Greetings my upwardly mobile friends,
The Personal Finance blogosphere has recently been awash with claims that the only difference between someone earning a super high income and someone earning minimum wage is luck. In reading these claims, I was shocked by the lack of support or information. In fact, I concluded that most of the opinions were nothing more than mere belief informed by nothing at all.
I decided to dig into this a bit. The Department of Labor provided a wealth of information. The federal minimum wage is $7.25 and this is generally what people base their minimum wage claims on. Of all people in the labor force paid an hourly wage, which is 58.3% of the labor force of ~80.4 million people age 16+, 2.3% of them earn an hourly wage at or below $7.25. If you include workers whose compensation isn’t based on time, that’s under 1% earning an hourly wage at or below $7.25. That bottom 1% includes teenagers, part time workers, workers that are paid gratuities (May actually earn more than minimum wage), and jobs that may be exempt from the minimum wage requirements. It doesn’t include the self-employed. Even if you stick with the inflated number, the Bureau of Labor statistics only goes as high as 2.3%.
Who is in this bottom percentile? The group heavily skews to young people under 25, single people, people working part time jobs, people with less than a high school education, and they are employed in menial food service jobs.
So what groups are earning more? People over age 24 make much more than their younger counterparts and income increases steadily well into middle age. Increased education statistically leads to increased income. Working full time helps a lot too.
If we assume that less than the bottom 3% are earning the minimum wage, we probably wonder what the top 3% are earning. According to CNN, the top 3% earn more than $270,000/year. The top 2% are earning more than $360,000/year and the top 1% earn more than $450,000/year.
The major difference between the minimum wage worker and everyone else is that, minimum wage workers are heavily kids and part time workers in food service….
In this day and age, government backed Student loans make it so that anyone can goto college and get a bachelors degree or advanced degree. Free public education means anyone can get a high school diploma. Will it mean that they will be in the top 5%? Not necessarily. However, it’s unlikely that they will ever be paid minimum wage. Hard work and planning are likely to be the major determining factors regarding their income levels.
Luck plays a role in all things to extent. However, luck is often described as the residue of preparation…. Age, education, and hard work play bigger roles on a measurable basis. Think about your future, goto school on a full time or part time basis, achieve certain educational thresholds, obtain relevant training, and work hard. Luck is going to be a minor player barring some unforeseen catastrophe.
The difference between a minimum wage worker and a millionaire is almost never luck. To suggest otherwise requires the declarant to believe that life is a lottery and your actions do not significantly impact your outcomes.