The new way to get rich slowly

The face of getting rich slowly is changing right before our eyes, even as the status quo is failing. Before this year's State of the Union address, the President's media supporters, fretting about his low approval rating, fumed“…never during his time in office has the state of the economy been better — yet rarely has he gotten such low marks from the public for his handling of it.”

The GDP is indeed at an all-time high. But, as someone said when I updated a group on the economy recently, “Did I just blink and miss the recovery?” Sound familiar? A paradox, indeed.

The main reason for the paradox is unemployment. The reporter above was correct when she said it's never been better during Mr. Obama's time in office … but she unwittingly nailed the problem: The incumbent Chief Executive has been in office quite a while already and never in the past century has it taken this long for employment to recover, prompting experts to dub this “the jobless recovery.” A recent Gallup poll shows unemployment is America's number one problem.

Juxtapose the lack of well-paying jobs with record numbers of $100 million houses for sale and price records for art and collectibles and the rising tide of rhetoric around income inequality seems inevitable.

Talk is cheap, though, so I called up a few folks at the Federal Reserve to find out: Is there hard data to verify income inequality?

There is — and it's much, much worse than you or I might have even thought.

The Inequality Gap

If you're over 30, you might remember the power-duo Lennon-McCartney. Welcome to the new duo articulating life today: Piketty-Saez. Thomas Piketty heads the Paris School of Economics and Emmanuel Saez, the Center for Equitable Growth at U.C. Berkeley. In 2003, they published a landmark study on inequality that everyone has been using ever since.

recent update to the study shows that a stunning 95 percent of the entire gain from the current recovery has gone to just the top 1 percent of the nation's income-earners:

Post trickle down

Interestingly, the 1 percent are not impervious to downturns. The table above shows they get hammered a lot harder by downturns than the plebs.

But the data also confirms: 99 percent of the nation is scrapping for only 5 percent of the total gain of this recovery, while the top 1 percent are snagging 95 percent of the entire nation's wealth increase. This has never happened before.

Is it a permanent shift or just an aberration? The Pikkety-Saez data set goes back 100 years, making it easy to spot long-term trends. To distill all the data down to a single number, I created an “index of equality” comparing inflation-adjusted incomes of the 99 percent with the 1 percent, starting in 1913. A rising line reflects more for the 99 percent, comparatively.

index of equality

The chart shows that, for 70 years, the 99 percent did better, relatively speaking, than the 1 percent — in other words, income equality improved.

Then it fell off a cliff.

This is not how it was supposed to be. What changed?

Trickle down

After the 1982 recession, our government embarked on what has since been called “trickle-down economics.” In essence, the thinking went that if you bless the rich, they will create opportunity (and wealth) for the rest.

Did the wealth trickle down? In a word, no. Here's a different look at the same data set. This chart compares the actual incomes (in 2012 dollars) for the two groups. To make them comparable, I indexed them based on the 1913 number.

Inequality indexed incomes

You can see how the advent of World War II created a spurt of income growth for the 99 percent as women went to work, industrial competitors Japan and Germany were decimated, and newcomer China had not yet awakened to take away American manufacturing jobs. It was the golden age of the American industrial worker, complete with job security, the corporate ladder, and, when you're all done, a pension you can count on.

That came to a screeching halt in the '80s as trickle-down economics became the new normal for all subsequent governments. The two lines converging after 1985 indicate the 1 percenters' share of the nation's wealth increased again … dramatically.

So what can you do about that?

Your first option is to vent your outrage over dinner or on the blogosphere. The rich, by the way, are feeling that. Tom Perkins, billionaire co-founder of the largest venture capital firm, recently caused a stir in a letter to the WSJ, complaining that the 1 percent are being vilified like the Jews in Nazi Germany.

Outrage doesn't put food on the table, though. A more sensible option is to do something.

1. Embrace the new reality. The days our parents knew are gone forever. It's hard now just to find a job with decent pay. Oh, and if you thought a government job is your ticket to security, think again. This Fed chart shows government jobs have been steadily declining for the past five years with no signs that the trend will reverse. Not only are you on your own for your current needs, you won't be able to count on a pension or Social Security either.

2. Embrace the wisdom that doesn't change. Live below your means and get rid of debt.

3. Invest. The 1 percent make their living off their investments. The tax code is harsh on labor but easy on capital. As you transfer your income from labor (a job) to capital (investing), you are likely to reap those benefits. Is this easy for someone making a living from an income-stressed job now? Perhaps not. But not making investing a serious priority only ensures permanent servitude to capricious bosses.

4. Reframe your income opportunities. What new income opportunities are there? In a nutshell…

Start your own business

This may sound daunting, even depressing, but consider:

1. We've never seen a generation so well-equipped to be on their own as this one. The main reason for this is technology. You have resources at your fingertips that your parents didn't have. Sites like elance, Fiverr and others provide brokerage platforms for personal services — a great starting point.

