One of the biggest issues in America today is wealth inequality. We live in one of the richest nations in the world but it does not matter because the majority of the wealth is concentrated into a few hands.
Wealth inequality is not only one of the great economic issues of our time but also one of the greatest moral and political issues of our time.
Wealth inequality can be described as the unequal distribution of assets within a population. The United States exhibits wider disparities of wealth between rich and poor than any other major developed nation.
Defining Wealth
We equate wealth with “net worth,” the sum total of your assets minus liabilities. Assets can include everything from an owned personal residence and cash in savings accounts to investments in stocks and bonds, real estate, and retirement accounts. Liabilities cover what a household owes: a car loan, credit card balance, student loan, mortgage, or any other bill yet to be paid.
In the United States, wealth inequality runs even more pronounced than income inequality
Household Wealth
Source: Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data, Emmanuel Saez and Gabriel Zucman, August 2015
The share of America’s wealth held by the nation’s wealthiest has changed markedly over the past century. That share peaked in the late 1920s, right before the Great Depression, then fell by more than half over the next three decades. But the equalizing trends of the mid 20th century have now been almost completely undone. At the top of the American economic summit, the richest of the nation’s rich now hold as large a wealth share as they did in the 1920s.
Source: Distribution of Household Wealth in the U.S.: 2000 to 2011, U.S. Census Bureau, August 2014
The 21st century has not been kind to average American families. The net worth — assets minus debts — of most U.S. households fell between 2000 and 2011. Only the top two quintiles of the nation’s wealth distribution saw a net increase in median net worth over those years.
Source: Household Wealth Trends in the United States, 1962-2013: What Happened over the Great Recession?, Edward N. Wolff, December 2014
The rich don’t just have more wealth than everyone else. The bulk of their wealth comes from different — and more lucrative — asset sources. America’s top 1 percent, for instance, holds nearly half the national wealth invested in stocks and mutual funds. Most of the wealth of Americans in the bottom 90 percent comes from their principal residences, the asset category that took the biggest hit during the Great Recession. These Americans also hold almost three-quarters of America’s debt.
The Forbes 400
Source: Combined Net Worth, Forbes 400, 1982-2015
The most visible indicator of wealth inequality in America today may be the Forbes magazine list of the nation’s 400 richest. In 1982, the “poorest” American listed on the first annual Forbes magazine list of America’s richest 400 had a net worth of $80 million. The average member of that first list had a net worth of $230 million. In 2015, rich Americans needed net worth of $1.7 billion to enter the Forbes 400, and the average member held a net $5.8 billion, over 10 times the 1982 average after adjusting for inflation.
Source: Combined Net Worth, Forbes 400, 1982-2015
Inequality is skyrocketing even within the Forbes 400 list of America’s richest. The net worth of the richest member of the Forbes 400 has soared from $2 billion in 1982 to $76 billion in 2015, far outpacing the gains at either the Forbes 400 entry point or average.
The Racial Wealth Divide
Source: Institute for Policy Studies, Billionaire Bonanza: The Forbes 400 and the Rest of Us, December 2015
The billionaires who make up the Forbes 400 list of richest Americans now have as much wealth as all African-American households, plus one-third of America’s Latino population, combined. In other words, just 400 extremely wealthy individuals have as much wealth as 16 million African-American households and 5 million Latino households.
Source: Pew Research Center analysis of Federal Reserve Survey of Consumer Finances data, December 2014