It's Not Enough To Be 'Well-Off' Anymore

Tyler Durden's picture

The past two decades have seen both an increase and a decline in income inequality. Within countries, income inequality has increased in a near universal manner. This is particularly the case when considering the true real income levels experienced across a society, as income inequality has generally been allied with inflation inequality (it is more expensive to be poor, basically).

Some of those forces that have created national income inequality have also, however, reduced international income inequality. The increase in per capita income in several key emerging markets (most popularly associated with the gains in China) has reduced international income inequalities between countries.

Paul Donovan, UBS: The Rise Of The Rich?

So what has happened to the well-off in global society? A quick comparison of the development of incomes in higher income countries and key emerging markets bears out this story.

The upper echelon

Taking the top quartile of the US population as having disposable income levels that can be described as “well-off”, the income threshold for such households’ disposable income is circa $100,000. The Euromonitor group conveniently provide data on how many households exceed this threshold amongst high income countries as of 2010 (national currencies are converted using purchasing power parity exchange rates, which always causes economists a twinge of discomfort, but it does allow for stability in the results).

So what marked “well-off” in the past? This is a highly subjective analysis, and of course one could back out the real number using inflation rates (or better still, income quartile-specific inflation rates). Affluence is often a matter of social aspiration, however, and the concept is perhaps best categorised by using the similar relative measure of affluence. If we take the benchmark as being the top quartile of the US population, that suggests that in 1990 a threshold of $55,000 disposable income in 1990 as being the hallmark of the “well-off”. Euromonitor also conveniently supply data on this population. Comparing 1990 with 2010, the number of households inhabiting the “well-off” category of high income countries increased by 18.6%, to number nearly 77 million.

The fast track

So what of the emerging markets, which seem to generate such excitement amongst popular opinion? Here the published Euromonitor dataset becomes less helpful. We have data on those households with disposable incomes over $10,000 in countries like Brazil and China, but we do not have any more granularity than that (largely because the “well-off” on our definition are such a tiny proportion of the population of these countries).

To put things into context the top 10% of China’s population in 2010 had a disposable income in current prices (per household, not per person) of around $55,000 on average. That is a fraction higher than the average of the fifth decile of US income distribution (i.e. the population of the poorest 40-50% of American society).

The top decile in Brazil come closest to the income level we use to demark being “well-off” with over $90,000 income. India is lower than China, and Russia lies just below $80,000.

What does this mean about the growth of the “well-off” in these societies? Each country has a slightly different story. In the case of Brazil, the level of income for the top decile has been remarkably stable over time. A comparison of those earning over $55,000 in 1990 with those earning over $100,000 in 2010 is unlikely to show much increase. Indeed, there is the possibility of a decline. For China, the number of “well-off” citizens in 1990 can be assumed to be close to zero. The defining $55,000 household income was significantly above the top decile’s income level at that point. Drawing on historic parallels, we would suggest that around 1% of the population probably qualify for “well off” status in 2010.

India is more problematic. The top decile is some considerable way from the $100,000 threshold. To have 1% of the population classified as globally “well-off” would err towards the generous. However, India is an unequal society, so perhaps we should accept 1% as being an upper limit of a 0.5% to 1% range. Russia probably has the largest increase in well off citizens – in part because of the choice of start date (1990 was not a terribly good year for Russia in economic terms).

How have the “well off” risen?

Using our approximation, the four emerging markets are likely to have increased the number of “well-off” households by something like 6.7 million over the past two decades. Adding this to the numbers of high income economies, that point estimate would give a 29% increase in the number of “well off” households in these economies.

This sounds like a new age of affluence. But before we get carried away by the rise of what might be termed the upper middle class, there is a point to reflect on. The number of well off households having increasing 29% from 1990 to 2010 needs to be compared against a rise in the global population of 30% over the same period. In other words, the number of “well-off” households has risen broadly in line with demographics.

This then begs the question – why has income inequality increased, if the number of "well-off" households is rising proportionate to the increase in overall population? The answer to that is that it is not enough to be “well-off” any more. The growth in income inequality within countries owes much to the rise in incomes of the very highest income groups – the top 1%, even the top 0.1% of the population. In relative terms, the “well-off” are not as “well-off” as they used to be.

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SolidSnake961's picture

how long can such income inequality last?