2. In human history, self-employment has always been the default: We are wired for independence. The technology of the industrial revolution took that away, but current technology is giving that independence back. In this new world, your efforts are justly rewarded by a marketplace which, while not perfect, is not as capricious as a fickle boss or an employer given to outsourcing jobs.

3. Never has it been as easy to start small while maintaining your day job. For less than $100, you can get a domain name and a year's hosting. Getting set up to receive payments is a little trickier, but still easier than finding a well-paying job. There is a lot of free advice on how to do everything from marketing to shipping your product.

The revolution is under way already

Starting your own business sounds more radical than it really is. Several readers (and writers) on this very blog are already going down this road. They're not alone. This Federal Reserve chart shows the dramatic shift from large employers to small employers, which includes start-ups. (It's interesting to note how those weathered the recession so much better too.)

Even if you don't open your doors tomorrow, start thinking what business could hold your future. Ask friends. Ask many friends. Some will be naysayers, others eternal optimists. Listen to both groups. Take cautions from the Eeyores, but don't let them stop you.

It is a new day out there. You might not become a 1 percenter, but you can get a lot closer, get many of their benefits, and enjoy the freedom and fair reward your efforts bring.

It will still be getting rich slowly because durable things rarely are created overnight; but self-employment is the new way, make no mistake about it. And while getting rich slowly this way is a tougher road than just showing up for work and collecting a paycheck, the advances in technology keep making it easier. In the end, this road would be more rewarding than getting laid off five years before you plan to retire.

More about...Economics, Investing, Side Hustles

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David
David
6 years ago

Just goes to show the rich get richer and the poor get poorer.

William @ Drop Dead Money
William @ Drop Dead Money
6 years ago
Reply to  David

True, but the last two charts show there was a time when that wasn’t true.

That’s the intrigue: it doesn’t have to be that way necessarily.

Sarah
Sarah
6 years ago

Excellent point! Piketty’s brilliance is in making the connection of why there have been times where the mass of workers begin to accumulate wealth and the inequality gap decreases. To quote an article appearing in the WSJ on Mr. Piketty’s work: “Wealth inequality accelerates because the return on capital outpaces the increases in economic output.” (Paletta. WSJ. http://blogs.wsj.com/economics/2014/04/14/5-takeaways-on-wealth-and-inequality-from-piketty/)

Mr. Cowie’s suggestions to invest in the markets and also start one’s own business are good for the current economic environment; however, for real change tax reform is needed.

William @ Drop Dead Money
William @ Drop Dead Money
6 years ago
Reply to  Sarah

Good point on the tax reform. The second chart clearly shows how inequality zoomed when the “trickle down doctrine” of lowering the top tax rates took effect, and stayed in effect through many administrations.

El Nerdo
El Nerdo
6 years ago
Reply to  Sarah

Tax reform might be necessary but it’s not sufficient. If tax revenue is spent in more wars and internal surveillance but not on education and basic research and infrastructure, tax reform would just be useless.

Jennifer
Jennifer
6 years ago
Reply to  David

No, this shows that the rich are getting richer faster than the poor are getting richer.

More important that income inequality is income mobility. http://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-to-riches-to-rags.html?smid=pl-share&_r=0

What we should care about more is whether the poor are getting richer rather than which group is getting richer faster.

Sarah
Sarah
6 years ago
Reply to  Jennifer

Excellent article and good point, but I still think there is a problem in this country with wage stagnation, which is a critical part of mobility. The sale of a business, inheritance or several years at the top of your game might allow one to move into the top 1%, but the overall trend in the US is for fewer middle class jobs — and that’s about wages, which gets back to Piketty.

Johanna
Johanna
6 years ago
Reply to  Jennifer

Actually, this article doesn’t address “the poor” at all – it’s just the 1% and everybody else. There’s a lot of variation within the 99% – the top 19% are doing all right, but the bottom 20% are sliding backwards.

Dave @ The New York Budget
Dave @ The New York Budget
6 years ago

Very nice post. It’s interesting to see the inequality data laid out in these graphs. And I definitely have a strategy to live in this new world and thrive. I will be absolutely fine.

But many people won’t. I’m more concerned about the people that aren’t reading this blog. The hard workers who have their nose to the grindstone and are busy raising kids and are less educated on personal finance. Either the inequality needs to change, or we need to do a much better job educating everyone (or both!)

