The richest 10% of households now represent 70% of all U.S. wealth
marketwatch.com
marketwatch.com
Most of the top tier wealth is driven by investments and in the wake of globalization (and "easy" money from CBs,) stocks and other asset classes have risen drastically. Given that the lower rungs in the world all have little to no investments compared to the "upper class" it's just basic math than people with investments will out perform those with none.
There will undoubtedly be a mean reversion on asset prices at some point in the future, which will lower the wealth gap as prices fall...but that might not be a good thing. What we really need, if we want to bridge the gap, imo, is teaching people to invest their money...and I mean in more than just a 401K and a house. If you look at actual living standards, even the middle and lower classes are in much better shape than they were in every previous decade. So we're making strides there. So we need to improve our education system (specifically for the lower class) and teach everyone to invest in the economy as a whole.
Moreover, you are simply not correct to say that living standards are improving for everyone. Life expectancy in the United States has gone down for the third year running (the first time that's happened since WWI) due in large part to crises that disproportionately affect poor people.
And poor people usually do have money to invest, I grew up very poor. My grand mother had no plumbing, no A/C or central heating (and this is the US,) so I know what true poverty is. You will not find that virtually anywhere in the US now.
I beg to differ. The area where I grew up, in rural southeastern Ohio, has been ravaged by the opioid crisis. IMHO, it goes hand-in-hand with the loss of industry and jobs and the rise of poverty and hopelessness that's been left in the wake of that loss of economic prosperity.
The majority of student debt is held by a very very small percentage of overall students, and many of them came from wealthy families or are going into very rich fields.
Professional students obviously will have substantially more. But most professional school loans are private and not federal as there is a cap.
Also I believe your argument along the lines of you don't have it as bad as your grandfather did therefore you aren't poor is a fallacy.
I'm middle class and about 18 months ago finally moved some modest savings (5 figure amt) into a robo-advisor controlled account. It's basically been flat the entire time, and is now up 1.4%, not even beating inflation over the same time period. Now, I get it, patience is everything. But it's definitely pretty detached from reality to blame poor people for their bad financial literacy in not having tens of thousands to drop into "investments" when this kind of thing is the reality even for those of us that do.
The proportional wealth gap of these groups (not individuals in each of the groups) should stay the same, and even the absolute gap should decrease (on 25% return, one group earns 0.25 billion and the other earns 0.42 billion, thus decreasing the gap by 0.17 billion).
I could understand the argument that the top 1% are smarter investors (though my butt-feel disagrees :), or that the next 9% have less non-tied funds available for investment, but you haven't brought those arguments: you even mention the same returns on their proportionally smaller investments.
So how did the top 1 to next 9 go from 23:37 to 32:38? It does not flow from your initial or subsequent argument, or am I missing something?
[0] https://money.cnn.com/2018/05/22/pf/emergency-expenses-house...
Source?
As of 2015, U.S. 15 year olds do about average on international tests of financial litteracy, as compared to other OECD countries[0]
The issue is not that 2/5ths of people are bad at managing their money, it's that they don't have any money to manage.
[0] http://www.oecd.org/education/pisa-2015-results-volume-iv-97...
http://www.aei.org/publication/some-amazing-findings-on-inco...
Here's the thing though: I'm not really sure that even with a fiduciary responsibility that the mere incentive of "getting a percent of interest earned on the behalf of clients" really does the market any good.
A 10000 dollar investment in the right place at the right time can make the difference for a small business, which won't even appear on the radar for an investment fund.
These types of money management schemes basically bias the system in favor of a smaller population of larger beneficiaries.
I don't know about anyone else, but I think if people held onto their cash, and managed it to improve what they can locally, I think that we'd see more bang for the capital buck expenditure.
I have seen much more get done with a bit of money in the right place at the right time rather than just throwing absurdly large amounts around and just banking on getting a couple percent back.
My layman's point-of-view at least.
For example, you would need to explain why up from post-war until the mid-70s you see increases in income for most people basically matching increases in productivity, and why today there is a disjunction between the two.
It isn't merely a principle at work.
So, the rest of the top 10% have remained basically at the same level of (relative) wealth (37% to 38%), and the wealth from the poorest has moved to the top 1%!
So, looking at the top 10% here paints a less bleak picture of where the wealth is being accumulated/moved.
IOW, it's not even the rich getting richer, it's just the super rich!
And I'm sure the housing crash of 2008 didn't help. Real estate is often a key financial investment for the middle class. Housing has recovered (and more!), but a lot of middle class lost/sold their homes and didn't benefit from the appreciation.
https://dqydj.com/net-worth-brackets-wealth-brackets-one-per...
I assume the average senior developer here in a mid-range city probably makes around $120k ~ $160k. Where does that fall into national averages on just income (and yes, I realize this article is talking about overall wealth and not necessarily income).
