Excuse us while we channel Thomas Piketty for a second: the truly affluent, the highest earners… they receive the highest proportion of total income outside their wages: generally from business and investment income.
And, turning off the Piketty channel: at the lower ends of the total income spectrum, there is also an increase in non-wage income: this time more due to transfer payments and contract work, which (see our previous article on income and hours worked) also relates to less hours worked.
A Brief Apology
Unfortunately, we just didn’t have enough 2013 data to follow this through to the very top reaches of personal income… data gets sketchy around the top .5 percent with the 2013 IPUMS-CPS dataset. However, we were able to partially verify one of Piketty’s key income observations by going through the top 1%. That said, here are our criteria:
- Age over 18
- Reported working at least 1 hour in 2013 CPS
- Total income plus wage income listed this time, unlike previous articles.
Wage and Total Income, by Income Quantile
How to read this: the orange and yellow total and wage incomes are the ‘start’ of the quantile, and the data is inclusive of the labeled income but stops just short of the next income quantile. The percentage listed is how much of that quantile’s total income was wage income. So, yeah, the 0th quantile didn’t earn “$0”, they earned up to $19,176 in 2013.
As with some of our last few articles, we also found this one tough to read with all of the data points labeled. So, here’s our number crunching in table format:
|Quantile||Total Income/Start||Wage Income/Start||Percentage Wage|
We downloaded the CPS microdata from the University of Minnesota’s Minnesota Population Center’s IPUMS-CPS site.
Miriam King, Steven Ruggles, J. Trent Alexander, Sarah Flood, Katie Genadek, Matthew B. Schroeder, Brandon Trampe, and Rebecca Vick. Integrated Public Use Microdata Series, Current Population Survey: Version 3.0. [Machine-readable database]. Minneapolis: University of Minnesota, 2010.
Is This What You Expected?
So, if you’re between the 25th and the 90th percentile of earners… a bit stretched and contrived, yet somewhat okay definition of the middle class… wages matter the most. As you get closer to the extremes, whether in the bottom or the very top quantiles, your income breakdown starts to get a bit different. We only were able to take this one to the top 1% of earners, but it’s already obvious here: to crack the top 1%, you need to make $253,500… and we can predict that ‘only’ $207,356.94 of it was from your day job.
Here’s your takeaway, if you’re gunning for the very top: build up those income streams from the outside of your day jobs, whether through capital gains, rents, dividends, business income, or whatever else you’ve got going. It’s a road well traveled by those at the very top!