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What’s the Difference Between High-Income Earners and Low-Income Earners? Print
Wednesday, 19th August 2009 (by J.D.)This article is about Career, Self-Improvement
In June, a user at Ask Metafilter wondered: What are the differences between someone who makes $100,000/year and someone who makes $30,000? As you might expect, this question generated a lot of discussion — all of it interesting.
Many commenters noted that, from their experience, high-income earners generally exhibited several of the following traits:
- They maintain a strong work ethic.
- They don’t watch the clock.
- They seek to improve their skills.
- They do quality work.
- They’re flexible and adaptable.
- They maintain a good social network.
- They possess self-confidence.
A few commenters noted that there are two other factors that absolutely play a role in how much a person earns. Chief among these is choice of profession. Even if you’re the best damn high school physics teacher in the world, you’ll still probably earn just $50,000 or so. (But if that gives you a fulfilling life, that’s probably worth more than a high salary.)
Hard work, etc. do not guarantee a higher salary — but they do improve the odds. A second oft-overlooked factor is luck. Chance. Happenstance. There’s no question that luck plays a role in how much a person is paid. But as I’ve argued in the past, in most cases luck is no accident. It’s possible to make your own luck — to a degree.
There are many great comments in the Ask Metafilter discussion, including a mention of a Platonic dialogue about wealth and economics. One of my favorite comments is from decathecting, who writes:
Lots of people make six figures, including plumbers, business managers, attorneys, high school principals, military officers, technicians, landlords, psychologists, and people in thousands of other professions. The common denominator is that they’ve figured out what they’re good at that other people are willing to pay them to do.
From my own experience, I know that while I was stagnant and uninterested in my career, my income was also stagnant. It wasn’t until I decided to take charge of my own life that my financial situation improved — including the amount I was earning.
I’ve seen the same in the lives of my friends. It’s easy to coast, to become complacent. But it’s important to remember that with incomes especially, nobody cares more about your money than you do. If you want to earn more, you must play an active role in obtaining the money.
Finally, I want to note that a high salary is not the the panacea that many people believe it to be.
Sometimes the costs of a high income make the payoff less than you might expect. For example, I have a friend who is an attorney. He makes a fair amount of money. But he’s also burdened by outrageous student loans and business expenses. Though his income is high on paper, it’s actually rather modest after he’s paid for his necessities.
High income earners face another problem that prevents them from getting ahead: lifestyle inflation. Sure, that’s a nice problem to have, I suppose, but if you don’t learn to control your spending as your income increases, you’re not really much better off in the long run than somebody with half your salary.
Ultimately, I don’t know if it’s possible to say that there’s any one magic thing that leads one person to make more than another. Yes, hard work probably makes a difference. But so does luck. Have you noted a difference between the high-income earners in your life and the low-income earners? Is there a pattern? Or does it all seem rather arbitrary?
Addendum: I seem to have done a poor job of conveying my message today. I’m not trying to imply that “poor people are lazy” or anything of that nature. However, I do think there must be differences between high-income earners and low-income earners, that it’s not purely a matter of luck. So, what are these differences? It must be possible to have an intelligent conversation on this subject without being rude and without becoming defensive.
August 19th, 2009 at 5:10 am
All good points. I think another part of earning more that gets ignored is stress. As you climb up and earn more, it typically involves more stress. For some people, it’s worth it. For others, not so much.
August 19th, 2009 at 5:15 am
I would add education to this list, a lot of higher paying careers require advanced education.
Long hours, hard work, saying yes, yes, yes (when you would sometimes rather say no), and keeping stress under control to avoid burn out.
August 19th, 2009 at 5:19 am
I was lucky to grow up in a somewhat wealthy family. Growing up, my dad got laid off at his job. He had some time and eventually got a job as VP at one of his previous colleague’s companies. There was some people that worked at his new company for 15 - 20 years longer than he did. I remember asking him why is it that he gets to be VP when some people working under him have been at that company for far longer than himself.
He told me that, “Some people are just meant for it, some people are not.”
I will always remember that line as it goes to show that hard work and loyalty does not guarantee reward. Even in my current job I am low income and I work way harder than most of my co-workers who probably make more than I do.
August 19th, 2009 at 5:24 am
I’m surprised to be saying this on this blog, but I don’t like this post very much at all. It seems awfully presumptuous. First of all, I work with low-income people everyday in my position at a non-profit. I know low-income, and making $30,000 is certainly not it. Secondly, the list of traits for high-income workers can apply to people all along the economic spctrum. People who live in poverty work hard too–they might not sit at a desk all day, but they work two or three jobs and spend hours securing resources for their families just to meet their basic needs and survive day to day. Please consider this concept in future posts–you do have middle and low-income readers; please don’t isolate us.
August 19th, 2009 at 5:24 am
I appreciate that you recognize luck as a factor. I would say it’s a critical one. If you or anyone hasn’t read Malcolm Gladwell’s book, Outliers… please do. It’s implications are huge. While he talks about the reasons for the success of the ultra-successful… similar powers are in control of those of us ‘regular folk.’
Your environment, which you have little control of - in other words, luck - is the major contributor. Just being born in the US pretty much guarantees an income of at least $18,000 - likely more if you look at averages.
People on Metafilter suggest high earners:
-maintain a strong work ethic.
-don’t watch the clock.
-seek to improve their skills.
-do quality work.
-are flexible and adaptable.
-maintain a good social network.
-possess self-confidence.
These are trivial. Plenty of high wage earners don’t have ANY of these… likewise plenty of hardworking, intelligent people are left behind economically. It’s actually a bit insulting to presume people don’t have these attributes based on income.
August 19th, 2009 at 5:24 am
And I think this is fundamental to much of the stuff you discuss on this blog. It takes planning to buy the ingredients and have them on hand to cook a good meal at home; planning to have a garden; planning to investigate and cut one’s bills down; planning to navigate a higher educational degree and a subsequent career; etc.
Much of a lower income, more paycheck to paycheck mentality concerns reactionary spending, impulse spending, deficit spending, all with little or no planning. People often work quite hard, but if they do not step back, however briefly, from the daily grind to do a bit of planning, it creates a serious impediment to increasing income and decreasing spending.
I, too, though, think that luck has a role to play.
August 19th, 2009 at 5:26 am
I think the biggest differentiator is a sense of entitlement. People who think the world owes them a living often flounder along from job to job, and never seem to understand why things “never work out”. People who realize that they are responsible for making thier own way are far more likely to succeed in a career sense.
August 19th, 2009 at 5:44 am
I agree with comments #4 and #5. I’m conflicted about this post and some of the comments because it assumes a lot of positive traits about high-income earners that may not really be true. As a high-income earner myself, I can say that two traits have helped me: a crazy work ethic and caring more about money than about happiness in my job.
The second trait, in particular, isn’t something that I’m proud of or something I’d recommend, but I freely admit that I chose a career I didn’t like because of its earning potential (and to please my parents, but that’s another story). Many of my co-workers are the same way: making lots of money is simply a higher priority for them and they’re willing to sacrifice much more than lower-income people to get it. I earn less than some of them because I’m not willing to give up health, sleep, family time, peace of mind, and outside interests like they do. Of course, I’ve also worked with plenty of people who were lazy, but who’ve managed to work the system so they can coast along on their schmoozing and political abilities alone. People like that seem to get a pass on the work ethic part.
Plus, contrary to the “you won’t be good at something you hate” myth, I’ve managed to be quite successful at my job because I hate failure even more than I hate my career. So don’t be so quick to assign all positive traits to people with money. The reality is much more complicated than that. I’m making changes in my own life right now because I’ve learned the hard way that being happy with my life should be a requirement, not an option.
August 19th, 2009 at 5:54 am
Depending on where you live, “luck” can be the biggest contributing factor. I live in an area where you are often defined by where you went to high school. There are lots of private schools, each with it’s own personality. Alumni contacts and support is huge. Many people never leave the area and their contacts have been developed since adolescence. I’ve seen veritable idiots get cake jobs because of the contacts and hard working newcomers to the area are mystified that they are passed over. I call all this luck because we can’t choose our families and whether they can afford 15k a year for high school.
August 19th, 2009 at 5:56 am
Just to clarify, the article says that if you’re a high earner, you likely posses X characteristics. Some people are saying this assumes if you are not a high earner, you do not posses X characteristics. That is a mistaken negation and is not necessarily true (and certainly not implied by the article). The contrapositive, if you do not posses X characteristics, you are likely not a high earner would be correct. Too much LSAT studying
August 19th, 2009 at 5:59 am
Kudos to Kaitlyn and Jeremy (#4, #5) for mentioning that many low-income people exhibit all the good traits that Metafilter pointed out, and many high-income earners do NOT. Laziness is an equal-opportunity trait, as is industriousness. One can’t say that high income earners are usually ‘harder-working, more focused, do better quality work, etc etc’ than low income earners.
