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Monday, June 01, 2020

This Is What It Takes to Be in the 1% Around the World

In the U.S., the wealthy have been pulling away from the middle and working classes, whose incomes have barely grown for the past couple of decades. Inequality is widening even within the ranks of the top 1%.

By: Bloomberg | Published: April 22, 2020 10:52:33 am
This Is What It Takes to Be in the 1% Around the World An entrant drives a classic car at the 2019 Concorso d’Eleganza Villa d’Este show by Lake Como, Italy.

The “top 1%” is the symbol of wealth and power thanks to a protest movement. Since Occupy Wall Street popularized the term almost a decade ago, inequality has surged, and this exclusive group has only gotten richer and more influential.

Yet the top 1% covers a wide span, from prosperous professionals to billionaires with more wealth than many nations. And the difficulty of making the cut varies greatly depending on where you live.

To join the group in the oil-rich United Arab Emirates requires more than $900,000, or 12 times more income than in India, a developing market so populous that the top 1% includes more than 13 million souls. In much of the developed world, an income of $200,000 to $300,000 gets you in the top 1%.

In the U.S., the wealthy have been pulling away from the middle and working classes, whose incomes have barely grown for the past couple of decades. Inequality is widening even within the ranks of the top 1%. While it takes about $500,000 per year to enter the top 1% of Americans, reaching the 0.1% now requires an annual income of more than $2 million. The threshold for the 0.01% is more than $10 million.

What They Owe

Some countries make special efforts to attract the global 1% and their wealth. Singapore and Monaco, for example, have turned themselves into tax shelters where the well-off can live and invest under a lighter tax and regulatory burden. Some nations rich in oil and gas can also afford not to tax the top 1%.

In most of the world, though, politicians use taxes to try to level the playing field between the wealthy and everyone else. In many nations with a progressive income tax, the highest rates apply only to the richest portion of the 1%.

What They Spend

The rising wealth of the world’s top 1% has prompted a boom in luxury spending, especially in China. McKinsey & Co. estimates spending on personal luxury goods like accessories, jewelry and watches is up 47% since 2012.

Many members of the top 1% have little interest in designer handbags or high-end fashion, of course. Housing, education and child care are far more common expenses for this group, and their costs can vary widely around the world.

A common theme from city to city is a fierce competition for English-speaking international schools, according to Gail Rabasca, executive vice president at relocation consulting firm Chamness WorldWide, as expatriates fight for spots with local children whose parents “want more competitive educational positioning and intercultural awareness for their children.”

The prices for high-end real estate in major global cities jumped from 2010 to 2018, but growth has slowed more recently, said Liam Bailey, global head of research at Knight Frank. The problem is a backlog of supply and a sense that costs are too inflated, he said. “There are limits to how high very wealthy individuals will bid prices.”

 

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