Date: September 15, 2016
Income Inequality – Podcast
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- Income Inequality
Hello. This is Scott McDonald and Welcome to the Perfect Place to Put a Practice Podcast. A great deal has been said in the media regarding income inequality. I have not talked about this before when it comes to placing a practice in the United States but it might be worth discussing as we get questions it the concept.
In a nutshell, income inequality means that there are some people in a state who earn a great deal more than the average person. There are many advocates for economic reform who believe that this is inherently wrong. Their ideal is that everyone should earn close the same amount as everyone else. This philosophy is what has sparked the spike in minimum wage laws in states like New York, California, Illinois, and Washington. The measurement or metric used is to determine how much more does the top 1% income earners make above a standard measurement like the Median or Average household income. The greater the disparity, the more unjust or immoral the income inequality is.
The news media has made much of the fact that the rate in which this difference is increasing shows that only the top earners have really been making big amounts after the Great Recession. But I would suggest to you that this is not really an important factor, particularly when choosing where to put a practice. Granted, most professionals will fall into the 1% of the earners in the United States. To be in the top 1% of net worth this year, you will need about $7.8 million dollars. To be in the top 1% of earners, you need about $380,000 per year. How far that will go will depend on many factors such as the cost of living. $500,000 per year in New York City doesn’t go as far as it will in South Carolina.
True, in many states, general practitioners tend to hover closer to $200,000 but relative to the rest of the U.S., they are still doing pretty well. So, does it matter which parts of the U.S. have the greatest disparity between the really rich (which may include you) and everyone else? Yes, it does but not necessarily for the reason you think.
In terms of measurement, we will look at how many times the average the top 1% earn. At the outset, we will throw-out Wyoming which is an outlier because its population is very small and the rich are often not year-round residents. Instead, we will look at New York with 45.4x, Connecticut with 42.6x, Nevada with 38.3, Florida with 34.7x, and Massachusetts with 30.2x. Florida and Nevada might be outliers because of the large number of retirees they have which tends to mess up the numbers. But California is up there with 28.9x. Do you see the pattern? The states that have the highest differences tend to be mostly democratically controlled and seem to be creating legislation to punish the wealthy? Yeah, that means you.
If you haven’t figured out why they are coming after you, I recommend you read a little in the publication, “Mother Jones.” Listen to a few speeches by Bernie Sanders. Look at the initiatives and new laws being passed in the name of income “fairness.” My message in this session is that there are some states that the political will to “cure” income inequality is much greater than others. Illinois and New York are likely to pass some serious laws that will target professionals, doctors in particular as making conscionable revenues. Neighboring Indiana (16.5x) and Ohio (17.8x) will not.
Now, the question could be asked, “Are the attitudes of people truly reflected in the figures for income disparity and are local governments really going to act upon them?” That is a great question. But what we have noted is the relationship between legislation and these figures. It is likely more of a correlation than a cause-and-effect. But the correlation is strong enough that I thought it might be worth noting in a podcast session and letting you decide. There seems to be an underlying move toward more socialist ideals in the U.S. that is being expressed in the political will. Personally, it seems odd to me that the emphasis has not been placed on helping individuals earn more. Rather, it seems as though the direction in public opinion is to pull the high wage earners down. There is a part of the political will that we no long want a rising tide to lift all boats as President John F. Kennedy is quoted as saying. We seem to want the time to stop rising so everyone will be level.
But as my research indicates, this is not a national-wide phenomenon. Rather, it is regional. To a special degree, it means that people in practice as fleeing those areas in the U.S. that are intent on punishing them while others are welcoming of their business. If you are in a position to choose the part of the Country that will welcome the creation or expansion of a practice, I hope you will give it special consideration. In the meantime, my team and I are trying to figure out those places that are most congenial to new practices and professionals who want to grow something new.
You have been listening to the Perfect Place to Put a Practice Podcast from DoctorDemographics.com. I have been your host, Scott McDonald. And thanks so much for listening.