7 ms·

The richest 10% of households now represent 70% of all U.S. wealth

70 points by smacktoward 7y ago

jrh206 7y ago
Honestly thought it would be worse than that?
- code_duck 7y ago
  The "the share of wealth among the richest 1% increased to 32% from 23% over the same period." finding is maybe worse.
- FabHK 7y ago
  According to this, the top 1% control 32% of the wealth (and the bottom 90% about 33%, a bit hard to see on the graph). According to the previously discussed Bloomberg piece (about Zucman and Saez), the top 0.1% of taxpayers own 20% of US wealth, the top 1% control 39% (and the bottom 90% have 26%). So, it might be worse. EDIT to add: Bloomberg piece discussed here: https://news.ycombinator.com/item?id=19991496 https://news.ycombinator.com/item?id=19991496
- pzo 7y ago
  It is probably worse if you would compare wealth distribution globally. Those statistics only represent distibution in USA - 1st world country and currently the biggest economy in the world.
- pmoriarty 7y ago
  It probably is worse, because by definition no measure can include hidden wealth. Hiding wealth is not quite as easy as it once was. Thanks to financial transparency legislation and the pressure the US has mounted on the international banking system, simply dumping money in to a Swiss bank account isn't as effective as it once was. I'm frankly surprised that such measures were successful in countries that are run largely by and for the wealthy, and they are one of the developments that keeps my customary pessimism about the way the world is heading in check. Still, the ultra wealthy still have the resources to hire some very smart and creative people to hide their wealth in other ways.
lovedva 7y ago
Is the Pareto distribution the way it is because on every time step the tail ends have exponentially more ability to pull away? Is there some sort of statistics concept that models time variation of distributions (first derivative?) or their acceleration (second derivative ?)
- hammock 7y ago
  No. There is quite a bit of income mobility in the US, and these types of reports never really explore it. Instead, they leave you with the idea that the top 10% today are the same people that were there 10 years ago. Which is false.
  - deleted 7y ago
    [deleted]
  - FabHK 7y ago
    Social mobility in the US is, by now, smaller than in many other developed countries, IIRC. EDIT to add some sources: > The key observation, based on a growing body of research, is that when it comes to upward social mobility, the U.S. is truly exceptional — that is, it performs exceptionally badly. https://www.nytimes.com/2019/02/28/opinion/ivanka-trump-social-mobility.html https://www.nytimes.com/2019/02/28/opinion/ivanka-trump-soci... > Although the discovery of America’s low mobility, compared to similar countries, is relatively new, it turns out that mobility’s been low for some time. http://www.msnbc.com/msnbc/us-social-mobility-problem http://www.msnbc.com/msnbc/us-social-mobility-problem > A new study indicates that from the 1980s to the 2000s, it became less likely that a worker could move up the income ladder. https://www.theatlantic.com/business/archive/2016/07/social-mobility-america/491240/ https://www.theatlantic.com/business/archive/2016/07/social-...
    - dantheman 7y ago
      It's hard to compare, you have perfect mobility when everyone is dirt poor. In the USA it's possible for people to get really rich, so measuring how many from the very bottom make it to the very top is not a good metric; especially when composing to other countries whose top is in the middle. So if you compare mobility between income ranges you will find the US to be more mobile.
deleted 7y ago
[deleted]
chrisco255 7y ago
The Pareto principle strikes again!
jedberg 7y ago
So we know that this distribution is bad for the economy, and these trends generally precede a recession or depression. We also know that the policies that fix this, namely a wealth tax and or extremely high taxes on the wealthy generally don't produce the results you want (the ultra-rich tend to find ways to avoid said taxes so only the minor-rich end up paying). So what do we do?
- krsrhe 7y ago
  We do nothing special, and have a recession/depression cycle.
  - jedberg 7y ago
    People tend to die during those events due to lack of access to food and health care. So that may not be the best solution.
- jdavis703 7y ago
