Falling Further Behind the Guy With the Shoes and the Parking Space
For the past week I’ve been analyzing the 2013 Survey of Consumer Finances produced by the Federal Reserve. The report’s main conclusion has been widely reported: income inequality grew dramatically coming out of the great recession. I’ve been trying to find some unique insight buried in the report that would make an interesting blog post. All the details pale in comparison to the major conclusions of the report. So I thought I’d write about the one set of numbers that best summarize the entire report.
If you are in the bottom 25% of all American families by net worth, your income fell from $32,600 to $31,400 or 4% as the economy recovered. If you were in the top 10% of all American families by net worth, your income jumped from $297,000 to $356,000 or 20%. Even families with above average net worth (50th to 75th percentile), saw their incomes rise by only 4%, which is less than the rate of inflation.
Average Pretax Income
What does this mean? According to this morning’s New York Times, luxury men’s shoe sales are booming on Madison Avenue. One pair of shoes at the John Lobb store will cost you between $8,000 and $25,000. Business is so brisk, that a number of upscale brands are also opening stores in the same vicinity. Meanwhile in SoHo, one parking space in a condo project will cost the new owners a million dollars. Two hundred square feet of parking and storage at 42 Crosby Street is on offer for at least $5,000 per square foot. Of course the units themselves will cost $8 million to $10 million.
The rest of us are supposed to be distracted by the exciting news that the screen on IPhone 6 Plus will be 5.5 inches in diameter instead the meager 4 inches on our IPhone 5a. Millions of people will probably line up to buy the new phone or the Apple Watch, which will be preloaded with Apple Pay so we can more easily fall into debt and further behind the folks stepping out of their million dollar parking space in their $25,000 shoes