Some of the hardest-working people I’ve known have been low-income workers. They come in early, bust their ass, are the last ones to leave, often skip breaks, etc., for hourly low-income wages.
Meanwhile, I’ve had the displeasure of knowing several high-earning bosses who were the laziest, sleaziest, dishonest people I’ve ever seen…sneaking into work hours late each day, and sneaking out early, doing no work, having blatantly lied to get their positions (saying they knew the software, but then clearly showing on the job they could hardly turn on a computer much less run the software).
How well you can shmooze with people, how gregarious you are, how out-going and extroverted you are will often get you further in life than just “hard work” or “Good work ethics”. Luck is often based on how many people you can meet, relate to, and strike up some sort of relationship with. For those people who are severely introverted or have social anxieties, it is hard to ever get ahead. These people work hard, have wonderful work ethics, strive to learn more, but lack the very last two traits on that list, which are the most important ones and really, the key ones: the extroverted, gregarious attitude that it takes to make the necessary “Social Network”, and the necessary self-esteem to have “Self-Confidence”.
Of course, the exception to this rule (gregarious=social network=higher wages) would be the few people out there who are brilliantly smart in the maths and the sciences. I’ve noticed that brilliant computer programmers make six-figures, but I’ve run across a few that are definitely introverts and NOT gregarious. It’s just that their skills are in such high demand, and so few people can do their job, that they can command a high salary while being very very introverted and grouchy.
August 19th, 2009 at 6:03 am
I disagree with this post. The main determinants of your earning power are your education, gender, geographic location and age. Education is very much influenced by your family’s class status to begin with. Women earn less than men, as do other groups facing systemic discrimination, even when they are doing exactly the same work. Additionally, women often take on the unpaid work of childcare which affects their workforce earnings for decades. Geography can place a ceiling on both income and opportunity. Income also increases with time and seniority, peaking in about your mid-50s.
So while you listed a bunch of individual things you can think about to influence your own earning, this article needlessly oversimplifies earning capacity and blames people for some circumstances beyond their control.
August 19th, 2009 at 6:03 am
high income earners, more often than not do jobs that they love, things that they would gladly do for free. which is not the case for low income earners
August 19th, 2009 at 6:08 am
You’re right, Peter, and I appreciate your defense of the author - because I agree, he was not implying that low income people lack X characteristics - but many, and some here are examples, could make that assumption from such claims even when the author does not intend it.
Human’s naturally try to simplify things. It’s easy to assume that if one state includes X attributes, that the opposite state would include opposite attributes - even if it’s wrong. My only advice is to just be careful - most people don’t take Critical Thinking Courses or go to law school.
August 19th, 2009 at 6:17 am
My husband is a high income earner. Just last night we were discussing whether a high income was the most worthy pursuit since it is the most consuming of his pursuits.
Here’s what we decided…
1. Pursuing a passion would be a worthier pursuit
2. At the end of the day the wealth comes from how much you keep not how much you earn.
In spite of our enlightened conversation,this morning he left home bound for the office before 6AM. I doubt he will resign from his position any time real soon.
August 19th, 2009 at 6:19 am
Hi,
I think peace of mind is much more important than high income. I have seen many people who are earning six figure income but they don’t have peace of mind. And no amount of money can buy peace of mind.
August 19th, 2009 at 6:20 am
I always find it funny when people talk about teachers as low income earners. Maybe it’s just where I live, but teachers start around $45k and after about 10 years are earning $90k+. Not exactly a low-income profession.
August 19th, 2009 at 6:35 am
Some of you are mis-interpreting my intentions with this post. I’m not trying to claim that “poor people are lazy”. I don’t believe that at all.
Instead, I’m asking if there are, indeed, discernible differences between high-income earners and low-income earners. If there are no discernible differences, logic dictates that it all comes down to luck. I don’t believe this is true, either. I don’t think it is all luck. I think there are real differences.
But what are the differences? What makes one person earn more than another?
Unfortunately, I think that in many cases, even in 2009, some of it has to do with race and gender. There have been huge strides made toward economic equality — but parity has not yet been reached. But what else is involved? What are the things that differentiate high-income earners from low-income earners?
I think it’s possible to have this discussion without becoming defensive and naturally assuming that the question implies disdain of those with smaller incomes. Because it doesn’t.
August 19th, 2009 at 6:35 am
Note that a high salary is also a function of where one lives. If you live in a high cost of living area, your salary will be higher. Rather than think in terms of overall dollars, I find its better to look at Purchasing Power Parity numbers.
I do not agree that luck is a MAJOR fact. I think its pretty minor. I grew up in, quite literally, next door to housing projects. i went to rough schools. Hard work, lots of perseverance, and a dream/goal, are what I believe are the primary contributors towards my success.
I prefer however, to look at the difference between high wealth households and low wealth households. You can earn ALOT of money and not be wealthy, because one doesn’t save. You can earn a little bit of money and wind up being wealthy, because of good habits.
JD is definitely right that lifestyle inflation plays a role. 6 years ago, I made less than 30K. Today, I make more than 100K. Aside from taking on a mortgage which was a monthly difference in rent of a few hundred dollars, my lifestyle hasn’t changed. I know the dangers of lifestyle inflation. And I figure if I was happy making 30K, then I can do the same things making 100K, save the difference, and in time can use those savings towards some of my own more dreamy dreams (like funding scholarships)
August 19th, 2009 at 6:37 am
@Walt (#17)
I wouldn’t call teachers low-income earners. Kris taught high school for eight years, and I always thought she was paid middle-of-the-road. But school teachers certainly aren’t paid vast sums of money, especially when you consider how many hours they work.
August 19th, 2009 at 6:41 am
Well, there’s really little happiness and life satisfaction difference, as multiple surveys love to point out…
I have a friend who’s a doctor, in his last year of residency, and one of his good friends is a surgeon. This past Sunday, when we went out to autocross, both of them managed to make it out. While it’s common to be envious of the professions for their high salaries, they rarely make it out to do what they enjoy doing. The surgeon’s wife was out there, reading a book, because that was the best she was going to get as far as spending time with her husband, which I joked with her about, the “glamorous life of a surgeon’s wife.” Uh uh, nooooooooo thanks.
When it comes to making a ton of money, you give up a lot to get it. I’d rather make $50k a year doing what I do or don’t enjoy and having enough time to indulge in my hobbies rather than make $100k a year doing something I don’t enjoy and having NO time for my hobbies. If I could ever make $100k a year doing what I enjoy and still having enough time for my hobbies, that I would love.
Peter (#10) got it right — It’s simply taking a group of people and seeing what they have in common, no suggestion whatsoever that lacking these makes you the opposite. Shows how much people read into things I guess. I make pittance for money, and I’m not insulted.
(So far for the year, $10k, woo! $8k after taxes…)
August 19th, 2009 at 6:43 am
I’m afraid I have to weigh in with the peeps who believe that the items in that list are not coupled with income level. I feel like I’ve seen at least as many exceptions to that ‘rule’ as examples of it.
Walt: where the heck are you that teachers can make $90K (and what is the cost of living there?) I just ran a half-dozen ‘teacher salary [location]‘ web searches and consistently found salary ranges way below what you’re suggesting. The only one that even came close to that was NYC, and to get $90K you need *twenty* years experience plus a masters’ degree. And with NYC’s cost of living, that’s just middling, not high.
August 19th, 2009 at 6:49 am
JD, thanks for clarifying at comment #18. I think part of what got my hackles up was that TSD posted this week on a similar topic, and the judgmental tone of that post and the comments colored the way I read your post. Sorry about that.
August 19th, 2009 at 6:53 am
J.D.–perhaps it isn’t “all” luck, but studies show time and time again that it is not mostly personal attributes that determine wage. This metafilter thing is particularly pernicious. It asks people what they *believe* about high income earners–and does nothing to document the statistics surrounding who earns high incomes. In this sense, it reifies our culture’s belief in a meritocracy, even though there is little evidence that such a thing exists. Perhaps this would be interesting if we could ever find two people with the exact same background–in terms of race, gender, parent income, college attended, number of children, stability of spouse, etc., etc.–but that is virtually impossible to do. Wage disparity in this country is real, and posts like this continue to make it sound as if that is to some degree attributable to personal attributes. It’s just a much thornier issue.
