People at the top of the wage scale are mostly employed in “thought” oriented jobs. The productivity of thought oriented jobs has been increasing at a greater pace than the productivity of workers at the bottom of the wage scale, who are mostly employed in “manual labor” oriented jobs. With increasing productivity comes larger margins, and the ability for companies to pay workers more wages.
When a person’s income level surpasses the point needed to maintain a comfortable lifestyle, surplus income can be directed away from consumption and poured into investments, growing one’s net worth. Basically, you begin to use your money earned from higher wages to make you more money through investments. Effectively, you create two income streams: one from wages and the other from your return on investments.
Once a person’s net worth surpasses one million dollars or their wages exceed $250k per year, the threshold for being considered an Accredited Investor, a whole new world of investment opportunities becomes available. These new investment opportunities often come with significant tax advantages to allow invested dollars to grow even faster. All this contributes to the fact that the income gap between the rich and poor is continuing to widen. The first step for those people at the bottom of the wage scale who desire to become rich is to migrate their employment from manual labor oriented jobs to more thought oriented jobs to gain more income from wages. This can be accomplished through either more education or by becoming self-employed.
By resisting the urge to use the increased income for more consumption and instead investing it, the invested money will begin to grow their net worth. In the end, income from wages is limited. You can only work so many hours per week. However, rich people accumulate wealth first through higher wages and then by making their money, which has no defined upper limit, work for them to make even more money. That is how the rich become richer while the working poor struggle to make ends meet.