  Make the tax code simpler. Eliminate all deductions. Have the government distribute grants for R&D, home ownership, childrearing or whatever other behaviors they want to incentivize — there’s no reason all these programs need to be administered by the IRS.
- cm2012 7y ago
  I'm pretty sure that higher taxes in general do reduce inequality. Inequality is far smaller in Europe than in the US, smaller still in Scandinavia.
  - jopsen 7y ago
    It's also what you do with the taxes..
    - zanny 7y ago
      Barring legislative capture by the rich (which happens a lot because of their distortedly large influence) just taking money out of their pockets does a lot to remedy a lot of the negative consequences of such high inequality. They could tax the rich, straight pay off federal debt obligations, and society would be healthier for it. Wealth inequality is more about the influence money has in both micro and macro-economic and social contexts than "I want what they have". Its no different than how other monopolizations work - the more of a supply you hold, the more distorted the market is around you. The same applies to money. Except money impacts all aspects of society, all markets - it gives you a greater voice in government, gives you influence over the lives of upwards of billions of people, etc. Just taking away that power from private individuals is often by itself a net positive for liberty.
deogeo 7y ago
In other terms, top 1% owns 32%, leaving 38% for the 9% below that.
- deleted 7y ago
  [deleted]
esoterica 7y ago
A little bit of googling seems to indicate that the total household wealth in the US was $86 trillion as of 2015, and there are 127 million households in the US, so the average household has $700k net worth. If you have more than that (and many people in tech do), then you are a beneficiary of inequality, not a victim of it, and you don’t have the right to whine about the billionaires hoarding all the wealth at your expense. A surprising number of upper middle class yuppies love to act like they are downtrodden proles just because they have less money than Jeff Bezos.
- PierceJoy 7y ago
  Now do it with the median.
  - esoterica 7y ago
    The point of using the average is to evaluate the hypothetical where all the wealth in the country were distributed evenly (and many of the people who claim to be victims of inequality would actually be worse off in a truly equal society).
    - 6gvONxR4sf7o 7y ago
      The average wealth is the 84th percentile wealth. If everyone became worth $677k, 84% of people would be better off (inflation aside).
      - esoterica 7y ago
        That is true, but people in the 90th, and 95th and sometimes the 99th percentiles still complain about how oppressed they are because billionaires exist.
- defterGoose 7y ago
  As always, someone has failed to understand that averages are a poor statistical indicator of, well, anything.
Proven 7y ago
If I am content, why would I care how much the wealthiest 10 percent have? If I am not, how does knowing how much somebody else has help me? There is nothing newsworthy here. The Fed and US government give an unjust boost to many people, both rich and poor.
crimsonalucard 7y ago
Well if 10 percent of the population contributed to 70 percent of the world's wealth then this is fair. Without the 10 percents leadership the world would not be what is is today. Think about it, you're just an engineer. Anybody can build something trivial like a rocket ship, a super computer or a large hadron collider. However, not everyone has the leadership skills to actually inspire you build that rocket ship. That's why CEOs are so rare. If we weren't giving the majority of Americas wealth to these CEOs there wouldn't be any technology in the world today because nobody is around inspiring the engineers build this stuff. So this wealth inbalance makes perfect sense. The amount of skill involved with inspiring people vs building a light speed drive is incomparable, only the CEO can inspire engineers to build such a thing. If you hire 10 CEOs instead of 10 engineers and pay them 90 percent of Americas wealth you'd be accumulating so much leadership skills and potential into a single company that you won't even need the engineers anymore... The technology will just materialize from excess inspiration.
willart4food 7y ago
Pareto's Distribution
6gvONxR4sf7o 7y ago
How do you take into account negative wealth? If 20% of americans have zero or negative wealth, and you need the positive wealth from the 20th-40th percentiles to make up for the negative, do you say the bottom 40% account for zero percent of U.S. wealth? Or do you just call negative wealth zero for these purposes? How's the calculation work? I'm asking because I'm wondering whether it's "the rich are too rich" vs "debt is getting crazy" or somewhere in between.