I’d rather you discuss real studies and statistics about these issues, like this:
http://weber.ucsd.edu/~kantonov/AAJOLE.pdf
You ask why we can’t have an “intelligent discussion” about the personal attributes in the metafilter “poll.” I think the reason you are finding resistance to this is because we so often discuss income as a result of personal attributes, and there is rarely intelligent discussion about the way demographics affect income. Generally, Americans don’t like to believe that there are things outside of one’s control that affects income. We would rather believe that by being an adherent to “Getting Things Done” or what not, that we can change our income and lifestyle.
August 19th, 2009 at 6:53 am
August 19th, 2009 at 6:54 am
I think most consider teachers to be low/middle-pay since there is a ceiling to their earning potential. Unlike business owners, lawyers, etc who can conceivably have very high incomes. However, most teachers I work with (tax clients) have very good pensions and benefits, something most of us in the private sector lack. Something to keep in mind.
August 19th, 2009 at 6:55 am
There are all kinds of hardworking smart folks making very little money and all kinds of lazy cheats making it hand over fist. I think that’s all unimportant.
I think the idea of the post was to generalize characteristics that are more than likely to show up in “successful” people, which it did. Of course, when you generalize there will always be outliers and situations that don’t fit. This was just a starting point for discussion.
Looks like it worked!
Two things that I have noticed between some of my friends and colleagues that are more successful and those that aren’t (success not equaling $) are
1) The more successful are usually eager problem solvers and the less successful are usually problem “passers” more likely to complain until someone offers them a solution.
2)The more successful are those that take 100% responsibility for everything that comes their way no matter what caused it. There are plenty of things that happen in life that we can fairly attribute to “someone or something else’s fault” but taking that stance never gets us anywhere.
August 19th, 2009 at 6:57 am
Some more reasons also include:
- time spent in the workforce
- if your male or female (for a whooole lot of reasons that I won’t get into here and now)
- if you have chosen to have children or not
- education
- location
- age
- career path - some jobs just make less money
I’m sad that a lot of people are saying that higher income earners = success and lower income earners = unsuccessful. That’s simply not true. Success should be defined by each unique person trying to achieve it.
And let us not forget, some of those high income earners have greater debt and smaller net worths then those who have a smaller income.
August 19th, 2009 at 7:00 am
I would also add that I think an intelligent discussion of this very issue can be found in the classic “The Millionaire Next Door,” which actually examines high income folks rather than just asks others about their *perceptions* of high income folks.
August 19th, 2009 at 7:06 am
@Ethel (#29)
Good point RE: The Millionaire Next Door. The book doesn’t actually look at high-income folks, but at high net worth folks. Or, as the authors put it, prodigious accumulators of wealth. The book is more about keeping the money you’ve earned than actually earning it. Still, it does spend some time looking at how people generate their money. If I remember correctly, the authors conclude that in general, high income earners were self-employed.
At the same time, I think we all know entrepreneurs who make very little money and who ultimately have to fold their businesses.
As I say, this is an interesting discussion, and there’s no way we’re going to find the “right answer” here at GRS, but it’s worth talking about.
August 19th, 2009 at 7:06 am
I’ve come to realize something strange lately. Although my husband and I make less than 60K a year we have a higher net worth than a lot of people making 200,000+ a year. That’s a good feeling to us.
My husband is a teacher. While he thinks his pay is fair I think he is underpaid. I agree with the post that mentioned you have to include the wonderful benefits and pension into that salary. But considering what (some) teachers do (educating America’s future) and the time a lot of them put in they are underpaid. But my husband is passionate about his job and will settle for the salary while doing what he loves.
August 19th, 2009 at 7:08 am
I fell into my career in high school (I’d rather not reveal) and now I am overpaid for a very easy job. I work a few hours a day and am paid almost 80k. I hate it, and my brain feels empty. Right now, I’m putting all the money in the bank and waiting to be fired, because I assume someone must notice how disengaged I am at this point, due to the fact that I haven’t been challenged in years.
We’ve both discussed that happiness does not come in the form of a paycheck. My boyfriend worked very long 18 hour days for his high salary, and I, in turn, am searching for my next career.
Stability is one thing. Happiness is another.
Do high earners have different traits? Possibly.
Maybe we just got lucky. But I know that 30k would be an adjustment that would be challenging, but definitely doable for a job that I love.
I don’t think people should chase a salary. I think they chould chase what they love.
August 19th, 2009 at 7:17 am
I’d like to point out a rather obvious fact that has not been mentionned - these categories are not static. People move from low to medium to high income earners, and back again.
When I was younger, I was definitely in the low income category. I stayed in the “low income” category from the time I started working at age 15 to when I graduated from graduate school, where upon I became a middle income earner. Now I am earning just a little below $100K per year. I am the same person, with the same values and charactoristics…just a little older ;-).
Even the high income earners may become low income earners again if: their business fails, they lose their jobs, they semi-retire, or retire.
These categories are not finite - people move in and out of them as their circumstances change. I think it is pretty naive to not recognize this. And wrong to attribute a set of charactoristics to someone simply based on their income.
August 19th, 2009 at 7:22 am
J.D., I would assert that high net worth people are more interesting and valuable to look at it in terms of the discussion you want to have. I took your post and subsequent clarifications to indicate that you are interested in the attributes that help financially successful people be financially successful. Why would you be interested in the attributes of people who earn a lot but have median net worths? I would assume that someone who earns a lot but can’t/doesn’t hold onto those earnings would not have the very attributes that you want to discuss–i.e., positive personal characteristics that allow them to succeed. If the discussion you want to have is only about annual salary, then I find it even less interesting and valid.
August 19th, 2009 at 7:22 am
Teachers are paid well since they don’t work long hours and their job is very secure.
I am talking about University Level Professors!
August 19th, 2009 at 7:22 am
Count me in among the folks who are put off by the implications of this post. Not necessarily JD’s take on it–I think his advice is wise in terms of how one should approach their own career. But I think the initial presumptions of the Ask Metafilter article are highly off base.
I have worked for less than minimum wage (farm labor) and I have worked for six figures, and I have never seen a sustainable correlation between inherent traits of an employee and their ability to earn salary. While I can point out many people who succeeded through hard work, determination, and natural skills, I can also point out just as many people who could not manage their way out of a cardboard box, yet still managed to score high paying, lucrative careers. Likewise, I’ve met hundreds of people who on paper should be earning a lot more–they are talented, intelligent and worked hard–but their salaries didn’t reflect this.
When I try to quantify salaries, I end up coming down to JD’s last question. It all does seem rather arbitrary to me. Arbitrary in the sense that people are all too often chosen for higher paying roles based on petty and insignificant social traits rather than skill or ability, and arbitrary in the sense that one field may suddenly become highly valued, while another might suddenly drop off the face of the earth due to rapid technological advances. All your efforts in the world won’t get you a higher salary if the demand for your services does not exist.
August 19th, 2009 at 7:24 am
Hey everyone!
I would like to toss some opinion into the mix.
One of the biggest things I have noticed about someone who earns more is that they BELIEVE they can earn more (or earn whatever they want)…
I have been trying to adapt this mentality recently - one of my mentors is just so darn sure ALL the time that he can make money. He has the attitude that if he was a professional toilet cleaner - he could make six figures. You know what? He is right! The richest person I know here in South Carolina digs holes and moves dirt for a living (on a very very very large scale).
I think that you really have to accept that you will never be the best at ANYTHING (there is always someone more skilled then you in some way or another). HOWEVER, you must believe that you have the potential to make more —- and go after it. It is crazy how that has been working for me lately. I’m with JD - you really can create your own luck sometimes!
As Dave Ramsey says, “Go out of the cave and kill something — bring it home for the family”.
I think some people believe they can go out of the cave and kill and elephant, while other might think that a pig is as best as they can do. Just my thoughts….
Also, I am completely not ignoring the fact that some people choose to work a certain career because they love what they do (and for whatever reason it doesn’t pay a high salary). But I am reminded of an episode of, “The Sharks” that recently aired (new show – it is awesome). A school teacher found an amazing way to teach kinds by putting Shakespeare to music. He brought it to, “The Sharks” (who are investors) – they made a deal and surely he is making big bucks now – doing what he loves with kids WHILE finding a way to make extra money doing it.
Good day everyone!!!
August 19th, 2009 at 7:28 am
@Ethel (#34)
You make a good point. High net worth folks are indeed more interesting and appropriate to examine than high income earners. But I feel like we explore the high net worth thing often here at GRS, if not always explicitly. The whole purpose of this site is to help others increase their net worth by looking at how others have done it successfully in the past.
