About 8 billion people live on earth, and around 335 million people live in the US. The total net worth of the global equity market is more than $152 trillion. The US equity market alone is $52 trillion (source).
On the back of the envelope calculation,
$152,000,000,000,000 / 8 billion people = $19,000/person. In US alone calculation, 52,000,000,000,000 / 335 million US residents = $155,223/person.
The above estimate clearly shows that the US and the world have enough wealth for each person to give everyone a comfortable life. Moreover, in the US, the entire wealth is more than enough to make everyone rich.
So, why is it that not everyone is rich, and most people live paycheck to paycheck?
The reality is that not everyone can become rich. Here are some core reasons why everyone can’t be rich.
Over the years, the price of everything has gone up, but the salary hasn’t. There was a time when a single-family member could support an entire family and afford a house, education, and car. But now it’s impossible.
In 1987, the average cost to attend a public university was about $1490 or $3,190 in today’s inflation-adjusted price. Whereas the average tuition fee to attend a public university in the 2020-21 school year was $10,740 (source) — an increase of 236%.
In 1987, the average cost to attend a private university was $7050 or $15,160 in today’s inflation-adjusted price. Whereas in the 2017-18 school year, this cost was $34,740 (source) — an increase of 129%.
According to the US Census Bureau, the average house price in 1990 was $79,100 or $163,991 in today’s inflation-adjusted price. But the average house price in 2021 was $273,000, according to Zillow — an increase of 66%.
But over the years, the Federal minimum wage hasn’t increased.
According to the US Department of Labor, in 1991, the federal minimum wage was $4.25/hour or $8.97/hour in today’s inflation-adjusted price. However, in 2022, the federal minimum wage is $7.25/hour — a decrease of 23%.
So, over the last 30 years, education costs increased 236%, housing prices increased 66%, but workers’ salaries decreased 23%.
The senate and house representatives regularly increase their salary and expenses but refuse to pass a bill that increases the current federal minimum wage from $7.25. For example, in 2022 alone, the house and senate increased their staff pay by 21% (source).
Therefore, it’s irrelevant how hard a person works; he won’t be able to afford a house or higher education without a student loan in today’s market.
These socio-economic scenarios will make some people rich and some people poor. Thus everyone can’t become rich in this society.
Opportunity is a vital factor in becoming rich. The opportunity to gather wealth in the US is more than in India. Even the minimum wage earners in America earn more than India’s upper-middle class. Even in America, not everyone has access to amass wealth on a similar level.
An offspring from wealthy parents will have better access to education, capital, and opportunities than a person whose parents aren’t that well off.
Most top technology companies such as Google, Apple, Tesla, and SpaceX hire primarily from top universities in America, such as Princeton, Stanford, Harvard, MIT, etc. These universities are expensive and require proper references to get into. It’s tough to get very high-paying executive jobs without a degree from prestigious universities.
A software engineer, a doctor, and an accountant don’t earn the same. Similarly, a person who works at a retail store will never be able to make the same amount of money as an engineer.
Some will become rich because of these excessive opportunities, and others will stay poor due to a lack of chances to prosper.
Not everyone has the same life goal and ambition. Furthermore, not everyone has the skill, knowledge, know-how, and stamina to fulfill that ambition.
No two-person physiology works similarly. Some people can memorize something quickly; others struggle to remember basic facts. Some are better at math; some are at language. Some are better speakers; some are better at athletics. Some people are better leaders; others are followers and don’t have the skill to lead people.
Therefore, even if two people want to achieve the same goal, one will be successful, and another will fail due to skill differences.
Elon Musk and Jeff Bezos both created rocket companies at the same time. However, Elon Musk’s SpaceX, valued at around $100 billion, is one of the most successful rocket companies. On the other hand, Jeff Bezos’s rocket company Blue Origin still could not achieve what SpaceX achieved and is valued at only a few billion dollars.
Even though Jeff is successful with his Amazon, he could not replicate it with Blue Origin despite investing tens of billions of dollars.
George R.R. Martin, the writer of “Song of Ice and Fire,” is a prolific writer and can write 15 pages per day. At the same time, some writers struggle with ideas and fail to complete 1 page per day.
Thus no two people have the same skill set to achieve the same goal. Because of these differences, no two people will be able to achieve the same level of success and hence money.
Some people are not good with money. Many won lotteries worth millions of dollars but lost it all within months or years (source).
Two persons with the same job will not be able to achieve the same financial freedom. Family, relatives, health conditions, and lifestyle will determine the end financial situation.
A single miscalculation in the stock market will ruin one’s finances, whereas others will make millions.
Therefore, the way people earn money and manage wealth is crucial in one being poor and one being rich.
The term being “rich” is not defined. How much money makes one person rich. Is it $20,000? Is it $100,000? Or is it $1 million? If we define being rich as living a comfortable, happy, and stress-free life, then many earn a living wage and are still happy. Some people earn more than $100,000 and are still not happy.
Those who seek money will never get satisfied even if they amass and become incredibly wealthy. The more money they acquire, the more they will desire; it’s human nature. For example, even though Elon Musk is one of the world’s wealthiest people right now, he still describes himself as a cash-poor person.
Not everyone desires the same lifestyle and living standards. Some are happy living in the desert living in Arizona, whereas some desire to live in the downtown Manhattan condominium.
Everyone can’t be rich. Various factors such as education, socio-economic opportunities, skills, knowledge, etc., will determine who becomes rich and who stays poor.