Danny
Danny
6 years ago

Dave, Thank you for mentioning education. I feel like it is the last thing talked about with this subject. If we are all educated when it comes to money and personal finance, many more of us would be in better positions. Of course anyone who is reading or commenting on this post is going to be more financially literate since they are on this site, but I have a very strong belief that personal finance needs to be emphasized, or at least taught in high school classrooms, throughout this country or even the world. Of course education is not the… Read more »

MC
MC
6 years ago
Reply to  Danny

One thing that the income inequality leads to as in what’s the near term solution? What is the solution to turn this economy around? It is to jump start the economy to get $’s into the hands of those who will spend it. The common folk. The most common term for this is stimulus and it is in effect being blocked. We all talk about what’s right for you or I would be to be trifty and save and pinch and scratch our way to a better fortune. The problem is, if we all do this, then the economy get’s… Read more »

MikeTheRed
MikeTheRed
6 years ago

If there’s one major, overriding trend I’ve seen over the last 15-20 years (in the US at least) it’s that the individual is being put in more direct control of their lives in ways they never had before. Examples: -Death of the Pension and Rise of the Personal Retirement Accounts -Slow death of the HMO, and the rise of PPOs, Health Savings Accounts etc. -The rise of the self-employed over traditional employment Basically, as the system rewards those who make their own way more, the more the system changes to require you to have to make your own way. Unfortunately,… Read more »

William @ Drop Dead Money
William @ Drop Dead Money
6 years ago
Reply to  MikeTheRed

I believe your observations are right on the money. We’re in the early stages of a revolution every bit as profound as the Industrial Revolution. We just need to find a suitable and catchy name for it.

Technology caused the IR and technology again is putting new means of earning an income in our hands. It’s up to us to figure out what they are and how to use them to improve our lives and those of the greater community around us.

k@Masters Of Our Own Dollars
[email protected] Of Our Own Dollars
6 years ago
Reply to  MikeTheRed

I think I prefer being in control. If I had a pension, I’d probably just say great, I’ll get a pension, then do little or nothing else to prepare for retirement. But I don’t have that, so now I’m forced to really think about retirement, and health care, and all those other things that used to be taken care of.

imelda
imelda
6 years ago

That’s one way to look at it, as whether you or someone else is taking care of you.

Another way to look at it is whether we are all taking care of one another, or leaving everyone to fend for them/ourselves.

Stefanie @ The Broke and Beautiful Life
Stefanie @ The Broke and Beautiful Life
6 years ago

Maybe the trend of micro entrepreneurship can be attributed to the collective realization that almost nobody can “make it” as an employee anymore.

Aldo @ MDN
Aldo @ MDN
6 years ago

I never believed in trickle down economics and always believed that there was very little chance of regular folks ever become rich without starting your own business or winning the lottery. But that was because I didn’t know much about personal or finances in general. We, as a nation and as a family, have to do a better job educating people about how to handle their own personal finances. Like you said, spend less of what you make and invest. Do what rich people do. Starting your own business is ideal but not until your personal finances are in check.… Read more »

Rail
Rail
6 years ago

Its not just a economic shift, but a cultural one that is happening in the U.S. My own political bias leans Theodore Roosevelt Republican/Libertarian, and as such I obviously am a “middle of the road” type of guy. What I have observed in this country in the last 30 years or so is a cult of personality built around a worship of money, fame and outright greed. Yuppies were born. The Movie “Wall Street was idolized. It became ok to act like Donald Trump. Then we have had the decimation of manufacturing in the U.S. along with a Wall Street… Read more »

El Nerdo
El Nerdo
6 years ago
Reply to  Rail

Great comment, but the problem is, the culture tends to follow the economy, not the other way around.

If your economy depends on hunting, your culture, mythology and child-rearing are going to be all about the hunt.

Same thing with agriculture.

Same thing with war and pillaging and slavery.

Same thing with industrial production.

Same thing with high-tech.

Same thing with casino capitalism, which is where we are right now.

Rail
Rail
6 years ago
Reply to  El Nerdo

Hey Nerdo. Casino Capitalism! Love that term. I never heard it before, but am going to shamelessly use it from now on. I like your theory on economy following culture, very good observations. And as far as the economy goes, well, if it goes to Hell in a handbasket the culture WILL out of necessity follow along. Horse and buggy days anyone?