But I’ll grant that perhaps this post was misguided. It doesn’t feel misguided to me, but I’ve learned that usually when something like this happens (I think somethings okay but everyone else does not), I’m the one who is wrong. I can’t always see how I’m wrong until much later, but…
I’m open to discussions in this thread, then, of how high net worth folks differ from low net worth people.
August 19th, 2009 at 7:33 am
I am surprised no one has mentioned this yet.
The number one determining factor of high income is self-employment.
Who you work for. Yourself, or someone else.
Most high income types ($100K), especially extremely high income types (500K+), are fully self employed or some type of self-employed / performance based / commission structure.
They own their business. They own their work.
It is not for everyone, and there are many risks, but that is where the real money is.
August 19th, 2009 at 7:34 am
Purely anecdotal, but the lower income earners I know tend to complain A LOT about what “life” has handed them. They acknowledge that they have made some poor decisions, but still blame the bulk of their circumstances on outside influences. (I’m not saying that is true for ALL low income earners, just the one’s I know.)
My father-in-law is a classic example of this. He has high blood pressure and a number of other health issues. He also comes up short every month on his bills. Its not hard to figure out why: he told us he stops at the convenience store every day on his way to work and buys a king size candy bar and a Mountain Dew. He eats fast food for lunch. He stops at the convenience store again on the way home for more snacks. Then he eats fast food again for dinner. Some people could probably afford to eat out every meal, but he is not one of them. He knows those things are bad for his health and bad for his wallet, but he continues to do them. He bought a Blackberry because “guys half my age have the internet already” and he was jealous.
Contrast that to a friend of mine that makes roughly $150k per year. He’s a solution-guy. Whenever I complain to him about some circumstance in my life he says, “Why don’t you just do X.?” Almost always there is some really easy solution, its just not always pleasant. I made a comment about a picture of a beautiful young girl in a bikini, saying I wish I could have a body like that. He said, “why can’t you?” He knows (and I do too) that if that was something I *really* wanted, I could hit the gym 15 hours a week and get it. It’s not a matter of “I can’t” its a matter of “I won’t” because other things are more important to me.
To sum that all up, I would say one key difference is that higher income earners believe they can do whatever they want, if they just do the right steps, working smart and hard. Lower income earners tend to place more weight on external factors.
August 19th, 2009 at 7:39 am
I think those points are corrct if the experiment is comparing absolutely same fields of work. For example, bilogical sciences, unless you join the pharmaceutical company, pay very little (academic science in Universities). Education be damned. But not everybody wants/needs to go after big bucks and work in environment of a big corporation, some like discoveries for the heck of them. That said, if two equal PhD’s work at the same University (location matters), then the more hardworking and so on will probably be on better pay. Unless the other one knows someone who knows someone who has an access to grants distribution:) In my experience, those big corporations actaully had this experiment cleaner - there really, if you work well and deligent, you get promoted and pay more. Simple.
August 19th, 2009 at 7:40 am
I think the only difference is high net work people have a better understanding of self-discipline and self-motivation.
Everything else is secondary.
August 19th, 2009 at 7:47 am
risk…
August 19th, 2009 at 7:48 am
In NYC, a lot of high income jobs require extreme life sacrifice- mainly working extremely long hours. If you’re not willing to give up time with your family, friends, and personal hobbies, I think you’ll always hit that ceiling.
August 19th, 2009 at 7:55 am
To KK - Post #6
Wow! You really just hit the nail on the head. You are discribing me. My family makes a pretty good income, but we still live pay check to pay check. I can’t seem to get out of this cycle or know where to begin and so at times, I would just chalk it up to needing to earn more, but what we really need is a plan! Thanks KK and Thanks JD for opening the floor on this discussion.
August 19th, 2009 at 8:01 am
The differentiator is our thoughts. What we think about money in this case. When working with clients I often explain the ABC model (http://hubpages.com/hub/The-Ellis-ABC-Model). In short our thoughts create our reality (or at least our perception of reality). I often use the example of the lottery. Most people who play the lottery are lower income. Therefore, most people who win the lottery are lower income. We also know that most people who win the lottery, within a few years, have lost it all and are right back where they started. How can this be? I believe it is because their thoughts about money and how it is used lead them to eventually re-assume their previous level of wealth. See the work of Ruby Payne (http://www.ahaprocess.com/) in explaining poverty, middle class, and wealthy.
I believe this because the converse is also true. People who are very wealthy, from time to time, lose it all and become bankrupt. Yet many, within a few years are back on top. For example Donald Trump. He has been bankrupt several times. From what I’ve seen of him on TV he doesn’t strike me as very intelligent. Luck would explain how he got rich once, but not repeatedly. All the reasons listed (the Metafilter discussion) increase opportunities, but
I think the real differentiator is the thoughts and believes we hold.
(BTW I buy one ticket a week. The current PowerBall jackpot is 1/4Billion dollars. Thats worth a $1 of “fun”).
August 19th, 2009 at 8:02 am
My spouse and I both had a mixed bag growing up…. both lower-to-middle class families, both with some pretty crushing emotional and support problems (meth addicts, suicides, bipolar parents, runaway siblings, lots of unhappiness). However, we were both quick learners and encouraged to do well in school. When a lot of our peers were focused entirely on screwing around with the opposite sex, we were reading and learning to fix computers. We ended up going to the same Ivy League school, where we met at our student jobs (fixing computers, of course).
Meanwhile, we never made the bad decisions associated with college students. We didn’t sign up for credit cards, we didn’t party 24/7 (though we did start hanging out with new peers who introduced us to the delightful world of upper-class entertainment), and we didn’t coast through on our parent’s dime. We both worked all the way through school, at one point I was working 3 student jobs in addition to my classwork. We had a good time, but we were always focused on moving towards a successful future.
The friends we made at those student jobs and wine parties and such ended up being our future career network, since we were all interested in the same things. Both of us have kept our focus on building a life that we both enjoy, which has meant keeping resume’s updated and always being ready to jump at a better opportunity when it comes up. We’ve finally, 5 years after college graduation, found the situation that we want to stick with, so we’re now turning our attention to starting a family and finally taking vacations and such. Relaxing a little.
Were we lucky? Of course. We were both born bright, curious, healthy, and white in the USA. That’s about as good as you can do in the birth lottery. However, we’ve also made a series of good decisions throughout our entire lives, choosing to focus on academics and building our futures, and surrounded ourselves with others who did the same. We solve our own problems, and blame no one else for our mistakes (of which we’ve made plenty).
So yeah. Looking back, it’s obvious why we’re doing well now. And equally obvious why the folks who made different choices when they were younger aren’t. Is it fair? Probably not, but that’s life, right?
August 19th, 2009 at 8:03 am
My instinct was that this was going to be a “hot” post, and the comments so far have proved me right:)
I definitely think opportunity and awareness are key, as in someone gives you a chance and you are aware that this presents an opportunity. Unfortunately, there are some out there that never get the opportunity. And, the even more unfortunate, that pass it up when it is presented.
I agree with those above that say that people at $30k can also have all of the qualities you list (hard work ethic, good quality)…maybe luck/opportunity/fate/etc. play a role here.
August 19th, 2009 at 8:11 am
JD, I really think that you can’t underestimate luck as a factor - participating in any market, be it the stock market or the labour market, is a gamble. You can influence your chances a lot with attitude and education, but it’s still a gamble (your chances are also influenced by things you can’t control, like background, geography, and unfortunately race and gender). Some people lose out, and some people strike the jackpot.
I think it’s comforting to believe that we live in some kind of meritocracy, because it seems fair, but it isn’t really the case.
August 19th, 2009 at 8:11 am
I actually do think that high income earners “watch the clock” As the old saying goes, time is money and if you’re not aware of where you are spending your time (and whether you are being compensated well for that time spend) then you will not optimize your earning potential.
My tip would be to track every minute of your day and make sure you’re getting good ROI for your work effort.
Best,
Scordo.com
August 19th, 2009 at 8:16 am
No guarantees in life regardless and it’s true there are differences between high and low earners the way there are between successful and unsuccessful people. All determines on different personalities, industries and more. A lot of factors go into it but there are basic guidelines that will help.
August 19th, 2009 at 8:17 am
I do not agree to this at all. Reason being the fact that I fall under a low-income category and still fit into the charecteristics of ‘high income category’. Ha! does it surprise you that I work as a Post-Doc at a top tier university? Yes! career in science does not pay you great but you are expected to deliver quality work, work harder than anyone else. Sadly, being highly educated does not assure you of high salary either! My husband makes almost double income than me and we work in the same research areas. He does not need to go in on the weekends but I have to sometimes. The only difference being that, for what I do at the University, he does at a company and gets paid more. Does it make me any less hard working than me?
