Changes in the Distribution of Wealth Between 1989 and 2004

Tom Bozzo of Marginal Utility let me know about this Fed report on changes in the distribution of wealth and net worth from 1989 to 2004. Here's the abstract plus several graphs constructed from tables in the report. The first graph shows, for example, that the percentage of net worth held by the bottom half of the distribution was 2.5% (see table 5 in the report):

Currents and Undercurrents: Changes in the Distribution of Wealth, 1989–2004, by Arthur B. Kennickell Senior Economist and Project Director, Survey of Consumer Finances, Federal Reserve Board: Abstract This paper considers changes in the distribution of the wealth of U.S. families over the 1989–2004 period ... Real net worth grew broadly over this period. At the same time, there are indications that wealth became more concentrated, but the result does not hold unambiguously across a set of plausible measures. ... Graphical analysis suggests that there was a shift in favor of the top of the distribution, while for the broad middle of the distribution increases were about in proportion to earlier wealth. Within this period, there are other interesting patterns. For example, from 1992 to 2004 the wealth share of the least wealthy half of the population fell significantly to 2.5 percent of total wealth. ... The paper also presents some information on underlying factors that may explain a part of the distribution of wealth, including capital gains, saving behavior and income, inheritances, and other factors. There are two special topic sections in the paper. The first presents information on the distributions of wealth of African American and Hispanic families. The second presents information on the use of debt across the distribution of wealth.

As a sample of what's in the report, here are some of the tables in graphical form. First, here's a picture of the proportion of total net worth held by net worth percentile groups. This shows, for example, that the percentage of net worth held by people in the 99th-100th percentile group is slightly larger than the percentage held by the 50th-90th percentile group (click on graphs to bring up larger versions):

Next, this is the dollar value of net worth for various percentile groups of the net worth distribution:

Here is the percentage distribution of wealth across income classes. There are two versions, the one in color and one in black and white that shows the changes with better contrast:

Here's a look at the Gini Coefficent:

And finally, the distribution of the age of the family head by wealth (not net worth) group for 1989 and 2004:

The wealthier are older in 2004. There's a lot more in the report, including an analysis of sources in the changes in the wealth and net worth distributions. The paper looks at changes in capital gains, saving behavior, income, inheritances, debt, demographics, and other factors to explain shifts in the wealth and net worth distributions and finds that income, saving behavior, capital gains, and inheritances all play a role in the explanation.

Comments

[Emmanuel]

This paper is fascinating, if depressing. I'm not entirely sure what to make of the supplementary use of Forbes 400 data, though.

[anne]

http://www.calvorn.com/gallery/photo.php?photo=5950&u=4|11|...

Eurasian Wigeon
Patchogue Lake, Long Island, New York.

Well done and revealing and discouraging, though not surprising.

[algernon]

If I may be the angel's advocate, it isn't so bad.

"Real net worth grew broadly over this period."

And aging of the population probably explains a lot: People under 35 generally haven't accumulated anything. More people are 55 than in '89, & that group has accumulated.

Also, it's different people who are rich in '04. I'm worth roughly 16 times more now than I was in '89. Is it a bad thing that there are ~9 million American millionaires now compared to 2 or 3 million in '89?

More negative explanations might involve the deteriorating public schools; anyone only having the benefit of them is no doubt less able to earn a living now than in '89. More fatherless children may be another factor.

Nevertheless, there is still a lot of opportunity to honestly prosper in this country.

[Wyn]

If you'd like to look at some detailed tables, including some from Kennickell's study and some additional ones generated from them, which shed light on the underlying dynamics, go to the Wealthandwant website at http://www.wealthandwant.com.

Start with the simpler tables at http://www.wealthandwant.com/issues/wealth/90-9-1_Tables.html

or wait for the guided tour, which will be up in a couple of days....

Emmanuel, as I read it, the Forbes 400 data simply means that wealth is even more concentrated than what the SCF study which mostly omits that cohort shows. What we don't know, exactly, is which sectors they own. Presumably STOCK and BUS are the two biggies. And those are already quite concentrated just looking at the SCF data.

[Wyn]

Would anyone like to argue against the estate tax, with this data in front of them?

[true]

Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike ‘lesser’ estimates, this includes all stocks, bonds, cash, and material assets held by America’s richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own ‘humanitarian’ spin on it. Calling attention to her own ‘good will’. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don’t fall for all of their ‘humanitarian’ CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can’t just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars. Transfered FROM US TO THEM. Over a period of about 27 years. Thats Reaganomics for you. The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They will never settle for a reasonable share of ANYTHING. They will do whatever it takes to get even richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductable crumbs and call themselves ‘humanitarians’. IT CAN’T WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. Crime, poverty, and suicide will skyrocket. So don’t fall for all of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductable contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah, Ellen, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. So don’t fall for their ‘good will’ BS. ITS A LIE. If you fall for it, then you’re a fool. If you see any real difference between the moral character of a celebrity, politician, attorney, or executive, then you’re a fool. WAKE UP PEOPLE. The 1% club will always say or do whatever it takes to get as rich as possible. Without the slightest regard for anything or anyone but themselves. Vioxx. Their idea. Sub-prime. Their idea. NAFTA. Their idea. Outsourcing. Their idea. The commercial lobbyist. Their idea. The multi-million dollar lawsuit. Their idea. $200 cell phone bills. Their idea. $200 basketball shoes. Their idea. $30 late fees. Their idea. $30 NSF fees. Their idea. $20 DVDs. Their idea. Subliminal advertising. Their idea. The MASSIVE campaign to turn every American into a brainwashed credit card, pharmaceutical, love-sick, celebrity junkie. Their idea. All of which concentrate the world’s wealth and resources and wreak havok on society. All of which have been CREATED AND ENDORSED by celebrities, athletes, and executives. IT MAKES THEM RICHER. So don’t fall for their ‘ good will’ ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTABLE PR CRAP. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. EXTREME WEALTH HAS MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don’t believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.