I wonder what mid range looks like.
Why? And after that, how?
I can't possibly imagine housing not being treated this way as long as the population is growing.
And it's not really even housing that's driving the issue, it's LAND. In some form or another, basically everything of value that's not IP (and arguably even IP) requires land use.
Guess what people don’t own large number of those types of assets?
So before everyone does the typical “we should get government involved” rabble rousing, be aware that it is because the government got involved that this is happening.
IOW, government got involved on behalf of the rich claiming to also benefit non-wealthy in the long run.
This is all a bit simplified, and coming from someone only affected transitively (so without full focus on the developments).
According to [0] there were 73,110 ultra wealthy US citizens in 2017, i.e. individuals with more than $30m in net worth. The same article says that the average net worth in this group is $120m.
In aggregate this group thus controls 120m * 77 110 = 9.3 trillion dollars.
Since there are around 330m people living in the US this would amount to only a little over 28k per person when redistributed.
[0] http://money.com/money/4833875/ultra-wealthy-americans-milli...
That's... that's a lot. And that's only from the top 0.02%.
If we stole all the money from every 10%er household, who control 70% of aggregate household wealth, we'd have 70% of $93 trillion (2016 value) or $65.1T. Spreading that across 90% of 127M households nets about $564,500 per.
In the past what has driven this trend downward?
A period of sustained growth that saw full employment, adult vocational education - in the US in part from the GI Bill, healthy and rising welfare, rising wages, good pension provision and an unprecedented growth of the middle classes.
High income taxes, sometimes extremely high, from both sides of politics saw greater opportunities for infrastructure and redistribution.
It started to fall apart with the 73 oil crisis, that in good part marched us into neo-liberalism and Thatcherism/Reaganism.
(Wealth and income distributions have significant differences)
See picketty's book "capital in the 21st century" if are interested in light bedtime reading of statistical evidence for changes in wealth over the last century or two
From what I understand, it might be possible to set up a partnership which does investments, and pool money from about 50 partners. That would allow a decent angel investment group with a few-thousand-dollar buy in. Why don't more people do this? It's very doable to learn about how to read a business plan, read financials, etc. Though it's a risk, it might be helpful to allow the middle class to make informed investments to grow wealth.
I know my parents could afford to have a lot less “wealth” and be comfortable thanks to my mom’s pension as a public school employee.
On the other hand, how much worse off is the middle class now that private pensions are rapidly disappearing?
https://www.cnbc.com/2018/07/27/how-much-you-have-to-earn-to...
> To be among the top 1 percent of U.S. earners, a family needs an income of $421,926
For top 10%, you have $178,793.00 per
> Just to put some numbers on it 2017 you'd need a net worth of about 1.1 million dollars to be in the top 10%.
> https://dqydj.com/net-worth-brackets-wealth-brackets-one-per....
Top 1% - more than $434k/year household income.
Top 10% - more than $179k/year.
50% is $61k/year.
Source: https://dqydj.com/united-states-household-income-brackets-pe...
This puts 70% of net worth/total wealth at $68.5 trillion, owned by the top 10%. I'm sure someone can find the "number of households" but I don't have it handy, so I'm going to just go with 120 million, and see what the average wealth of the top 10% (12 million households) is:
$5.7 million
Of course, the 9.999% above the bottom person could own way more, and that final 0.001% that qualifies might have much less than $5.7 million. So how do you figure out that piece?
Oh - someone else provided a link: https://news.ycombinator.com/item?id=20051782
Looks like in 2017 $1.1 million qualified you for 10%, while a little over $10 million qualifies you for 1%. (That's almost too neat...)
It's why 'The rich get richer, the poor get poorer' is an old expression, I guess.
https://www.celebritynetworth.com/articles/billionaire-news/...
I see that as only half the story. While 0% loans were filling the coffers of Bank of America and Sallie Mae and Chase and Wells Fargo, those same banks were turning around and loaning the money out for consumption at 25% or for assets that rapidly depreciate like cars and TVs at 5-25%, or purchases of questionable value like college tuition at more variable rates.
r > g is still something of an open question in my mind, but the economic weaponization of debt and the inability of consumers to shield themselves from its adverse effects seems to be the reason for the wealth gap and why the increase in capital returns has payed better than overall economic growth, effectively transfering the future wealth of the poor to the present assets of the rich.
It could probably be solved in a generation with stricter regulations on consumer lending and the conversion of social security into a mandatory 401k, similar to Australia's "Super" program.
The fix for capitalism is to force everyone to be capitalists.
Maybe in an ideal world that could be true, but it would also require for the bottom 90% to get 90% of the total income received in an given year. As we can see, that's nowhere near the case.
So of course the single digit percentage of the population that makes the lion's share of total income also has to pay the lion's share in taxes.
That means 90% of people are not contributing as much as they could to society.