Don
Don
6 years ago

It was refreshing to read that the author’s solution did not include “tax the rich.” I did notice one significant oversight in the article – no mention was made of the growth in credit card usage and home equity credit lines in the 1980’s. These financial tools made it possible for people to easily buy things they could not afford and reduce net worth growth. Where as the 1940-1970s generations had to save up for what they wanted, the 1980s-present generations can due without savings. This surely has contributed to a decrease in wealth among people that have found they… Read more »

Chuckie G.
Chuckie G.
6 years ago
Reply to  Don

Now this is an interesting insight. Is at least part of the issue that people became complacent with stagnant wages simply because they could charge it and fool themselves (and perhaps just as importantly, others) into thinking they are keeping pace? That may very well be. Credit is kind of a mutiny sedative in that regard. I can honestly say I have never thought of it like that.

phr3dly
phr3dly
6 years ago

As a card-carrying member of “The One Percent”, I’ll take issue with this statement: “The 1 percent make their living off their investments.”. My wife and I are both engineers, and make our living off of our jobs. The 1% is actually a pretty easy group to get into. The 1% of the 1% is where the money is. That said, I think something else is going on here. I think this data is comparing apples to oranges. Any dataset of “reported income” needs to factor in unreported income. The tax reform in the 80s (which results in the first… Read more »

Chuckie G.
Chuckie G.
6 years ago
Reply to  phr3dly

“The 1% is actually a pretty easy group to get into. “ This is among the most absurd statements I have ever heard. Being in the top 1% of anything, by definition, is not easy to do. Take any hobby that you are enthused about. Examples could be running, car racing, guitar playing, cooking… hell even playing cornhole. If you’re a runner, are you in the top 1% of say 100 meter sprinters? If you race cars, are you in the top 1% race car drivers? So on and so forth. If you aren’t in the top 1% of anything… Read more »

Matt
Matt
6 years ago
Reply to  phr3dly

I’d argue that a pair of engineers making $394,000 a year is very, very rare.

Sure, people on the coastal cities often command mid-six figures for these types of jobs. However, cracking $200,000 is hard to do without moving into a management position.

How one can claim this is an easy group to get into, let alone become an annual member as you are, is beyond me.

Lauren {Adventures in Flip Flops}
Lauren {Adventures in Flip Flops}
6 years ago
Reply to  phr3dly

I can see where the OP is coming from with the whole “this is easy to do” thing. I think for someone who is an engineer and married to one, especially if they’ve been with the same companies for awhile it probably *does* seem easy to be there. If they’ve been good with their savings, they could have a million + saved, easily, and have a very easy life. That being said, I think it’s easy for someone like that to say it easy. This guy has a lot of cultural capital behind him. He and/or his wife probably came… Read more »

phoenix1920
phoenix1920
6 years ago

Great article! However, I believe that advice encouraging everybody to begin their own business should be given with caution. IMO, it’s like pointing out how great the lottery system is–where the few who win big are publicized, but we never think about all those who don’t win. My in-laws own their own business and work longer hours than anybody else I know–only to get by. Nobody thinks of those kind of business-owners. My husband and I have done side businesses here and there, but the supplemental income is marginal for a lot of work. I have one acquaintance who lost… Read more »

William @ Drop Dead Money
William @ Drop Dead Money
6 years ago
Reply to  phoenix1920

Those are great points. When you take a job, you don’t know how it will work out — same with a new business.

The beauty of the technology we have nowadays, though, is you can start a new business as a part-time sideline without having to give up your job.

Nobody said it’s easy or anything but hard work. In the history of humanity that never changed, Except for a privileged (very) few, most of us get ahead only by making sacrifices and working harder than the average person around us.

KC in ATX
KC in ATX
6 years ago

Uncertainty about a new job and uncertainty a business you’re trying to get off the ground are worlds apart.

Susan
Susan
6 years ago

During the economic expansions of the 90s and the early 2000s, I was always broke and seemed to never be able to get ahead. Then I took Dave Ramsey’s course and learned that the problem wasn’t the economy it was me. By getting out of debt and living on less than I earn I was able to continue saving so that even in the Great Recession I was still building my net worth. Too many people make too many excuses for why people don’t save. Overlooked in this analysis is that the saving rate fell dramatically over the last 30… Read more »

Jay
Jay
6 years ago
Reply to  Susan

Well said…and ditto.

Reggie
Reggie
6 years ago

First of all, focusing on income inequality in a personal finance blog is a straw man argument and a “keeping up with the Joneses” mentality that this site has historically been against. If you want to discuss income inequality in a political or macroeconomic context, fine. But when it comes to PERSONAL finances, it doesn’t matter what anybody else has. When you retire (and during your working career), you will either have what you need financially to meet your goals, or you won’t. This is independent of how rich (or not) anybody else is. It is based on how well… Read more »

Linda Vergon
6 years ago
Reply to  Reggie

Great thoughts and caveats, Reggie! To your point of the fundamental principles of GRS, I do think William addresses that briefly when he encourages people to “embrace the wisdom that doesn’t change” and “live below your means and get rid of debt.” I like the caveats you add about entrepreneurship not being a panacea for getting wealthy, and that creating a business that lasts and provides wealth requires a different mindset and skill set. They are particularly valid and on point. However, finding ways to increase your income is certainly also a tenet of the site, the same with learning… Read more »