August 19th, 2009 at 8:19 am
I think it’s impossible to pinpoint a single factor because there are several factors and those factors are different for each individual’s situation.
I don’t know why, but comment #7 really stuck out to me. If you set a goal, have the drive and perseverance to see that goal fulfilled, it WILL happen.
I can’t stand when people make excuses because of their up bringing or neighborhood they grew up in. Granted, we all don’t start at the same level, but we all have the freedoms and liberties to make it to the same place if we truly desire it. That is the true pursuit of happiness!
August 19th, 2009 at 8:19 am
I agree with J.D. There should be a rational discussion about what the differences are. There must be something different in the income levels. What makes those differences? Are they the risks that the person chooses to make? There are some controllable aspects such as education. I would like to hear from more of the top earners to know what they are doing or how they got to their position. Was it just sitting it out and waiting for someone to leave? I would like to hear more about how to increase salary substantially. I think this could be a very interesting topic if explored more.
August 19th, 2009 at 8:20 am
It’s clear that both internal characteristics and external environment play a role in how much money a person makes. It’s not possible to distill it down to one or the other.
It’s also valuable to discuss what those internal and external factors are, because if we have a clearer understanding of them, then we’re empowered to maneuver within them more effectively.
Race, gender, and *especially class* have a lot to do with earning potential. Understanding that, those of us who come up in challenging circumstances are better equipped to deal with them.
For instance. I am from a middle-class family that fell into lower class circumstances through crises and addiction in the family. Understanding that I didn’t have the built-in social network that some of my more affluent peers did helped me because I was able to consciously build my own version of that network, which got me into my (high-earning) career.
All lives flow from a confluence of internal motivations and external forces. In my case, I’m smart enough to do tricky IT work, which is a form of luck. There’s also the fact that I looked at my slightly disadvantaged position as a challenge rather than a fact. Others in my family take a more victimized position to our circumstances, and/or have internal barriers that I don’t have.
It’s complicated teasing these out, but if we can talk about these internal and external factors objectively and without rancor, I think we can actually learn a great deal that will help us, and enable us to help others, in navigating the internal and external limitations we encounter…
August 19th, 2009 at 8:24 am
Also - I think it’s more useful to look at what makes people poor than what makes people rich. Most of the poorest people I know are either very young or have something holding them back from taking risks - a dependant (or several), a major health problem, or a need to be employed to stay in the country. Most of the higher earners I know aren’t exactly worried about being able to send money home.
August 19th, 2009 at 8:25 am
what’s the difference this time around….?
the recession/depression.. I was making over $120k per year, now.. well.. less than half that.. still more than your $30k base, but a long way from the previous.. thank God we sold our house, have money in the bank, currently rent for allot less than our previous mortgage, and adjusted our lifestyle along the way..
otherwise we’d be screwed
August 19th, 2009 at 8:25 am
I totally agree that high earners have the traits you list. This describes my husband to a ‘T.’ He’s hard working, has found a niche to supply a service that others are willing to pay for, he does quality work, he strives to improve himself and do even better…and he makes three times what I do - over six figures a year. He has time for family, but his work is important to him. He knows how to prioritize.
Sure, some high earners have earned their six figures using different tactics, but they’re not fooling anyone. It’s the people with the traits you list that others seek out.
August 19th, 2009 at 8:26 am
SUPPLY AND DEMAND, as far as I’m concerned that’s all it comes down to. High income jobs (the jobs themselves, not the earners) are jobs that are worth more to the entity paying the money. Plumbing is not a complicated profession. It isn’t exceptionally physically or intellectually demanding and doesn’t usually demand long hours. But there is a serious risk of getting covered in poop on a daily basis. That turns a lot of people off and therefore most of the plumbers I have known have made a very good living considering their level of education.
The same is true of science/engineering. There are only so many people with the aptitude and desire to do many kinds of technical work. The lower supply means those in demand must be paid more.
I have heard a number of people both here and IRL complain about people who make more than them and shouldn’t. Instead I look at why a job is worth more. Sometimes it’s nepotism or cronyism, but when one looks closer the vast majority of high income jobs have demands that most people either CAN’T meet or WON’T. Managers where I work might have an MBA and make more than the PhD engineers they manage, but their level of responsibility is much higher, as are the demands of travel and availability (they are available anywhere in the country when their senior management tells them to be). Many engineers complain about the salesmen that make more money, but if you can’t sell it to bring in customers it doesn’t matter HOW good you are as an engineer, you aren’t bringing value to your employer.
I agree with a previous poster that high income earners are the people more likely to take responsibility for their own lives, because they are willing to make the sacrifices that qualify them for those higher paying jobs. As I said there are exceptions and nepotism/cronyism. But 90% of the high income earners I know EARN their high income. Second guessing the person/people/customers who have deemed them worthy of that income when I don’t know the specifics is rather presumptuous.
August 19th, 2009 at 8:27 am
I think it’s the ability to be decisive. Deciding that holding a job is worth not getting drunk on a Monday night. Deciding that you’re going to say no to things you can’t afford. Deciding that you’re going to go back to school even if it means sacrifices.
I work at a non-profit, and maybe 1/2 of the people who get our services say they want a job or an apartment, but they can’t stick with a plan, keep appointments or hold down a job.
Basically everyone we help here at work is low-income, but difference in participant’s trajectories is very correlated with their ability to decide what they want and follow through.
August 19th, 2009 at 8:31 am
Whilst traits such as hard work, self-discipline, good social skills etc probably do contribute to earning more money in many (not all) cases, that is still really luck.
I mean, if you have good parents, who teach good study habits, and allow you to explore lots of options at a young age - you’re off to a head-start.
If you have poor parents, a disruptive childhood, medical issues that interfere with schooling… then you’re behind.
No, nothing is guaranteed in either case, we all have stories of wealthy kids who wind up poor, and poor kids who make themselves a success. But on average, the odds are against those from poorer backgrounds.
There are so many variables, and so many different factors, that it really becomes kind of moot.
August 19th, 2009 at 8:34 am
Income is probably one of my biggest worries about choosing a profession. I am finishing my last year of high school and will be attending college in the fall of 2010, yet still can’t decide what career path may be best for me. My passion is teaching and learning, but a teacher’s income is below what I hope for. I think I will still pursue teaching to see where it leads me, because I just can’t imagine myself in any other job.
Maybe I’ll want to take on a different kind of responsibility and be a principal. Who knows?
August 19th, 2009 at 8:37 am
opportunity, awareness, preparation, confidence
Beyond that, there is a lot of luck and timing. These traits above should be important in every wage earner, but sometimes its about who and what you know.
August 19th, 2009 at 8:38 am
Two other comments, I can’t take credit for the thoughts as I got them both from Thomas Sowell (I believe):
Older people earn more, that’s just reality. As their experience expands so does their value to any given company. But they also typically have quite a few more responsibilities as their houses expand with families, their kids go to college, and retirement draws ever closer.
Studies have shown success (I believe the study focused on educationally) is dependent on a persons level of self control. Intelligence didn’t determine good grades, ones ability to control one’s impulses and apply oneself did.
I think the same is true in life. High income earners and ESPECIALLY wealthy people, have a high degree of self control. This translates to getting things done and achieving goals.
August 19th, 2009 at 8:58 am
Scott(#47) is bang on….my husband and I are also a ‘high net worth’ couple and I couldn’t agree more with his comments.
We married at 21 owning nothing but a water bed(early 90’s!)and student loan debt…we took our wedding gift money and bought a cheap room o’furniture from a discount store (so we would have somewhere to sit), honeymooned in Fargo, ND (yes, you read that right) and invested the rest (~$3K) in a mutual fund. We look back now and wonder why we made choices so vastly different for everyone we know….who bought shiny new appliances and honeymooned at resorts in Cancun. Fifteen years later, guess what, we are doing quite well(business owners)…and they are making minimum payments.
Inherent personality traits? “Lessons learned” from family/upbringing? (in our cases, what NOT to do.) That, I don’t have the answer to.
August 19th, 2009 at 8:59 am
” * They maintain a strong work ethic.
* They don’t watch the clock.
* They seek to improve their skills.
* They do quality work.
* They’re flexible and adaptable.
* They maintain a good social network.
* They possess self-confidence.
”
Perfect points.I can not agree any more.And now I know why I am still so poor,hummm…Will take lots of changes before becoming rich.Thank you for the article.
August 19th, 2009 at 9:03 am
I’d like to add a couple of other factors that I think might be even more important than those listed:
–ENERGY LEVEL! This is often the substantial difference between highly successful people and others in the same field. If you have a naturally high energy level, you can accomplish so much more than others. High energy people are far less likely to get worn down by fatigue. You can do certain things to improve your energy level, but from what I’ve seen, you either have this or you don’t.
