Most people know about income inequality: the gap in earnings between the 1 percent and the rest of us that has been growing steadily since the 1970s.
But there is also growing inequality when it comes to wealth — not just income, but a household’s total assets, such as savings, value stored in a house, pensions, or other sources of money, minus anything it owes. The difference between wealth held by the top 1 percent and the rest of us has climbed back up to levels not seen since the roaring 20s, according to new preliminary research from economists Emmanuel Saez and Gabriel Zucman:
The two economists note that wealth has always been very concentrated at the top, but that the top 10 percent of the distribution has started making bigger gains in recent decades. Yet even that doesn’t tell the whole story, as most of the changes are happening within the 1 percent. Since the 1980s, the top 0.1 percent of the wealth distribution, or those who have more than $20 million in assets, has seen big increases, and the top 0.01 percent, or those with more than $100 million, has seen even bigger ones. But there hasn’t been a big jump in wealth inequality for people below the 0.1 percent:
Meanwhile, those who the economists call the “middle rich,” or everyone who makes it into the top 10 percent but aren’t rich enough to reach the top 1 percent, are actually losing ground:
While wealth inequality today looks a lot like it did in the 1920s, the factors driving it are slightly different. Between 1913 and 1929, the economists note, the rich saved more and also got higher returns on their wealth, which led to “explosive inequality dynamics.” Then after the crash until 1986, the Great Depression and then highly progressive capital taxes kept inequality at bay. But since then, wealth concentration has been rising thanks mostly to a difference in savings rates between the rich and poor. The bottom 90 percent were basically unable to put anything away in the years before the financial crisis, while the richest had a high savings rate.
This is a problem that my continue to worsen, as fewer Americans say they’re able to put money away than before the crisis. About one in three isn’t setting anything aside at all. It also diverges based on income: those with incomes over $50,000 fare better at saving. This problem, coupled with stagnant wages for most of us alongside soaring profits and wages for those at the top, will continue to mean that the 1 percent accumulate more and more income and wealth.