Beth
Beth
6 years ago
Reply to  Reggie

Bloggers aren’t exactly representative of the population. People who are happy in their days jobs and meeting their financial goals don’t make a lot of money blogging about it. I entrepreneurship is really a lifestyle choice and depends on a person’s interests and personality. I’ve known happy self-employed people and miserable self-employed people, and the same can be said for people who work for other people. Many people I know have alternated between being employed by others and self-employed at various points during their careers. In Canada, about 51% of new businesses survive five years — and that’s a high… Read more »

William @ Drop Dead Money
William @ Drop Dead Money
6 years ago
Reply to  Beth

Beth I agree with you about some people preferring to work for other people. (I’m one, too.) It’s not the topic of the post, but the unfortunate reality we face is the very option of getting a well-paying job may be disappearing before our eyes. That’s not something entirely new: two hundred years ago, pretty much everyone worked for themselves — general store owner, smith, farmer or innkeeper. They didn’t have much of a choice. Around us, society and technology may be changing to take us back, in a new way, to how the human race made a living for… Read more »

Beth
Beth
6 years ago

May I ask where you’re getting the “pretty much everyone worked for themselves 200 years ago” fact? I’m not being sarcastic — I’m genuinely curious. I can think of many groups that weren’t self-employed: household staff, nurses, tenant farmers, teachers, apprentices, artists and artisans who worked for patrons, clergy, wait staff, shop assistants, factory workers, mill workers, printers, manual labourers (working on railroads, etc), police, military, explorers, the crews of ships, — I could go on. There were no laws against child labour or slavery yet, never mind the status of women. It just makes me wonder how many people… Read more »

Carla
Carla
6 years ago

I guarantee my ancestors were not working for themselves 200 years ago unless you count the “master” I might also be related to.

phoenix1920
phoenix1920
6 years ago
Reply to  Reggie

Good point. If getting into the 1% club is the goal, I haven’t seen any statistics as to how many people are able to do that by starting a business–whether the self-employed are a higher chance to be part of the 1%ers than other means. The NYT has a graph that illustrates the occupations of the people in the top 1%: http://www.nytimes.com/packages/html/newsgraphics/2012/0115-one-percent-occupations/

imelda
imelda
6 years ago
Reply to  Reggie

Very interesting points, though I can’t say I agree with them all. I wonder what you think, though, of the research from “The Millionaire Next Door,” which indicates that the VAST majority of millionaires own their own businesses? Of course you can be wealthy without being a millionaire, but do you think that contradicts your belief that one can get rich without their own business? In case you don’t know, in that book, they found that although there are rich lawyers, doctors, and Wall St investors, the vast majority of the millionaires in this country are business owners. I don’t… Read more »

Reggie
Reggie
6 years ago
Reply to  imelda

Hi Imelda, I’m quite familiar with the book “The Millionaire Next Door”. I find it interesting that you focus on the part that says that 2/3 of the millionaires they studied own their own businesses. While it is true the book says this, I think the main point of the book is that the average millionaire accumulated his/her wealth by being thrifty and spending consistently living well below their means. The surprising revelation was that you would not recognize most of these people because they don’t wear fancy clothes or drive fancy cars — hence the name “The Millionaire Next… Read more »

Reggie
Reggie
6 years ago

Starting a business is now easier than ever. Which also means that competition among new businesses is greater than ever.
Starting a business is not a magical road to wealth. It can destroy wealth just as easily as build it if you don’t know what you are doing.

Linda Vergon
6 years ago
Reply to  Reggie

Another very strong point, Reggie!

Reggie
Reggie
6 years ago

Thanks @William.
Sounds like we are on the same page. 🙂

David @ Simple Money Concept
David @ Simple Money Concept
6 years ago

As bad as the charts may look, it’s still not that bad compared to many countries. I was in Shanghai, China a few years ago, and if you want to see the gap between the rich and the poor, look no further. From where I was staying (downtown), if made a right turn, I saw something that was like brand new New York City. If I made a left turn, then I saw the part of Shanghai was probably still in its original form.