–ABILITY TO FOCUS ON WHAT’S IMPORTANT. Most of us spend too much of our time worrying if the report is in, that our work spaces are organized, that we’re getting along with everyone,and dozens of other details. High earners are usually not detail people; detail people get lost in details. High earners have an almost sixth sense that keeps them almost singularly focused on the bottom line, which is usually money.
August 19th, 2009 at 9:07 am
“Give me a stock clerk with goals and I
will give you back someone who can make history. Give me
someone without any goals, and you have got yourself a stock
clerk.” - JC Penney
August 19th, 2009 at 9:14 am
You forget “height” - there are several studies that prove that taller people earn more.
I didn’t like this article, it is sort of the financial equivalent of telling fat people to exercise more and eat better.
August 19th, 2009 at 9:17 am
The biggest reason was mentioned at least once in the comments. MINDSET!! High earners believe they are worth it in most cases. You will always run into someone making a lot of money and having no belief in themselves, but overall our belief system limits how much we make.
The second biggest reason - Your friends. Your income tends to be the average of your 5 closest friends. It comes down to psychological reasons that go back to reason #1. MINDSET.
Most people who earn a low income that start to move up get pulled back down by their friends. In most cases to succeed they will have to find new friends. I know that sounds terrible but it is human psychology. You can work the laws of nature in your favor or you can complain that they are not fair.
I have worked at both levels of income, minimum wage to over 6 figures a year. The only thing that changed was my mindset. I was stuck at 70k for a long time and jumped to 100k once I decided I was worth it.
Many of the other attributes that were mentioned will drive how far you move up the earnings scale, but mindset is the single biggest limiting factor.
Talk to people who earn in both ranges. You will see a huge difference in mindset
August 19th, 2009 at 9:21 am
I totally agree with Brenda in #11; she says:
How well you can shmooze with people, how gregarious you are, how out-going and extroverted you are will often get you further in life than just “hard work” or “Good work ethics”. Luck is often based on how many people you can meet, relate to, and strike up some sort of relationship with. For those people who are severely introverted or have social anxieties, it is hard to ever get ahead. These people work hard, have wonderful work ethics, strive to learn more, but lack the very last two traits on that list, which are the most important ones and really, the key ones: the extroverted, gregarious attitude that it takes to make the necessary “Social Network”, and the necessary self-esteem to have “Self-Confidence”.
My husband is amazingly competent at many things. He owns his own business, and if he weren’t so skilled in a multitude of things, his business would have gone under in 2001 or this past year.
Yet many jobs still go to people who are much more socially extroverted than he; once people know him, and he’s more expansive, he gets lifelong clients. But until they break the ice with him, he’s shy, and it makes a huge difference in new job bidding.
He’s learned to compensate and has learned some “tricks” to seem more outgoing; he makes sure to say things like “no problem; no worries; I appreciate it” and other things that convey a more enthusiastic business approach, but it’s really HARD for him.
Last point: management. People who are willing (like me) to take on the crappiness that is people management (hiring, discipline, coaching, firing, etc.) make more money than those who stay in operational and line staff jobs. I saw the writing on the wall early, and became a manager at 27. It’s made a huge difference in my earnings.
August 19th, 2009 at 9:30 am
While this post (and the ensuing discussion) were definitely interesting to read, I was hoping for something different after seeing the headline. I was hoping for a discussion on how people of different income levels SPEND their money.
For example, our household income is around $100k. When I look at our budget, I see very, very little fat left to be trimmed. I often wonder how these families get by with $60k, $40k, or $30k incomes. What am I spending on that they’re forgoing? Health insurance? Retirement savings? A small (~$1,000) vacation every year? An emergency fund? Cable? What are the differences between my budget, and theirs, and someone making $200k?
THAT would be in interesting discussion, for a future post (in my opinion).
August 19th, 2009 at 9:32 am
I think it has to do with a lot of factors. Education, for one. Typically, people who have degrees, courses, etc. beyond high school tend to make more money. What about plain old intelligence? Would it be politically incorrect to say that many smarter people get the higher paying jobs? I think there must be some truth to that.
Of course there are exceptions, like the lazy rich kid who coasts thru university and gets a job at daddy’s business, but that’s hardly the majority. The majority of university students are there because they are book smart.
Street smarts can get you far, too - not every successful person went to school.
Laziness can be seen in groups of high and low income earners. You can get stangnant in any job and just “coast”.
Many people are extremely hard workers and are trapped in lower paying jobs because of circumstance - they never went to school even if they had the ability, they’re a single parent, etc.
I guess what I’m saying is we can’t really make too many generalizations.
August 19th, 2009 at 9:33 am
Part of why I am transitioning from an office job to a home-office job is because I am more motivated than my current profession will pay me for. Your first point is an important one—as someone working in a nonprofit arts organization, I can only go so far. However, knowing how to negotiate one’s salary, be a personal advocate, and be passionate about one’s work is still very important. I received a 6.5% raise this year, while the rest of my organization stayed the same or took a voluntary pay cut. It isn’t much in real dollars, but it is comparatively significant—and largely due to my self-advocacy!
So I think there are really two measures: One that compares a person’s wage-earning to others in their profession, and another that compares across professions. My experiences in the nonprofit sector are pushing me toward self-employment. I have always known about my passion for translation, and as I start my business I have realized that people are willing to pay me TWICE as much as I make in the nonprofit sector. And I am just beginning! This is part of the second measure, the side where people happen to enjoy and have the skills for a more highly valued job. It also matters when someone is motivated enough to take risks or innovate to create that higher-paying job.
I think it is more complex than how you laid it out in your post, but I also believe that many of the comments so far are hitting on other factors in the salary game.
August 19th, 2009 at 9:38 am
I see some people talking about “luck” when they really mean “choices.” Lacking a better term, “luck” = uncontrollable factors (parents, where you were born, ethnicity, etc.). However, things such as where you live now and where you work now are not “luck” at all; they are the culmination of a series of choices. Working in industry versus academica: culmination of choices. Living East Coast versus Midwest: culmination of choices. Having a lot of debt, having children, staying at home with your kids: culmination of choices. Note that I’m not quite calling them choices themselves - some people really don’t have a lot of choice in their current circumstances, but they can’t disregard that their choices brought them there, for better or worse.
August 19th, 2009 at 9:50 am
I am onboard with most of those things but some are not entirely under your control as your upbringing plays a part. Is that an excuse? Maybe.
August 19th, 2009 at 9:56 am
Hmmm.
I am a smart, capable person who gets askes stupid shit like “If you are so smart, why aren’t you rich?”
My response was/is “There are some things I will not do for money.” And that for me is it in a nut shell.
That said, a lot of where you end up depends on where you start. (Luck.) Family money, family connections, how you look (I’ve read too many studies that show pretty people are always judged more capable), whether or not you have some unique talent and the means to exploit it.
I’ve watched so many people who ragged on my lack of “motivation” crash and burn like zeplins while I have quietly done what I pleased. I’ve lived a GREAT life with extraordinary freedom and full of mad adventure. To that end I have made sacrifices and done without a lot that I am sure those pople deem “essential.”
Some of your respondands openly admit that they make oodles of money because THAT IS THEIR GOAL and they relentlessly persue it to the exclusion of much else that is rewarding and healthy in life. In my opinion THEY are paupers and I pity them.
August 19th, 2009 at 9:57 am
Great comments so far. One thing which was left out was. I believe in every one’s life, opportunity knocks one’s door at least once or twice. If you open your door, you are on high net worth track, otherwise, you are where you are.
Other readers have pointed these : Believe in your self, Social Networking, Friends, and Planning early on.
I am not a high earner (I make around 80K). I believe I can be a high earner after I read through some of the reader’s comments. let me change my attitude and see how it will work out.
August 19th, 2009 at 9:59 am
How many high income earners have time to read a blogs during work hours? Or are they too busy working hard, going the extra mile?
I’m guilty of not spending 100% of my allotted work hours working. Rather, I find myself catching up on personal emails, blogs, banking, and news. YET, I think I deserve more money that I make because of the level of service I provide to my customers is head and shoulders above my peers. Hypocritical? Absolutely.
Time for some reflection.
August 19th, 2009 at 10:00 am
Excellent post as always. I did not get the impression that you were saying poor people are lazy.
I think hard work is necessary, but so is luck - no question about it. In my case, I made a good choice of parents. But if you are born to poor(as in quality) parents who don’t emphasize things such as hard-work, integrety, honesty etc you are going to have a hard time succeeding. It’s easy to say “pull yourself up by your bootstraps…” but not so easy to do if you were born into poor circumstances.