Oracle of Kypseli's picture

As long as there is IQ inequality. Education costs must be lowered

IndicaTive's picture

"In relative terms, the “well-off” are not as “well-off” as they used to be."

Can you seasonally adjust the relative numbers please? Hurry.

old naughty's picture

Point-less, IMHO.

You think the .1% would let you thought-well-offs off their hooks?

Overfed's picture

You can't teach common sense, or the ability to see through bullshit. We're fucked.

Meesohaawnee's picture

as long as the muppets have all their distraction.. lookee over there Its drew peterson!!

asteroids's picture

Hmmm. It seems you are well off if you are not on food stamps eh?

nmewn's picture

Pretty much.

Haven't you heard?...200k is now considered "rich".

Rincewind's picture

What bugs me about all these comparisons is that it considers national levels with a broad brush. 200k certainly does not make you rich in the south bay area, but may be a lot of money, if you are somewhere mid-west.

Doña K's picture

Confucious says: He who spends less than he makes is well off.

Mazlow says: food, shelter and security, brings you to a "well off" state.

I say: If you can buy foodstuff in the supermarket without looking at prices and/or use coupons, you are "well off" as a state of mind.

nmewn's picture

That's correct.

Someone, somewhere, no doubt in a dimly lit room in DC, has figured out that the most politically expedient thing to do is target that level.

Any lower, they risk overthrow. The rich don't care as most of theirs doesn't come from "wages".

What they don't realize (or maybe they do and don't care) is there are those just under that threshold that see they (the 200k) are being targeted for class warfare.

I'm sayin all people want more, not less and/or mediocrity, doled out by a 100k a year bureaucrat, plus pension, plus accidental death/dismemberment, medical, vision, dental and a car to drive home every night on our dime.

Why, that could be their head in a basket ;-)

IndicaTive's picture

Where I live they seem to do quite will on the SNAP.


Cursive's picture

Working, or being generally productive, is actually fun.  It's the tax and regulatory rat race that I could do without.  Everyone could be well off if we weren't chasing materialistic dreams through goverment hoops.

Shizzmoney's picture

So much for "redistributing the wealth" (unless you are Jon Corzine).

Although, one could argue they could put Vince Lombardi or Jesus Fucking Christ in the White House, and even they wouldn't be able to fix this shit.

spdrdr's picture

Yesterday, my family and I fell from "lower middle class" to "upper lower class".

That explains the sonic boom you heard......

Poqit's picture

By disposable income the author means income after taxes?  A definition of terms would bring more clarity.

Neethgie's picture

i really hate this bullshit about working class middle class and rich.

there are really just 2 classes, well 3. the benefit lifestylers, people content to live on foodstamps and welfare and the boring but safe life provided.

and the working class who earn between 1-250k a year and somewhat above that.

then finally we have our elite who earn about 2.5m+ each year (usually vast sums greater) who have the political contacts know the right people who lord it up. so really we have workers and masters and scroungers.

Shizzmoney's picture

There isn't 1 America, or 2 different classes, or how god knows how many fucking races there are.

There are 300 Million different "Americas" today.....and that is kind of the problem.

bunnyswanson's picture

You've left out  hospital support staff, secretaries, waitresses, clerks, hairstylists, maids, cooks, auto shop workers, repairmen, sales people, teachers, transportation workers, blue collar workers. 

Raised taxes on a local level is nickel and diming them to death.  Gas prices, food prices, higher rents and the loss of their home equity (to qualify for a reasonable rate on a loan), have done them in.  They are becoming homeless if not moving in with relatives.  3 empty homes went up across the street just last month.  Foreclosures after their attempt at a home modication - which again resulted in the bank giving relief of full payments, denied the modification after 6 to 24 months, and demanded immediate payment of all back monies or foreclosue would occur.  0% down home loans are still be offered in California.

In calif...There are no customers.  There is no traffic.  No money is exchanging hands down here where we are.  The parking lots are empty.  Everyone is cranky and rather hateful.  Talking about it leaves one at a complete loss of words because it clearly appears to be a scam but it's far to comoplicated to even talk as they are so many different elements.  Bait and switch the carrot on the stick is what I call it.  And it continues.  Contempt from police and authority is in the air.  It's turning ugly.

These are the people who are sinking into an abyss.  Their meager wealth (home equity and job-related mutual funds/401Ks) was transferrred right out from fking under them.