TJ
TJ
6 years ago

Love this article, though I understand why some commenters might take issue with some of the advice on starting a business. I think it’s because when many of us hear the phrase “starting a business,” we think of something that requires lots of capital up-front, such as a franchise business or a storefront. But that’s not the only definition of a business. You can do something as simple as sell goods on Etsy or Ebay, or begin a blog about your hobby. Just because it doesn’t make millions of dollars doesn’t mean it’s not successful. (Incidentally, that’s a problem I… Read more »

Beth
Beth
6 years ago
Reply to  TJ

I agree. The problem is there’s so much rhetoric on PF blogs about self-employment is the only way to go and how you must be miserable in your veal-fattening pen (cubicle) if you work for someone else. It isn’t a dichotomy. I think in order to be a “success”, one has to be a good steward of their resources (both time and money). I think it’s possible to be a success working for someone else, and possible to be a success working for yourself — or doing both! If people can’t control their spending or wasting their time, they won’t… Read more »

William @ Drop Dead Money
William @ Drop Dead Money
6 years ago
Reply to  TJ

You’re right. We need new language. Starting a new business does sound fraught with risk, doesn’t it? What’s a better, new, term? Same with retirement. In the past that meant playing golf in plaid pants. Not any more. Now it’s “doing what you always wanted to do.” If that’s something you actually can make money from, it’s a new career. I retired after four decades in business to be a writer. What if I figured out how to do that twenty years ago — would that be retirement or a new career… or a new business? We need new language… Read more »

Reggie
Reggie
6 years ago

Thanks Linda! I agree with your point. The way I read the article, it said, in summary “Income inequality is rising, therefore times are changing and the way to get rich now is to start your own business.” My reaction was to that interpretation of the article. The way to build wealth is to consistently spend less than you earn over time. Increasing earnings requires a set of skills, regardless of the path chosen to do so (as you said, Linda). I am also reacting to the popularly published notion that starting a business is the way to get rich… Read more »

Linda Vergon
6 years ago
Reply to  Reggie

“Confidence is the feeling you have before you fully understand the situation.” Anonymous I agree — it’s rarely a good idea to romanticize being in business for yourself. Working for yourself gives you the freedom to decide which 20 of the 24 hours in a day you want to work! When I struck out on my own, I had very little training or information about business and still I made it work for 25 years. I loved it because, for me, learning how to grow a business and be successful was a very creative process. My second business was even… Read more »

Reggie
Reggie
6 years ago

TJ, People’s reaction isnt necessarily to startup costs of starting a business. It’s to the liklihood of success as well as the time and energy required to be successful. Starting a business on the side while working a full time job requires a large time and energy investment, and still doesnt necessarily have a high likelihood of success. My reaction is to no discussion of the realities of this path. As an earlier commenter stated, many successful business owners earn $30,000 – $60,000 per year while working 12 hour days. They are successful because their businesses last, but this isnt… Read more »

William @ Drop Dead Money
William @ Drop Dead Money
6 years ago
Reply to  Reggie

That’s a good point, Reggie. I’ve put it on my list as a writing project to go into those difficulties and risks.

There being not enough words in a single post, I didn’t talk about why the shrinking inequality reversed course. A big part of that is the disappearing of well-paying jobs: factory jobs to overseas and office jobs to technology.

And it’s that disappearing of well-paying jobs which leaves the route of a side gig (let’s call it that for now) as an option of increasing importance.

Make sense?

Reggie
Reggie
6 years ago

Agree wholeheartedly Beth!
I’d like to see more articles about a) how to successfully navigate increasing income as an employee by managing your career, and b) the realistic pros and cons of becoming an entrepreneur and the type of people likely to enjoy and succeed at this path.

Reggie
Reggie
6 years ago

William, I didn’t get from the article that you were referring primarily to side gigs. Perhaps that was my miss. Starting a business for ADDITIONAL income is significantly different than starting one for primary income. There are still pros and cons to consider, but a different level of risk. To be clear: I’m not against starting a business (for primary or supplemental income). I just hear too many people who shouldn’t be starting a business considering it because they don’t like their jobs or think it’s easy money, and too many people who SHOULD be considering it not considering it… Read more »

Reggie
Reggie
6 years ago

As for your (William) comments about the job market, that dynamic speaks to the other career path: being employed. There are risks here as well that people often ignore and fail to manage. There are also skills that need to be developed, such as career management. Learning the skill of career management enables one to increase one’s income as an employee. Part of that is understanding that having a job doesn’t provide security, having job skills that are DESIRED in the job market provides security (and income growth). This means you must pay attention to which skills are in demand… Read more »

TJ
TJ
6 years ago
Reply to  Reggie

Excellent points, Reggie. My only quibble would be this, to borrow a hockey analogy: There’s a difference between where the puck is, and where it’s going.

Twenty years from now, many jobs that people do today will be done by software and technology. (That’s already beginning today, in fact; even some radiologists, surgeons and lawyers are seeing their jobs replaced by software algorithms and robots.)

My point is that starting your own business may not be just a choice in the future. It’s likely going to be a necessity for many more people in the future than it is today.

