46 am
Oops – only the fist paragraph of that was supposed to be italicised.
Chris 03.30.05 at 8:54 am
John B:
Everything else is cheaper, since it can be done locally by locals for local wages.
That’s true for services. So haircuts and manicures are going to be much cheaper in Madras than in Manhattan. But — and this is the point of the Pogge/Reddy critique of the basket the World Bank uses for its poverty measures — the price of really basic foodstuffs (millet or rice for example) tends to vary less. See “this interview”:http://www.globalpolicy.org/socecon/bwi-wto/wbank/2003/09notcountpoor.htm for details:
bq. But because a dollar can buy more in some countries than others, World Bank economists attempt to convert its worth using a method called “purchasing power parity” adjustment. Existing purchasing power parity adjustments identify the extent of purchasing power of the world’s people according to their capacity to buy all goods and services consumed in the world economy. This is not limited to the things they need to survive, such as food, housing, clothing, and healthcare, but also includes limousine service, luxury hotels, and pedicures, which will presumably not be purchased by those without disposable income. Because services are typically cheaper in poor countries than in rich countries as a result of lower wages, purchasing power parity adjustments typically overstate the ability of the poor to purchase basic necessities that are not especially cheaper in poor countries.
Scott Martens 03.30.05 at 8:55 am
Actually, it’s more expensive to live in some parts of the underdeveloped world, if your goal is to live the same way as in a wealthier country. The UN has relative cost of living scales for all the cities where it has offices, and some of the most expensive are in countries far from the top in GDP per capita. I can’t find a copy on the web, but it seems to me that the most expensive places were in Africa and Indo-China. The cost of genuinely equivalent goods and services was much higher due to special taxes on imports and luxury goods that would be qualifed as normal living in New York or Geneva. In very poor countries, it’s often easier to tax imported luxuries and services for rich internationals than to tax subsistence agriculture. Phone bills to Africa aren’t so high because of network costs, they’re high because they are an easy source of hard currency revenue through international calling charges.
As for the point of the post, yes, they live different from us. I went to high school with the children of millionaires, and in a couple of cases billionaries, and most of them were convinced that they were middle class. If they only owned one house, drove Japanese cars, and only had a single au pair instead of household servants, they thought they lived like everybody else. Some of the African and Asian students that I’ve studied with have expressed the same sort of thoughts about middle class Americans and Europeans.
lth 03.30.05 at 9:07 am
Chris,
I wasn’t attempting to minimize or deny, but I do think that pushing what seem to be, from the above comments, at least fairly contentious statistics is neither clever nor responsible. You say in one of your own responses:
buy about as much per person per year as can be bought with $537 in a typical rich country or with $134 in a typical poor one.
Surely this just proves my point, that it seems the price to live in the developing world is roughly 1/4 the price of living in the developed world? Of course, I could be reading this wrong, in which case, please excuse me.
Like I say, I don’t want to minimize or deny, and yes, I do think it’s a terrible thing that ~80% of the world seems to live in abject poverty. But let’s have an honest discussion on it, eh?
perianwyr 03.30.05 at 10:17 am
The design of that website is sexual.
Matt Weiner 03.30.05 at 10:22 am
… and most of them are in the top 1 per cent.
I’m not so sure about that, Chris. The salary of a US Visiting Assistant Professor in a public university (ahem) doesn’t even make it into the top 5%, and students and Yglesias certainly won’t be there. Of course, taking Dave Heasman’s point about generational wealth into account Yglesias and our mysterious VAP can afford the book anyway, and students and visiting assistant professors have access to libraries that will allow us to read the book for free, so we should still be reading it.
Matthew 03.30.05 at 10:33 am
“The salary of a US Visiting Assistant Professor in a public university (ahem) doesn’t even make it into the top 5%”
Less than $33,700 a year?
Richard Bellamy 03.30.05 at 11:05 am
Can someone unpack the numbers for me? I work full time, my wife works part time, and I’ve got two kids. Is my income (a) just my salary; (b) my household salary; (c) my household salary divided by four?
It seems to make a relatively large difference between being about the (a) 50 millionth (b) 25 millionth or (c) 450 millionth richest person in the world.
Are two of the people I’m “richer than” my kids? While technically true, I think they probably have more stuff than I do.
Gabriel Rossman 03.30.05 at 12:53 pm
Chris,
The peer group reference mechanism you’re describing was used in:
Jonathan Kelley; M. D. R. Evans. 1995. “Class and Class Conflict in Six Western Nations” American Sociological Review 60: 157-178.
you can find the piece in jstor
ingrid robeyns 03.30.05 at 1:53 pm
In response to Richard Bellamy’s question:
one of the small links on the website gives more info, and states that it is all about individual income. So what you need to do is to turn your household income in “equivalised” incomes, by using so-called “equivalence scales”. Economists have a whole literature on what the apprioriate equivalence scales are; I don’t have any literature here at hand and haven’t used this technique for years, but of the top of my head, such a set could look like 1 for the first adult, 0.7 for the second adult, and between 0.2 and 0.5 for each child, depending on their age. The idea behind these scales is that multi-person households can share many goods (like a fridge, or rooms), and that kids cost less than adults. By adding all income in the household up, and dividing by the sum of the scales, one tries to compare households of different size.
The latest developments in this literature are equivalence scales for disabled people, who often need much income to reach the same level of well-being.