I believe this transfer of wealth is planned to be in stages (baby boomers will be the last group since they have the most influence on political decisions) It will be somewhat a relief when upper middle class is fleeced, left high and dry so they finally join the crowd trying to stop it from advancing and further (on Wall Street).

francis_sawyer's picture

Peggy Joseph is finally "well off"...

cowdiddly's picture

Yes when a reciept for a few bottels of Dom P. and some caviar set you back over 100K on the French Riviera  being a millionaire might not last through the evening on a good snot slingin drunk night out. And, thats without allowing for the hookers and blow.

toady's picture

The term 'well-off' is so random.

The crack ho is well-off with an 8 ball & motel room.

Willard Romney won't be well-off until he has out-done his daddy, no matter how many billion he has.

Do you have a roof over your head? Are the bills paid? Do you have a sence of fulfillment, or otherwise feel good about yourself? That's what I call well-off.

Some won't be well-off till they live like a Kardashian...

FieldingMellish's picture

There are plenty more people who are well off before tax than after tax... just sayin.

orangegeek's picture

Yesterday's well off has to do with what's in the driveway, the bank and on the back forty.


Tomorrow's well off will have more to do with state.

dolph9's picture

The thing that the well off don't understand is that everything they have is going to disappear eventually.  And it's because they don't believe in fighting, not really.

They simply don't understand just how many poor people there are, in America and around the world.  And those poor people fight, every single day, to feed their bellies.  And if they don't feed their bellies, then shit is coming around the corner.

The rich simply aren't prepared to nuke the world, and that's why they've dug their own grave.  Endless fiat money is the illusion of wealth, not wealth itself.  Wealth is to be a member of a prosperous, productive society, and to be slightly above everybody else in that society.  Wealth isn't having 100 billion meaningless digits in a world which is fast collapsing.

I've realized this as a member of the disappearing American middle class.  It's all a giant lie, in the end the poor will win and they will inherit everything, because they have the genuine fight in them, they don't use contraceptives, they don't give a shit about meaningless titles and accomplishments.  They live life the way it is...they are born, they breed, they compete, and they die, and they leave offspring who are like them.

zorba THE GREEK's picture

Having a disposable income of $100,000 in rural Alabama makes a family far more well

off than one with the same income in New York City. Wealth is relative. A chinese family

making $50,000 a year feels well off while an American family making the same feels

they are barely getting by. Zorba on the other hand is very rich. Zorba is a thousandaire.

Divine Wind's picture




Is Zorba a thousandaire with Drachma, Euros or FRNs ?

Son of Loki's picture

Good article TD. Reminds me of my brother. He bought a $500,000 whole life insurance policy back in 1985 when he was 32 and asked the agent back then, "Do you think that is too much?"

He realized by the time he dies, this $500k will be nearly worthless so why continue to pay premiums? So he cashed it in last year and purchased PMs instead.

Lester's picture

Trouble with trying to define "well-off" is that most who rationalize they are, really aren't...

Brother w/the 500K ordinary life policy taken out 27 years ago in point.  Coulda cashed dividends and done a max loan on his policy and kept it.  At time he applied, coulda even written off the interest expense on personal taxes.  Loan wouldn't have affected the dividend payout; half mil face policy funds tax-free Nuveen bond fund or could do so many more things creatively...

Yet, in process of shaking every last nickel from our pockets, no creative options remain; certainly no tax mechanisms to aid funding.  Rarely a good idea to cash-out a quality ordinary contract.  Max loan it and gift to a trust for your heirs or make an endowment to your favorite charity. Might not live til end of the week, or have heart attack at latest financial news BEFORE the money is revalued...


Well-Off means having all your needs met, significant reserves, tools, supplies, paid-for housing and vehicles; not to mention, Good Health and living in a nice locale.

Most people who appear well-off are maxed-out on all their lines-of-credit and have very little cash or marketable assets.  Got paper assets?  You are not well-off...


pd45's picture

Why is UBS spending it's shareholder's money on such confusing and pointless study? Do bankers have so money that they allow their economists to waste time?

financial apocalyptic contagion's picture

Man this UBS guy is so fuckin stupid.

Really poor analysis

EmileLargo's picture

You're rich if you cannot count your money - H L Hunt :)