- founderling 7y ago
  Money is debt. Imagine an island with two residents. Alice and Bob. There is no difference between these two scenarios: 1: Alice has 1 seashell. Bob has 0 seashells. 2: Alice has 0 seashells. Bob has 0 seashells. Bob owes Alice a seashell. Either way, Alice can go to bob and exchange her wealth for an apple. In scenario 1, she gives him a seashell. In scenario 2, she pays by voiding his debt. Either way, Alice owns 100% of all wealth.
  - 6gvONxR4sf7o 7y ago
    Isn't scenario 1 equivalent to 3: Alice has 0 seashells. Bob has 1 seashell. Bob owes Alice a seashell. Once all the accounts are settled by Bob paying Alice the seashell he owes her, it becomes scenario 1, so this seems a better match for scenario 1 than scenario 2 does.
    - founderling 7y ago
      Maybe. What I wanted to emphasize is that a dollar "In the bank" means nothing else then "The bank owes you a dollar". And banks do not lend money they don't have. And where do they have it from? From other customers. Ergo: Your $1 in wealth is someone elses $1 in debt.
      - 6gvONxR4sf7o 7y ago
        I agree with that, but it doesn't answer the question of how to account for negative wealth in a X% of americans own Y% of wealth calculation. In scenario 2, Bob has negative net wealth. In scenario 3, Bob has zero net wealth (which is why 1 and 3 are equivalent, not 2). Supposing we had a scenario where once all accounts are settled, Alice has 2 seashells, and Bob had -1 seashells, does alice have 100% of all wealth? 200%? (Equivalently, Alice has 1, Bob has 0, and Bob owes Alice 1) (edit for everyone else: this thread is confusing because I changed my comment to respond to founderling's edit, but founderling responded to my original comment before I changed it... ¯\_(ツ)_/¯)
TAForObvReasons 7y ago
Is this really a surprise? The 2008 bailouts were specifically targeted in a way that benefited the richest 10% of households disproportionately. Monies in the tax cuts and bailouts of companies were used for buying back stock [1], creating gains for those who owned stock but not for the other households that don't own sizable stock portfolios. https://www.cnbc.com/2019/05/25/the-stock-market-would-be-much-lower-if-it-werent-for-companies-buying-back-their-own-shares.html?yptr=yahoo https://www.cnbc.com/2019/05/25/the-stock-market-would-be-mu...
carbocation 7y ago
It's wild that neither this article nor the research paper it's based off of seems to define the absolute dollar value of those quantile cutpoints. https://www.federalreserve.gov/econres/feds/files/2019017pap.pdf https://www.federalreserve.gov/econres/feds/files/2019017pap...
gok 7y ago
> The national homeownership rate for the first quarter of 2019 was 64.2%, according to the U.S. Census Bureau. That is below the historic average of 65.2%, which dates back to the 1960s. Ugh I really wish we stopped caring so much about homeownership. Misguided pro-homeownership policies got rates unusually high in the mid 2000s, reaching almost 70% by 2005. It had no impact on wealth equality and almost certainly made the Great Recession worse, if not causing it entirely.
- drivingmenuts 7y ago
  The people who care about home ownership are either trying to justify/maintain the value of the home they own, or they’re trying to sell you a home. Since there’s such a large number of renters, what happens if we just convince them to ignore the non-renters?
tzs 7y ago
What is pretty much missing from almost all articles about the top N% having M% of some resource where N < M is a discussion of what percent the top N% should have. Note that unless everyone should have exactly the same amount of whatever resource is under discussion, then the answer to that question is not N should equal M, because that is mathematically impossible.
- throw0101a 7y ago
  > What is pretty much missing from almost all articles about the top N% having M% of some resource where N < M is a discussion of what percent the top N% should have. This involves a value judgement that goes beyond reporting the facts that the article does. You'd have to go to the op-ed section for that. Piketty has some ideas in his book: * https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... And even given the topic, and the book's length, I found it quite readable. Highly recommended.