Reggie
Reggie
6 years ago
Reply to  TJ

This may be true, TJ, that more people will be self-employed in the future. However, I don’t think your quibble contradicts my point that effective career management entails having or developing skills that are desired by the marketplace. This means having some understanding of the market trends for labor and skills. So take your example about jobs being replaced by software and technology. I could take this fact and go several directions with it. I could decided that software programming and testing is a growing field so I could get training on becoming a programmer. Or maybe that’s not my… Read more »

Reggie
Reggie
6 years ago

Linda, LOVE your last post!
My personal observation is that some people would love the being self employed despite the risks and challenges, and others would hate it. There don’t seem to be many people in the middle!

Linda Vergon
6 years ago
Reply to  Reggie

Ha! Love all your posts, Reggie! Thanks for helping to make this a vibrant discussion!!! 🙂

Reggie
Reggie
6 years ago
Reply to  Linda Vergon

Thanks! 🙂

Reggie
Reggie
6 years ago

Sorry everyone for not replying directly to your comments, but I was responding from my phone, and there is no option to respond directly to a particular comment when you are on the mobile site.
I didn’t even realize some of the comments were direct replies to mine until I came to the full website on my laptop just now!

Ash
Ash
6 years ago

Having read you post(excellent by the way) and the comments, I am more glad than ever that I live in Europe, generally a far more egalitarian society. Whereas we may not have the same opportunities you have, we take care of our sick, old and unemployed. We have here in Ireland a decent minimum wage(almost twelve dollars) and this is higher in other European countries. The rich pay very high taxes but still do well. I suppose you would call us socialists!

BD
BD
6 years ago
Reply to  Ash

Out of curiousity, how much is a gallon of petrol in Ireland? Or how much is steak per pound? How much for a gallon of milk? What does the average rent run?

Erin
Erin
6 years ago

The comments on this article have been just as enlightening, if not more so, than the article itself. This was a very good read.

Elaine
Elaine
6 years ago

I investigated those gig websites, although I’d read that they’re pretty disappointing in reality – you might make minimum wage. But worse, you have to sign away your rights for anyone to have your social security number and for anyone to do a background check, and I assume a credit check as well. That’s a lot of faith you have to put in their security framework and a lot of trust for the people getting your information. And yes, you can also start an Etsy shop or some other online shop, or try crowdfunding. Then all your friendships and relationships… Read more »

Beth
Beth
6 years ago
Reply to  Elaine

I looked at those sites as well and the pay was horrible for what I wanted to do. No wonder jobs are hard to find! With freelancers willing to work for less than what they’d get paid at McDonald’s, why hire staff?

Amanda
Amanda
6 years ago
Reply to  Beth

As someone who has hired folks from contracting/consulting websites previously, I can share that, at least in my experience, I chose contractors who 1) had good reviews 2) had prior work in their portfolio that was similar to the work I wanted and 3) answered my questions successfully. It was never the cheapest contractor. I don’t know if that helps allay your concerns? I think that many of the freelancers on those sites, at least the ones in the US, use it as a side gig endeavor, and not as a full time, until they’ve built up enough credit to… Read more »

imelda
imelda
6 years ago
Reply to  Elaine

“I find the choices in the barely-get-by climate pretty unappealing.”

They ARE all unappealing. Which is why all this rhetoric about the “new economy” where we can all be “entrepreneurs” and “direct” our own careers is so specious.

A world where the average person needs to have multiple jobs and side hustles to build a secure life is not a great world to live in. I wish people would stop pretending it is.

Scott
Scott
6 years ago

I agree with the key point of the article that one should not count on wages to make you rich. The “trickle down” didn’t work point is highly debatable. The well paying middle class jobs have largely evaporated widening the inequality gap.

Stan
Stan
6 years ago

Might as well be the ‘intelligence gap’. Not to be insulting to anyone but the smarter you are the richer you become. Smart with money, smart with relationships, smart with saving etc.

BD
BD
6 years ago
Reply to  Stan

No, it’s much more complex than that. I’m extremely “intelligent” from an IQ/GPA standpoint, and so are many people I know. We’re intelligent with money/relationships/etc too. But we’re all rather poor, because our talents fall within areas that have low earning potential (artists), and many of us suffer from chemical imbalances in our bodies that cause us to have poor social skills (ie, Social Anxiety, etc). No amount of “intelligence” can negate the effects of the combination of flawed social skills and jobs that have extremely low earning power. In a nutshell: There exist very intelligent people who do not… Read more »

Stan
Stan
6 years ago
Reply to  BD

Tell that to Stephan Hawking. He doesn’t let his physical handicap stop him from being brilliant and well liked (and rich).
But then again, people generally rise to their potential. Not only what they think of themselves what others think of them.

BD
BD
6 years ago
Reply to  Stan

Well, I know that Hawking’s talents/career doesn’t lie in creative arts or some other low-earning sector, so he’s missing half of the equation I laid out.

