The Distribution of Wealth in America


There is very little data about the distribution of wealth in America.  There is one source, the Survey of Consumer Finances, sponsored by the Federal Reserve Board,  that does provide data from 1983.

These data suggest that wealth is concentrated in the hands of a small number of families. The wealthiest 1 percent of families owns roughly 35%  of the nation's net worth, the top 10% of families owns over 71%, the top 20% owns about 85%, and the bottom 40% of the population owns way less than 1%.  As with the case of income, the evidence suggests an increase in inequality over time.


The Distribution of Wealth and Income

The distribution of wealth is much more unequal than the distribution of income, especially when focussing on the bottom 60% of all households.  The bottom 60% of households possess only about 4% of the nation's wealth while it earns 28.7% of all income.

 



Can you think of any reason for the much greater inequality in wealth than in income?

What do we tax more in the US:  wealth (assets) or income?

Think of all kinds of "income" taxes that exist -- federal, state, and (in some cases) local.  Think of the very few kinds of assets that are taxed:  property taxes, in some states taxes on the value of cars.   If you own considerable assets do you have a reason to keep them in forms that will not be taxed?
 


Which is a Better Measure of Societal Inequality:  Wealth or Income?


Looking at the distribution of wealth and looking at the distribution of income gives the researcher two quite different views of the amount of inequality in American society.   Which economic measure -- wealth or income -- should be emphasized?

 
Alan Greenspan, former chairman of the Federal Reserve Bank, made the case for wealth:
"Ultimately, we are interested in the question of relative standards of living and economic well-being. We  need to examine trends in the distribution of wealth, which, more fundamentally than earnings or income, represents a measure of the ability of households to consume."
Those who argue for the greater importance of income make the case that for wealth to actually have a significant impact on one's standard of living it has to be translated into higher income.
 



*For those interested in reading a very good study of wealth distribution in the US, please see Edward N. Wolff's  "Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze," June, 2007.  (Download the full text pdf file.)