Our closest biological relatives, chimps, brutally rip apart their own infants and eat their brains as a matter of course. That's biological reality. That's your starting point. Everything past that is a gift. If we just want to say that we can imagine an even better life than the one we have today and we should work towards that.. I'm right there with you. But how can you look around you and say life isn't good? Not "good" compared to what situation that has ever existed in all of history?
It seems like a college degree is more necessary in order to get a middle class job. So if we equated college with apprenticeship I think college might result in more debt for a similar result. However, I'm not super informed about how apprenticeship worked so I could very well be mistaken.
Imagine median worker income in the 1970s was $100. For a lot of women, they weren't allowed to be workers. Let's increase the population of "workers" by 20% (adding those women), but only pay those women $70 (because patriarchy). What's the median income now? $95.
Let's increase the number of "workers" by another 20% by bringing in 30 million immigrants and their descendants. Those immigrants were making $5 in their old country, but they aren't represented in that original $100 median worker salary. But now they're making $60. Better than they were, but worse than white men because racism. What's the median income now? $89.
This is the real story behind all the drama about median wage stagnation, median household income, etc. We added a bunch of lower wage people into the calculation. Those people are better off than they were before, but they drag down the one stat we look at with tunnel vision. That doesn't mean I deny any of the real concerns people have about racism/sexism/etc. But everything can literally be better for everyone, and as I demonstrated above we can still decrease the median household income.
When you say something like "median household income has barely budged in the last twenty years" that's a very shallow assessment. What's happened to the labor market? What's happened to the housing market? Are there more single people as a percentage of the population? Should we expect single households to have the same income as married households? What has been the historical household income for single moms? Are there more single moms today than 20 years ago? How does that impact median household income?
Is it all down to underpaid immigrants, then?
https://articles.ezlandlordforms.com/landlord-and-real-estat...
That should, on average, cut the household income of those houses in half compared to if two of those singles were married and/or living together. I don't know what the data is for just the last 20 years, but taking a small fraction of the households and splitting them up into two households each making half as much puts a big dent in median once you run the math.
For a household size of 2.6, we wind up with 3,846 households. If there's 3,846 households with a median income of $100, that makes our total economy $384,600.
Now let's assume enough of those families divorce such that there are now only 2.5 people per household. We wind up with 4,000 households. We still have the same total economy of $384,600 but split across more households (4000) that results in a median household income of $96. That's a 4% drop in median income.
Now of course in real life the change in household size isn't just people getting divorced (or never marrying). It's also reduce birth rate. But I hope you can see how a small change in single people makes a relatively big change in median income.
Real per capita GDP rose by around 25% over this period. What accounts for the other 21%?
I'm not making any claims that the gains have been perfectly proportional across all segments of the population. Only that the average worker is really better off today than they were before, and that the median wage charts don't give us very helpful information to gauge how much better/worse off they are.
These new additions to the labor pool don't just add another worker/job at the lower end affecting the median chart, they provide downward pressure on everyone's wages because they compete for those jobs. These workers are productive, so GDP goes up, but there is downward pressure on all wages. That is a big part of the story of the increasing wage/wealth disparity between the rich and everyone else. It's not the only factor, but it's a significant one.
I don't understand why you bring up women entering the workforce again. As I mentioned, that's wrong twice: the proportion of women in the workforce is flat over this timeframe, and additional women in the workforce would push median household income up, not down.
So we're left with immigrants. Thus my original question way up there: is it all down to underpaid immigrants, then?
What is the point of mentioning that decreasing household size could make the number misleading, when household size didn’t decrease by a significant amount? What is the point of repeatedly bringing up workforce participation by women?
It’s fine to say that a measure might be misleading because of other factors. But when those factors don’t actually make it misleading for the example being discussed, I don’t really get the point.
It’s also weird that you focus entirely on the possibility that everyone is better off. Isn’t it also possible that everyone is worse off while the median household income remains flat? Smells of ideological bias.
Not sure what better word could be used instead of overthrown.
Soon enough, the elites will not be overthrowable. The advantage that the many have over the few is the retraction of their consent; without housekeepers, farmers, maintenance workers, the rich have historically been forced to capitulate because they couldn't maintain their standard of living without the workers. With the rising tide of automation, I can see a very near future where the workers are simply obsolete, and the division between classes will become so wide as to be completely un-transversable. Those in control of the farmland and the machines that tend it will have no use for the lower classes any more. That's why we need to work on decentralized production, with households owning a production factor of their own which will keep them producing value. Think decentralized factories.
To be honest, if you live anywhere on the peninsula (looking at you Atherton) and even areas of San Francisco - a reckoning is coming. Neighborhoods will burn.
"There's a storm coming, Mr. Wayne. You and your friends better batten down the hatches, because when it hits, you're all gonna wonder how you ever thought you could live so large and leave so little for the rest of us."