As for my circumstance, I make just over $100,000 a year but I’m not happy with what I’m doing. (I made a poor career choice at age 18.) I would gladly take a $50,000 paycut to do something I enjoy. But as crazy as this sounds, I don’t think I could make $50,000 at anything else. The one thing I’m qualified to do pays very well, but I doubt I could get $30,000 doing anything else. A strange situation; I guess the grass is always greener…
Great discussion everyone.
August 19th, 2009 at 10:01 am
“…it is sort of the financial equivalent of telling fat people to exercise more and eat better.”
Well, what’s wrong with that? For the most part, that’s the solution to their situation.
There are extraneous reasons that people are poor or fat, but the vast majority of people are where they are in large part due to their own choices.
As a slightly overweight guy making $40k a year, I place myself at fault on both counts. It’s my own fault, and I’m working to make both problems better.
August 19th, 2009 at 10:02 am
I agree with # 28 Jessie:
Some more reasons also include:
- time spent in the workforce
- if your male or female (for a whooole lot of reasons that I won’t get into here and now)
- if you have chosen to have children or not
- education
- location
- age
- career path - some jobs just make less money
I would also add race to this list as well. There was also a study recently that showed that the types of majors that women tend to choose for their undergraduate degree is responsible for a high percentage of the wage gap. Obviously, women and men are socialized to choose certain majors and not others. I think there is much validity to the argument that social norms, strict gender roles, race, class, disability, who is given opportunities based on those things and who is not given opportunities, plays a huge role in who makes what kind of money.
August 19th, 2009 at 10:15 am
“However, I do think there must be differences between high-income earners and low-income earners, that it’s not purely a matter of luck. ”
Why?
If you are born poor you are much more likely to die poor. And if you are born rich, you are much more likely to die rich. Of course its not inevitable in either case, but it is certainly the most important factor.
If you are born poor in a poor community in the Congo you are much less likely to become wealthy than if you are born almost anywhere in the United States.
If you want to become wealthy, cultivate friendships with the wealthy and power. Its not what you know, but who you know. That is why all the Ivy league colleges continue to admit their alumni’s kids. They understand that what their other students are paying for is not the education, but admission to America’s ruling class.
The hardest working people I know are poor people. They work hard because they have no choice. They don’t get paid to engage in conversations, attend meetings or go to lunch/dinner.
There is nothing easy about working in a meat packing plant, harvesting strawberries or tarring roofs. But none of those jobs pay very well. You will have to not only work hard, but very long hours to make much money at them. And not even the young and strong can do that for very long.
As for choices, I don’t recall that the kids assigned to the “slow” classes in my school had any choice in the matter. That choice was made for them and, even if their parents had a role in the decision, they didn’t get to choose their parents.
There are really two different discussions here. One is why are people rich or poor. The other is whether those differences are a result “moral failings”. Let me suggest that contrary to popular opionin, wealth is more often a symptom of moral failing than poverty:
If your goal in life is to be rich:
Being totally selfish helps.
Being ruthless helps.
Being dishonest helps.
Being a good liar helps.
Being a sociopath helps.
Being greedy helps.
Being materialistic helps.
Lacking compassion for others helps.
Being predatory helps.
Begin good at identifying likely prey helps.
Appearing friendly helps.
If you are someone who is none of those things, you are unlikely to ever be extremely wealthy unless you were born to it or get very lucky.
August 19th, 2009 at 10:19 am
I am not sure it is all that simple. I know high income earners that work very little. They are smart, very good with people, know a good opportunity when they see it, are very adept at taking advantage of a situation, and are able to delegate. Some did work hard to get to that point, others not. Likewise, I know low income workers that work very hard, sometimes at two or three jobs. They are not lazy, but they lack the people, social and maybe even the common sense and prowess needed to move ahead.
I’ve seen situations where luck and the right opportunity coming at the right time had everything to do it.
Others have mentioned opportunities people are born into….such as being born into money and power, the chance for a higher education, and being a part the right crowd of people.
There are sooo many factors.
But, I tend to think that in most cases working smart and being good at what you do and having common sense will get you most anywhere with the right degree of desire.
August 19th, 2009 at 10:23 am
@Ross Williams - You have a very poor opinion of people who are wealthy it appears to me. You become wealthy by NOT being all the things you listed. You may accumulate lots of financial rewards but it will eventually catch you. Look at Bernie Madoff.
You become wealthy by providing more value to the world than you consume. I know that may sound a little hokey but think about a business. You continue to go their because the value they provide is worth more than the money you have in your hand. A business who can efficiently deliver that value will grow and be very profitable. The owner will become very wealthy doing this. To make sure that value is continued to be created he will reward his people who are making sure it happens. They will become wealthy as well.
Too many people have come from nothing to become wealthy. Don’t limit yourself by believing it is not in your control. If you don’t like your circumstances, change them. Make the committment and get to work on it.
August 19th, 2009 at 10:27 am
I am a New Mexico teacher and am a low/middle income earner. Before taxes and other deductions my wife and I earn 60k together. Six years from now we will collectively earn 100k.
August 19th, 2009 at 10:32 am
Kevin (80)–I think you’re on to something with your comment, “The one thing I’m qualified to do pays very well, but I doubt I could get $30,000 doing anything else.”
If high earners had truly universal skills exceeding everyone else, they should in theory, be able to make big money in what ever they might do. But in reality that’s seldom true!
Many people who are very successful in one career, or even in one job, or at a moment in time, fail miserably when they step into something different. This is very true of entertainers and atheletes, and I’ve seen it many times in business.
I know many reject the LUCK factor, but many, many successful people are so because they’re in their “zone”. That is they’re doing the job they’re meant to do, at the optimum time it’s meant to be done. Five years sooner, or ten years later, and the results are very different.
If this weren’t true, than no high earner would ever experience a large drop in income or a business or career failure, but THEY DO!
There may be skill and planning involved, but the luck part is that they come together in the right place, at the right time and in the right measure. Regrettably, this doesn’t happen for everyone. For those for whom it does, those are the high earners.
August 19th, 2009 at 10:45 am
My first thought on this is education/job choice. some jobs will almost always earn more than another. eg, electrical engineer vs teacher.
but what about those who earn more in the same or similar jobs? i agree with those who say believing in your potential, taking responsibility, taking risk, and i would add thinking for oneself. we have blue collar workers in our family who are hardworkers: work themselves to the bone daily. but they come in and do what others tell them and go home. no higher dream and no higher income. others in the family- same socio economic background- were blue collar workers that started their own blue-collar businesses, and have succeeded.
August 19th, 2009 at 10:53 am
Hi J.D., interesting post and discussion. I skipped a lot of the early comments after reading your addendum. Clearly, this one set people off!
As one later commenter said, it appears many are confusing/conflating “luck” and “choice.” It is not luck that causes one student to sit in back of the class and goof off while another sits up front, pays attention, and does all the assignments; nor luck that causes one immigrant to master written and spoken English so she can get promoted, while others do not.
It is also not luck that causes someone to take a job at a meatpacking plant. It is a chain of choices often going back generations - just as it is in the case of someone who takes a job managing a hedge fund.
Humans are by nature conservative, meaning averse to change. Most people will do what is presented to them as appropriate to do, just as they will not question what they are taught. They keep their heads down and work away, never looking up to see that there might be other paths.
This does not make them bad, or lazy, or stupid, but in a sense it is taking the “easy” road. There are an awful lot of people who actively discourage others from taking risks to achieve more than those around them, and it’s hard to buck that pressure.
Other people will raise their eyes to a horizon and see other possibilities. Those are the people who, over a lifetime, typically earn more and have a higher net worth.
August 19th, 2009 at 11:03 am
I make 6 figures in a field I love. I don’t feel like I work all that hard now. I don’t work particularly long hours, and I’m not often stressed. However, I’ve been working on developing my skills in some form or another for my entire life. (Literally since I could read and write.) I have skills that are in-demand and not very common. I also am pretty decent at networking within my field. None of this is calculated… it just happens to be what I’m passionate about. I’d say luck is certainly a factor, but I’ve definitely paid my dues as well.
August 19th, 2009 at 11:04 am
Exactly, Kevin (#87)!
Luck plays heavily into options when you look at timing and opportunities. When I entered my career, there was no rational reason to choose it, as my field was considered a dying industry. I spent four years after graduation struggling to find even a door let alone trying to get a foot into it. Logically, and by every standard discussed above, I never should have pursued that field. But as luck would have it, my field took off (for reasons that were fickle and unpredictable), and I went from having no options to having a wealth of choices. During that time period, my earnings went through the roof, as I’d succeeded through a choice that rationally I never should have made.