W. Kiernan 03.30.05 at 1:57 pm
Using 2003 income figures from
http://pubdb3.census.gov/macro/032004/perinc/new11_000.htm
I read that the 50th percentile of individual incomes for males in the U.S. is somewhere between $25,000 and $27,500, which according to the Global Rich List calculator works out to the 90th percentile of world incomes, and the 75th percentile of individual incomes for males in the U.S. is somewhere between $47,500 and $50,000, which according to the calculator puts them in the wealthiest 0.9%. (I am startled to note that the income range from $47,500 and $50,000, the 75th percentile for U.S. men, is the 90th percentile for U.S. women in the U.S., and while the median income for males is between $25,000 and $27,500, for U.S. women the median income is down between $12,500 and $15,000!)
Those numbers seem funny to me. The U.S. accounts for about 4.5% of the world’s population. A quarter of U.S. males and a tenth of U.S. females – that adds up to about 0.8% of the world’s population – fall in the top 0.9% of global incomes. So eight out of nine of the world’s citizens with incomes greater than about $50,000 would be Americans.
That doesn’t sound right to me, especially with the appreciation of the Euro these last few years. I suspect that the Global Rich List calculator is income-wise comparing you, the individual worker, with not just the other workers of the world but all the world’s citizens, including dependent children and retirees.
david 03.30.05 at 4:02 pm
How much money is there per person in the world?
AdamSmithee 03.30.05 at 4:56 pm
On the question of how to get into that hallowed one percent, the answer is, be born rich in a rich country.
Lee Kane 03.30.05 at 10:17 pm
I wonder — Does this thing use PPP to figure out my wealth? I live in NYC. A one-bedroom apartment in Manhattan costs about half a million dollars + about $800 “maintenance” for trash and whatnot per month. Of course, it’s difficult to save that amount when I’m paying about 50% of my income to the government, (I am including NYC sales tax of almost 9%). I am still better off than most people in the developing world, of course. But if one used PPP and subtracted the 50 cents on the dollar the government gets already the picture looks a little different….
Lee Kane 03.30.05 at 10:20 pm
Kiernan — Incidentally, I think you right. It is safe to assume, I think, that the web site generating the list is operating in the interests of “the greater good.” Therefore, distortions and lies by omission are considered kosher tools to make you “do the right thing.”
Lee Kane 03.30.05 at 10:35 pm
Urk — I should probably be banned for posting three times but I do want to agree overall with Ith that the discussion should be honest not attempting to deny the reality of widespread poverty. After all, of course, we are not talking about differences in comfort level but abject human misery on vast scales vs. the decision to eat in or out.
By the way, I am interested in that study that gives you “economic points” for example for being married–which is worth $$$–or having more than 5 friends, etc. in terms of human happiness. I lived for a time in Indonesia and the family I stayed with made probably less than $1000 per year as a whole. They lived in some respects much better overall than I do in NYC now, I must say, with a large communal family in one compound, and they probably worked fewer hours than I do now as an isolated Manhattanite in a tiny cubicle, I mean, apartment.
Can those people be compared to, say, a family in Sudan being driven out of their homes by the government and executed by a militia?
Matt 03.30.05 at 11:24 pm
I would just like to echo the sentiment that that was a beautiful post. Thanks.
bellatrys 03.31.05 at 10:25 am
Well, I’ve never been higher than the top 11%, and as things are now I don’t expect to ever be making more than $20k per year, college degree or no college degree, because I lack the necessary social connections and the sales personality and the penis. Doing the work for which others get paid (as they go out and golf), and being told that it’s fair because men have or want families to support, has left me increasingly liberal as I get older. My role in the ownership society is to be owned, and I refuse to be a sex slave, so there is no place for me but technoserf.
Living one pay check away from living under a bridge, not being able to afford health care or medicine, and not having reliable transportation in a northern winter, is nearly as miserable in a first world society as elsewhere. True, I happen not to live in a combat zone, but urban disaster areas here are only a relative improvement. And even the vaunted successes of the west – clean safe water and lack of enviornmental contaminants – are relative to your wealth and demographics here.
Thomas 03.31.05 at 1:22 pm
A few points: It is eminently possible to arrange to have ludricusly low costs-of-living in highincome countries. I pay 300 euro/month for a very nice room (with broadband) as centrally located as at all possible in an fairsized scandinavian city. Apart from food that is the totality of my fixed costs, which means that in practical terms I’m one heck of a lot richer than my income would indicate. (I blow it all on books, games, movies, eating out and nice threads .-)
It is *not* possible for a thirdworld resident to arragne hir affairs so that they don’t have to spend the entirety of that single daily dollar they make on bare survival.
Bellatrys: hhm. Move? Canada, Sweden and Finland are all nice places.
James B. Shearer 03.31.05 at 5:18 pm
I don’t trust the GlobalRichList figures. They show for example exactly half the people making between $100000 and $200000 make less than $150000 which is not plausible.
Raimo 04.01.05 at 8:26 am
Chris, I don’t even make it into the top 12%, and would die of disappointment if I couldn’t make myself look like a gazillionaire in this site: http://tinyurl.com/12f3
bellatrys 04.04.05 at 5:56 am
Thomas, are you really that much of a moron?
Do you not know that it costs a great deal of money to move, particularly abroad?
Are you really unaware that European countries don’t want freeloading broke immigrants, any more than we do, not even white Americans? And they don’t want to share jobs with us, either.
Or were you planning to subsidize my move, and find me employment in one of those countries – and anyone else in my position? If not, with all *due* respect, STFU.
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