70 points by smacktoward 7y ago

jrh206 7y ago

Honestly thought it would be worse than that?

code_duck 7y ago
The "the share of wealth among the richest 1% increased to 32% from 23% over the same period." finding is maybe worse.
FabHK 7y ago
According to this, the top 1% control 32% of the wealth (and the bottom 90% about 33%, a bit hard to see on the graph). According to the previously discussed Bloomberg piece (about Zucman and Saez), the top 0.1% of taxpayers own 20% of US wealth, the top 1% control 39% (and the bottom 90% have 26%). So, it might be worse. EDIT to add: Bloomberg piece discussed here: https://news.ycombinator.com/item?id=19991496 https://news.ycombinator.com/item?id=19991496
pzo 7y ago
It is probably worse if you would compare wealth distribution globally. Those statistics only represent distibution in USA - 1st world country and currently the biggest economy in the world.
pmoriarty 7y ago
It probably is worse, because by definition no measure can include hidden wealth. Hiding wealth is not quite as easy as it once was. Thanks to financial transparency legislation and the pressure the US has mounted on the international banking system, simply dumping money in to a Swiss bank account isn't as effective as it once was. I'm frankly surprised that such measures were successful in countries that are run largely by and for the wealthy, and they are one of the developments that keeps my customary pessimism about the way the world is heading in check. Still, the ultra wealthy still have the resources to hire some very smart and creative people to hide their wealth in other ways.

lovedva 7y ago

Is the Pareto distribution the way it is because on every time step the tail ends have exponentially more ability to pull away? Is there some sort of statistics concept that models time variation of distributions (first derivative?) or their acceleration (second derivative ?)

hammock 7y ago
No. There is quite a bit of income mobility in the US, and these types of reports never really explore it. Instead, they leave you with the idea that the top 10% today are the same people that were there 10 years ago. Which is false.
- deleted 7y ago
  [deleted]
- FabHK 7y ago
  Social mobility in the US is, by now, smaller than in many other developed countries, IIRC. EDIT to add some sources: > The key observation, based on a growing body of research, is that when it comes to upward social mobility, the U.S. is truly exceptional — that is, it performs exceptionally badly. https://www.nytimes.com/2019/02/28/opinion/ivanka-trump-social-mobility.html https://www.nytimes.com/2019/02/28/opinion/ivanka-trump-soci... > Although the discovery of America’s low mobility, compared to similar countries, is relatively new, it turns out that mobility’s been low for some time. http://www.msnbc.com/msnbc/us-social-mobility-problem http://www.msnbc.com/msnbc/us-social-mobility-problem > A new study indicates that from the 1980s to the 2000s, it became less likely that a worker could move up the income ladder. https://www.theatlantic.com/business/archive/2016/07/social-mobility-america/491240/ https://www.theatlantic.com/business/archive/2016/07/social-...
  - dantheman 7y ago
    It's hard to compare, you have perfect mobility when everyone is dirt poor. In the USA it's possible for people to get really rich, so measuring how many from the very bottom make it to the very top is not a good metric; especially when composing to other countries whose top is in the middle. So if you compare mobility between income ranges you will find the US to be more mobile.

deleted 7y ago

[deleted]

chrisco255 7y ago

The Pareto principle strikes again!

jedberg 7y ago

So we know that this distribution is bad for the economy, and these trends generally precede a recession or depression. We also know that the policies that fix this, namely a wealth tax and or extremely high taxes on the wealthy generally don't produce the results you want (the ultra-rich tend to find ways to avoid said taxes so only the minor-rich end up paying). So what do we do?

