We’ve heard about income inequality so much. The top one percent owns half of all of the wealth in the world. On top of that, income inequality is increasing at an ever more rapid pace. Pretty soon the wealthy elite will own everything and we’ll be back to feudalism!
In the U.S.
It has been suggested that the wealthiest one percent in America own 42 percent of all of the wealth. It’s a little less than the global numbers, but still staggering.
On top of that, the financial elite make 7.5 times more than the median income and retain 69 times as much as the median in their financial holdings. These numbers make the disparity look pretty scary, but recent data suggests otherwise.
A study by the Brookings Institution challenges what we’ve been told so far. When they include data from social programs like Medicaid and food stamps, the numbers change dramatically.
The wealthy own 33 percent of wealth in America, almost 10 percent less than the other calculations. They also show the ten year wealth gap increase was only 6 points. This is still a sizeable wealth gap, and it is increasing, but the numbers are less extreme than you’ve been told so far.
On top of that, it’s important to denote the difference in income inequality and wealth inequality. When we look at income, you need to earn roughly $380,000 annually to hit the top percentile. Earners in this group receive 18 percent of all income in America.
Wealth inequality is much more dramatic. To be in the top group by wealth, you need a net worth of $8.4 million. This is the group that owns 33 percent of wealth in the country.
While there is certainly overlap between top income earners and top wealth holders, the majority of Americans pulling in $380,000 a year are not worth $8.4 million or more. Of course, none of this really paints the picture correctly. To do that, we have to think globally.
Global Inequality
Across the globe, the top 1 percent are expected to surpass owning 50 percent of global wealth in 2016. This will be the greatest wealth inequality ever seen by humanity so far.
We saw how difficult it is to be in the top in the U.S., but how much do you need to pull to be a global elite. As it turns out, the number is shockingly small. An annual income of $32,400 USD is all it takes to hit the top 1 percent of the world.
The wealth measure is a bit tougher, coming in at $770,000. To put those numbers in perspective, the average working American adult earns $50,756 a year and is worth $340,340.
However, the average American with a fully paid mortgage and no significant credit card debt is worth right around $630,000. So, simply overcoming your debt can put you tantalizingly close to that top one percent.
Let’s look at this from another angle. Roughly half of all Americans make enough money to be considered one percenters globally. That number is based on the total population of the U.S., so children are included. Well more than half of the full-time workforce is globally elite by income.
What does this really tell us?
Mostly it indicates that poverty stricken areas aren’t seeing fast change. The poorest regions of the world are remaining fairly stagnant while the wealthier regions are getting richer, and fast.
Income and wealth inequality are increasing, even within our borders, but the major disparities come from poor regions still being without proper infrastructure, education and healthcare. If trends continue unchecked, within a few short decades the poorest 10 percent of Americans will still be pushing the wealthiest 1 percent globally.
What it Means
Income inequality is an inescapable part of globalization and free trade. It isn’t nearly as badly as the media has led us to believe, but it is still unmistakably increasing.
Regardless of where you fall in the American spectrum, the country’s economic growth all but guarantees that even the poorest among us are headed towards elite wealth status.
This doesn’t change the fact that they’ll be in poverty by our standards. It really highlights how little it takes to be in that one percent and how much room for improvement we still have, both domestically and globally.
Regards,
Ethan Warrick
Editor
Wealth Authority