Again: Intelligent people who are in jobs with LOW-EARNING potential and have low charisma and social skills are still going to be “Not Rich” and intelligent at the same time. Not everyone who is intelligent is automatically going to be able to rise above it all, enter into a well-paying job based in STEM, and become wealthy.

Beth
Beth
6 years ago
Reply to  Stan

I think you’re going to find outliers across many sectors and abilities. Most authors aren’t going to be J.K. Rowling, just like most TV personalities will never be Oprah Winfrey.

To say “they did it, so anyone is capable of doing it too” is a nice idea, but is it realistic?

Beth
Beth
6 years ago
Reply to  Stan

I’m a bit skeptical about an intelligence gap considering the level of college/university graduates is higher than ever before. A couple of things I learned when I was teaching: – People are intelligent in many different ways. Some people who are test-score smart lack emotional/relationship intelligence, for example. Some people I know have started successful businesses such as roofing, cleaning or masonry. – Personality plays a large role. You can be exceptionally smart, but you also need to get along with others, have self discipline and have a strong work ethic. Some people who don’t do well in school do… Read more »

Aldo @ MDN
Aldo @ MDN
6 years ago
Reply to  Stan

I don’t think it has anything to do with intelligence. People just don’t know about certain subjects. I’m a Chemist and I could argue that people that don’t know chemistry are not intelligent because chemistry is the foundation of life itself. But this kind of thinking is just wrong, I’m not more intelligent than anybody else, I just decided to study a particular subject. The same works with finances, they really don’t teach you this stuff in school so if you don’t decide to learn on your own or somebody tells you about then you just don’t know. You could… Read more »

Rob
Rob
6 years ago

The charts are very interesting. It looks like the 1% have finally caught up with the 99%’s impressive income gains. Now we all make 3.5 times what our grandparents made. Everyone got their turn and surprisingly it looks like the 1% were genteel enough to go last. I’ll take the current situation over any other point on those graphs.

lmoot
lmoot
6 years ago

I find contract work to be the best of both worlds. You can hire yourself out for a project, or a season (or any other set period of time). You don’t have the year-round commitment to an employer or a business, and you can choose the gig you want based on what you need/want to earn for the moment. In a sense, being a contracted or seasonal worker is a bit entrepreneurial. You have your set of “clients”, which are your recurring employers, and can set your own work schedule throughout the year, deciding which gigs to take on. Best… Read more »

Cassidy Cash
Cassidy Cash
6 years ago

Someone in this thread said “the rich get richer and the poor get poorer”. I have to think that’s only true if you stick yourself in a category and rely on the system. If you are willing to believe there is a better way, and step outside your comfort zone and create your own reality, you can change your future. I’ve seen it happen as part of the graduate degree program I am with when individuals create their own businesses. They think it’s only a nice idea when they start but they surprise themselves when they achieve not only financial… Read more »

Alex @ Credit Card XPO
Alex @ Credit Card XPO
6 years ago

Very interesting stats and great advice on getting rich slowly. Investing (buying properties and renting them out) and starting my own business have worked great for me in building wealth and achieving financial freedom.

Wess Stewart
Wess Stewart
6 years ago

This is a great article.

I’m actually really grateful for it being pretty fair as well, since most articles that I’ve seen discussing the 1% vs 99% are really just written to throw fuel on the fire…which really frustrates me.

Thanks for giving us all something to think about.

E.B.
E.B.
6 years ago

It’s easy to fall into the trap of thinking, “I’m doing fine and I’m nobody special, what’s your problem?” The problem is that if you are “doing fine” in this country, you ARE somebody special. You are employable to a level that allows you a comfortable living. That is rare and getting rarer all the time in this country. A woman I know was abused as a child, barely finished high school, and now has a hard time keeping a job. She is doing the best she can with what she’s been dealt in life. She’s not exactly in a… Read more »

Paul Dabuco
Paul Dabuco
6 years ago

It’s quite sad when some people are pointing fingers at the government for their failure of not being rich. Gov’t has little (to nothing) impact on everyone’s lives if we are just doing the “right thing” – spend less and increase income. That’s it, nothing more, nothing less.

Yes, taxes mean a lot for us but that is part of our lives/existence. Else, better find a country that has no taxes 😉

Kr
Kr
6 years ago

Looking to start my own business in the future. The article mentioned free resources for setting up billing, marketing, etc. Does anyone have good resources for those things?

7cedars
7cedars
6 years ago

Like the article, would like to see more info as to why the poor are getting poorer.

Suffice to say, one can’t start a business if one can’t speak proper English, nor make a complete sentence.

The 1% are smarter, more engaged, stay attune to what’s happening in the world. The rest don’t. And it’s not that they can’t, they just don’t…or won’t.

People are getting VERY lazy.

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