krsrhe 7y ago
We do nothing special, and have a recession/depression cycle.
- jedberg 7y ago
  People tend to die during those events due to lack of access to food and health care. So that may not be the best solution.
jdavis703 7y ago
Make the tax code simpler. Eliminate all deductions. Have the government distribute grants for R&D, home ownership, childrearing or whatever other behaviors they want to incentivize — there’s no reason all these programs need to be administered by the IRS.
cm2012 7y ago
I'm pretty sure that higher taxes in general do reduce inequality. Inequality is far smaller in Europe than in the US, smaller still in Scandinavia.
- jopsen 7y ago
  It's also what you do with the taxes..
  - zanny 7y ago
    Barring legislative capture by the rich (which happens a lot because of their distortedly large influence) just taking money out of their pockets does a lot to remedy a lot of the negative consequences of such high inequality. They could tax the rich, straight pay off federal debt obligations, and society would be healthier for it. Wealth inequality is more about the influence money has in both micro and macro-economic and social contexts than "I want what they have". Its no different than how other monopolizations work - the more of a supply you hold, the more distorted the market is around you. The same applies to money. Except money impacts all aspects of society, all markets - it gives you a greater voice in government, gives you influence over the lives of upwards of billions of people, etc. Just taking away that power from private individuals is often by itself a net positive for liberty.

deogeo 7y ago

In other terms, top 1% owns 32%, leaving 38% for the 9% below that.

deleted 7y ago
[deleted]

esoterica 7y ago

A little bit of googling seems to indicate that the total household wealth in the US was $86 trillion as of 2015, and there are 127 million households in the US, so the average household has $700k net worth. If you have more than that (and many people in tech do), then you are a beneficiary of inequality, not a victim of it, and you don’t have the right to whine about the billionaires hoarding all the wealth at your expense. A surprising number of upper middle class yuppies love to act like they are downtrodden proles just because they have less money than Jeff Bezos.

PierceJoy 7y ago
Now do it with the median.
- esoterica 7y ago
  The point of using the average is to evaluate the hypothetical where all the wealth in the country were distributed evenly (and many of the people who claim to be victims of inequality would actually be worse off in a truly equal society).
  - 6gvONxR4sf7o 7y ago
    The average wealth is the 84th percentile wealth. If everyone became worth $677k, 84% of people would be better off (inflation aside).
    - esoterica 7y ago
      That is true, but people in the 90th, and 95th and sometimes the 99th percentiles still complain about how oppressed they are because billionaires exist.
defterGoose 7y ago
As always, someone has failed to understand that averages are a poor statistical indicator of, well, anything.

Proven 7y ago

If I am content, why would I care how much the wealthiest 10 percent have? If I am not, how does knowing how much somebody else has help me? There is nothing newsworthy here. The Fed and US government give an unjust boost to many people, both rich and poor.

crimsonalucard 7y ago

Well if 10 percent of the population contributed to 70 percent of the world's wealth then this is fair. Without the 10 percents leadership the world would not be what is is today. Think about it, you're just an engineer. Anybody can build something trivial like a rocket ship, a super computer or a large hadron collider. However, not everyone has the leadership skills to actually inspire you build that rocket ship. That's why CEOs are so rare. If we weren't giving the majority of Americas wealth to these CEOs there wouldn't be any technology in the world today because nobody is around inspiring the engineers build this stuff. So this wealth inbalance makes perfect sense. The amount of skill involved with inspiring people vs building a light speed drive is incomparable, only the CEO can inspire engineers to build such a thing. If you hire 10 CEOs instead of 10 engineers and pay them 90 percent of Americas wealth you'd be accumulating so much leadership skills and potential into a single company that you won't even need the engineers anymore... The technology will just materialize from excess inspiration.

willart4food 7y ago

Pareto's Distribution

6gvONxR4sf7o 7y ago

How do you take into account negative wealth? If 20% of americans have zero or negative wealth, and you need the positive wealth from the 20th-40th percentiles to make up for the negative, do you say the bottom 40% account for zero percent of U.S. wealth? Or do you just call negative wealth zero for these purposes? How's the calculation work? I'm asking because I'm wondering whether it's "the rich are too rich" vs "debt is getting crazy" or somewhere in between.

