Monday, May 6, 2013

You no longer have to be born rich in America to become super wealthy

                                      You no longer have to be a Rockefeller in America to get rich 

With income inequality rising in the United States, there are two popular conceptions about which people make up the wealthiest 1 percent of Americans: that they were born into wealth or that they mainly include the CEOs of the largest public companies. Both of these are wrong.

New research from Joshua Rauh, professor of finance at Stanford Graduate School of Business, and Steven Kaplan, professor of entrepreneurship and finance at the University of Chicago Booth School of Business, finds that only a small fraction of America’s wealthiest fall into either of these two categories, and in both instances, the numbers are falling over time. Consider:

  • In 1982, 60 percent of the people on the Forbes 400 list of wealthiest Americans came from wealthy families, compared with 32 percent in 2011.

  • In 2004, top executives of publicly traded companies made up only 5 percent of the top 0.01 percent of the wealthiest people in the United States—a sliver of the population whose members earned individual salaries of at least $7.2 million per year that year. Another example: The combined yearly income of the top 25 hedge fund investors exceeded the combined income of the CEOs of the Standard & Poor’s 500 index in 2009. What explains the shift?
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