Tuesday, November 13, 2012

Income Inequality

Interesting blog posts about how income inequality is greater in the top 10% of incomes. Its all about second derivative, the higher the income the higher the inequality.
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).


Now if we assume two things, (1) relative differences matter more than income level and (2) you mostly interact with people within 10% of your income percentile, then at high-ish income level the problem of inequality becomes even worse from a psychological perspective. Someone who is earning 17% more than you doesn't really live that different of a life, someone who is earning 171% more than you is living in a completely different world. Maybe this is why people get so caught up in i-banking, corporate law or climbing the corporate ladder.

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