founderling 7y ago
Money is debt. Imagine an island with two residents. Alice and Bob. There is no difference between these two scenarios: 1: Alice has 1 seashell. Bob has 0 seashells. 2: Alice has 0 seashells. Bob has 0 seashells. Bob owes Alice a seashell. Either way, Alice can go to bob and exchange her wealth for an apple. In scenario 1, she gives him a seashell. In scenario 2, she pays by voiding his debt. Either way, Alice owns 100% of all wealth.
- 6gvONxR4sf7o 7y ago
  Isn't scenario 1 equivalent to 3: Alice has 0 seashells. Bob has 1 seashell. Bob owes Alice a seashell. Once all the accounts are settled by Bob paying Alice the seashell he owes her, it becomes scenario 1, so this seems a better match for scenario 1 than scenario 2 does.
  - founderling 7y ago
    Maybe. What I wanted to emphasize is that a dollar "In the bank" means nothing else then "The bank owes you a dollar". And banks do not lend money they don't have. And where do they have it from? From other customers. Ergo: Your $1 in wealth is someone elses $1 in debt.
    - 6gvONxR4sf7o 7y ago
      I agree with that, but it doesn't answer the question of how to account for negative wealth in a X% of americans own Y% of wealth calculation. In scenario 2, Bob has negative net wealth. In scenario 3, Bob has zero net wealth (which is why 1 and 3 are equivalent, not 2). Supposing we had a scenario where once all accounts are settled, Alice has 2 seashells, and Bob had -1 seashells, does alice have 100% of all wealth? 200%? (Equivalently, Alice has 1, Bob has 0, and Bob owes Alice 1) (edit for everyone else: this thread is confusing because I changed my comment to respond to founderling's edit, but founderling responded to my original comment before I changed it... ¯\_(ツ)_/¯)

TAForObvReasons 7y ago

Is this really a surprise? The 2008 bailouts were specifically targeted in a way that benefited the richest 10% of households disproportionately. Monies in the tax cuts and bailouts of companies were used for buying back stock [1], creating gains for those who owned stock but not for the other households that don't own sizable stock portfolios. https://www.cnbc.com/2019/05/25/the-stock-market-would-be-much-lower-if-it-werent-for-companies-buying-back-their-own-shares.html?yptr=yahoo https://www.cnbc.com/2019/05/25/the-stock-market-would-be-mu...

carbocation 7y ago

It's wild that neither this article nor the research paper it's based off of seems to define the absolute dollar value of those quantile cutpoints. https://www.federalreserve.gov/econres/feds/files/2019017pap.pdf https://www.federalreserve.gov/econres/feds/files/2019017pap...

gok 7y ago

> The national homeownership rate for the first quarter of 2019 was 64.2%, according to the U.S. Census Bureau. That is below the historic average of 65.2%, which dates back to the 1960s. Ugh I really wish we stopped caring so much about homeownership. Misguided pro-homeownership policies got rates unusually high in the mid 2000s, reaching almost 70% by 2005. It had no impact on wealth equality and almost certainly made the Great Recession worse, if not causing it entirely.

drivingmenuts 7y ago
The people who care about home ownership are either trying to justify/maintain the value of the home they own, or they’re trying to sell you a home. Since there’s such a large number of renters, what happens if we just convince them to ignore the non-renters?

tzs 7y ago

What is pretty much missing from almost all articles about the top N% having M% of some resource where N < M is a discussion of what percent the top N% should have. Note that unless everyone should have exactly the same amount of whatever resource is under discussion, then the answer to that question is not N should equal M, because that is mathematically impossible.

throw0101a 7y ago
> What is pretty much missing from almost all articles about the top N% having M% of some resource where N < M is a discussion of what percent the top N% should have. This involves a value judgement that goes beyond reporting the facts that the article does. You'd have to go to the op-ed section for that. Piketty has some ideas in his book: * https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... And even given the topic, and the book's length, I found it quite readable. Highly recommended.