The Rich Are Getting Richer, But Are The Poor Really Getting Poorer?

The census data is in, and we now have household incomes over the last decade. Here you can see the incomes of each 5th of the population's household income (adjusted for inflation in 2009 dollars). They also break out the top 5%, which allows us to calculate with the near top 15% (top 5th minus top 5%) make.

You'll remember that in Robert Kiyosaki's book Cashflow Quadrant, he puts forth the idea that the Business Owners and Investors make up the top 5% and hold 95% of the wealth. This graph shows household income not wealth, but there are two components to accumulating wealth: first, spending less than is coming in, and second, time. Some people who make "a lot of money" spend even more. The less you can spend than you make, over time, will accumulate wealth. There is, however, a limit as to how much you can decrease your spending. This is where the larger incomes make it easier to accumulate wealth.

Looking at the graph, we can see that the top 5% had tremendous gains, over 85% more income in 2009 than in 1967, or an average of 1.6% increase per year. That is a 1.6% raise per year, every year, above inflation. Doesn't sound like all that much, does it. The top 5th, taking out the top 5%, had a gain of 60% in income over the same 42 years, which is a 1.2% increase per year over inflation.

Where it gets really interesting is looking at the next four 5ths, which grew, from highest to lowest: 42%, 25%, 18% and 29% (or 0.85%/year, 0.55%/year, 0.41%/year and 0.64%/year). The poorest 5th actually grew faster than the next higher 40%. In other words, those who make up to $20,000/year got bigger raises, on average, than those making between $20,000/year and $65,000/year.

Another interesting note is that only the top 5% are really affected by downturns, at least dollar wise. As far as biggest one year drop, the top 5% have it the hardest, with a 6% drop in income. The next hardest hit is actually the lower 5th (orange line in the graph, not bottom 5th), those making between $20,000/year and $40,000/year. Their biggest drop was 4.5%, you just can't see it very well, because it's not as big of a dollar drop. Everyone else's biggest drop was between 3% and 3.4%.

So what are the income ranges?

Household Income Ranges
	2009 Low	2009 High	Biggest Drop	Biggest Raise	Average Raise
Top 5%	$200,000/year		6.1%	17.3%	1.6%
Top 5th - Top 5%	$100,000/year	$200,000/year	3%	5.9%	1.2%
Higher 5th	$65,000/year	$100,000/year	2.9%	5.3%	0.9%
Middle 5th	$40,000/year	$65,000/year	3.4%	4.4%	0.6%
Lower 5th	$20,000/year	$40,000/year	4.5%	5.1%	0.4%
Bottom 5th		$20,000/year	3.4%	8.6%	0.6%

So the poor aren't actually getting poorer (unless the government is not reporting real inflation), it's just that the rich are getting richer so much faster. Of course they take bigger risks also.