No, the Richest 1% of Spain Does Not Live on Income

No, the Richest 1% of Spain Does Not Live on Income

The question of why the rich are rich is something that society tends to ask, and, depending on the answer we give to that question, we can make very different policy decisions. For example, if those who earn the most receive their income mostly from non-work sources, we tend to see the resulting distribution as more unfair than if these individuals shared the same source of income as the majority of the population, among other things because wealth (from which income from capital derives) is inherited, which may indicate the existence of what the OECD has called ” sticky roofs .”

Although this is not exempt from controversies ( human capital is also inherited ), we start from this initial assumption, that the greater the proportion of the income of the richest they get from incomes outside work, the more unfair society is.

With this database, you can know, at the census section level, the income of people and their distribution according to income sources. With this last objective in mind, the article presents a very interesting graph that shows the percentage of the income of the census sections, sorted by percentiles, which are income from capital. Using this graph, we obtain that one-third of the income of the 1% that earns the most (in fact, 1% of the census sections that earn the most) is capital income.

This caused great turmoil among some famous disseminators, especially Javier Gil, who ventured to affirm that these capital incomes came mostly from rental income, which he said disproportionately concentrated on the top of the distribution, it is evident that Top 1% do not live from their work.

At this point, you have to ask yourself, what exactly are the income of capital? According to the article itself, three different concepts, yields of movable capital (interest and dividends), real estate capital (rents), and economic activities (self-employed income).

The key here is not so much in what weight the three considered together have, but what weight they have separately, especially the self-employed income, since no one could argue that an autonomous does not really live from his work, even if the national accounting has determined that your income must go to that tailor’s drawer that is the income of capital. Thus, I have disaggregated with the ECV microdata what percentage of the net income of the households of the members of the top 1% corresponds to each of the three sources.

At first I thought (and I said so ) that the CVD was lower when studying the income of the richest segments of the population, in line with what most authors who have worked on the issue of inequality consider , essentially because in the past I calculated the percentage of the income of the top 1% that was derived from the movable and real estate capital and obtained a result of approximately 10% on its total income, just one third of what the newspaper article obtains. However, it turned out that this difference was only due to not considering the income of the self-employed if they are included, I obtain an extremely similar result to that of the article, the three concepts assuming 30% of the income of the top 1%.

This allows us to clarify many things, since of the 30% of capital income obtained by the richest, 18.3% are self-employed income, 6.2% rents and 5% dividends and interest. That is, only 11% of the income of the top 1% that earns the most are derived from sources outside their work, which is very much in line with the results of researchers covering this issue, indicated that in recent decades in In developed countries, the profile of the top 1% has progressively shifted towards higher income from work (thus generating greater wage inequality). Once again, it is demonstrated that the biased interpretation of the aggregated data leads only to equally biased conclusions.

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