Then, a few years ago, I made another choice to leave my chosen field. At the time, my choice was based on personal goals, not earning potential, and in some ways appeared to be giving up a good salary for a much lower one. But, as it turns out, my previous field is out of demand once more, and additionally is now overrun with trained individuals who are looking for work. If I’d stayed in my field, I would now be having a hard time finding work, let alone matching my current salary.
Neither of my choices initially appeared to be the right choice for earning the best salary, yet both have served me very well. That’s where the element of luck comes into play.
August 19th, 2009 at 11:09 am
I think there are different mindsights when it comes to accumulating wealth. This does not mean that every one who is rich or poor subscribes to a certain set of principles; it just means that some people are more attuned to acquiring assets. I think Tony Soprano said it best in his exchange with a crooked politician about flipping houses…..Politician: “Tony you’re not looking at the big picture here, we’re talking hundreds of thousands of dollars!” Tony: “See that’s why you’re a politician and not a businessman…maximum value is the big picture. There must be seven grand worth of copper piping in those houses”
Lol, im not advocating organized crime, but you get the picture. For some people, good is good enough. For others…the sky is the limit.
August 19th, 2009 at 11:16 am
Among the people I know the overwhelming deciding factors in income are education and profession.
The vast majority of people I know who make higher incomes are college educating in professional fields. The vast majority of people I know who make low incomes do not have college education and work in service industries. So profession and education are the key deciding factors.
Personal qualities like work ethic, self confidence and quality of work are not the difference among the people I know. I know someone with pretty poor self confidence who makes at least $75k and someone with great self confidence that makes $8 /hr. All the people I know making lower wages have good work ethics.
August 19th, 2009 at 11:20 am
When I was 22, I was going to college and working at the same time. I was making about $35k/year. By 24 or so, I was leaving school, and took a job in San Francisco making $68k/year. Now I’m 28 and last year I grossed something like $142k.
I can tell you the jump from $35 to $68k was a lot more dramatic in terms of feeling financially comfortable than the jump to $100k+. Sure, the extra money is nice, but I was doing just fine on $68k, whereas $35k really required watching where each dollar was going and being careful with what I bought.
I could give you a long list of traits that people who succeed and get top-tier jobs in the software industry share (based on my experiences), but I’m not sure if anyone’s interested. I do think a lot of the traits in J.D.s list are represented, but I’m not sure if they’re the most important ones. Boiled down to the most basic points, I think the core traits that have helped me, and that I’ve seen help others in this field, are:
1) Be *good* at something that’s both useful and challenging. You can be good at something that’s useful and simple, but there will be so much competition, since everyone else can do it too, that it’ll drive salaries down. You can be mediocre at something challenging, but you’re not going to be the one sought after for the high-end positions.
2) Make sure other people know that you’re good at this thing. You may be the best programmer in the world, but if no one knows it, they’re not going to hire you. Be vocal and self-confident. Some people, especially the people you’re out-competing, will call you arrogant, but if you’re confidence is warranted, employers (or customers) wont mind. You can overdo this and start to get annoying, too, but that still might be better than too little confidence.
3) Know what you’re worth. A good programmer in the san Francisco Bay Area is not cheap. But if you went to school at Midwestern State U, they probably kept telling you that average starting salaries were $55k (or something like that) for computer science grads. $55k around here, in this line of work, is a joke. If that’s what you’re making it’s because you’re either really not very good, or because you don’t realize that everyone else at all the other better companies is making $80k+. Still, I’ve seen plenty of recent college grads saying things like “Wow, they offered me $60k, that’s above average, that’s fantastic!” My first job post-college offered my $60k. I countered with $70k and they offered me $68k, which I accepted. Even still, I knew I was just doing OK, and that I wasn’t earning some super-fantastic salary. I was probably in the top third or so of people just coming out of college in this field, definitely not in the top 5% or anything.
And yeah, I’m good at what I do. Better than a lot of others I’ve seen. You can call me arrogant if you want — you wouldn’t be the first. I’ve also made risky decisions that turned out in my favor largely based on luck (like moving to San Francisco to work at a startup company). But a lot of the other people, probably most of the other people, who’ve achieved the same level of success have taken similar risks, and sometimes they’ve taken them several times, not succeeding until the second, third or fourth try. But eventually, they’re sitting at the top of the field making six-figure salaries and getting all the flexible vacation time and free food that you read about in articles about Google’s or Netflix’s working environment.
None of this necessarily applies outside the software industry, but I do know what flies and what doesn’t for programmers in the silicon valley.
August 19th, 2009 at 11:21 am
First, two observations from my experience:
1. People who READ more will earn higher incomes because they know more. Please note that I did not say they’re smarter, I said that if you read more, you know more (unless you’re reading People magazine). Choose your reading material wisely. Good choices for those who want to make six figures might include the WSJ, Forbes, Fortune, and trade journals for jobs you want to have someday.
2. People who PREPARE themselves for success (accrue experiences likely to be positive, like education, and avoid experiences likely to result in negative outcomes, like drugs or alcohol) are more likely to be ready for success when an opportunity comes along.
Luck is what happens when preparation meets opportunity. Seneca
One free association string: When you read a lot, your vocabulary improves. When your vocabulary improves, you are able to comprehend more of what happens around you. When you comprehend more of what happens around you, your reactions are better. When you react to things better, you succeed in more situations. When you succeed more often, you usually get opportunities to make more money.
August 19th, 2009 at 11:22 am
I think there are many factors to take into consideration. Different circumstances, personality, education, gender, and so on. Plus, a lot of high-salaried folks tend to spend that cash on bigger homes, fancier cars and other items. And when that happens, we’re all in the same boat as far as debt and trouble making mortgage payments is concerned.
As one poster noted, I’d rather have the time to enjoy life outside of work at a lower salary than a high salary that I’m working 24/7 for.
August 19th, 2009 at 11:26 am
I’m sure this has been said in the comments, but I agree with Kaitlyn (#4). We are all born into different circumstances and raised differently. It’s hard to break the cycle and everyone is presented with different opportunities. And if you’re not exposed to something it’s hard to aspire to it. I’m not saying people don’t break through the barriers, it’s just harder for some people.
August 19th, 2009 at 11:39 am
This kind of topic always touches a nerve.
As I see it, there are two different questions being looked at here:
1. Why does [some other person/group of people] make less money than others? How could they make more money?
This is where unhelpful anger, finger-pointing, and the flinging around of statistics come in. Doesn’t really make for a useful discussion.
2. Why do I personally make less money than others? How could I make more money?
Ah, now we’re getting somewhere. Here we can take responsibility for ourselves, our actions, our choices. We can look at what we might change in our own lives to improve our situation, by examining things that other people have done. We can disregard statistics that say we should be failing (or succeeding, for that matter), as statistics apply to groups of people, not individuals. Even asking these questions is a step in the right direction.
Unfortunately, the first question usually attracts more discussion and responses as people get angry and start arguing. People love conflict, what can you do?
On the plus side, commenters here are a pretty good crowd. Things are largely civil, and I’m glad to see it.
August 19th, 2009 at 11:40 am
The difference is family background. Were your parents college educated? Did they ‘force’ you to go to college? Or, at the very least, was going to college part of your ‘family culture’ (as in, everyone does it)?
A lot of lower income workers come from families with uneducated parents who are also low income earners.
August 19th, 2009 at 11:50 am
J.D says that he’s not trying to call poor people lazy. That’s nice of him to mention. I believe in his good intentions.
But when you list bullet points that supposedly explain why some folks are high income, you don’t have to be a highly educated person to figure out that the implication is that if you are not high income, then you must not be that list of desirable traits.
So really, it’s not hard to see why some read it that way.
The thing about personal finance blogs is that they’re all about what YOU can do to make things better. That’s what I read them for. I’m a teacher, my hubby is looking for work post-grad school. My family needs good advice on how to live on modest means. These blogs are truly helpful in that regard.
They are less helpful in trying to explain sociological factors, one of the largest being class. Because the truth of it is that not everyone can succeed. The pie is limited. To say otherwise is rather disingenuous and leads to posts like these, which to me read like:
“I’m not trying to insult you, but maybe if you just worked harder…..”
or to take an off-topic analogy, while speaking to a heavy person:
“Gee, did you know how many calories that soda has?”
It’s frustrating for some to read this, because people’s lived experiences don’t bear out that everyone can make it. Some can’t. That doesn’t mean that they can’t make their lives better, but not everyone is going to be high income. That’s not the nature of a capitalist system.