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Equally Unequal

If you think the income gap in America is large enough, the wealth inequality is by no means smaller. But first let’s be clear what the difference between income and wealth is. According to this blog (https://www.stlouisfed.org/open-vault/2019/august/wealth-inequality-in-america-facts-figures) by the Federal Reserve Bank of St.Louis, income includes such sources as wages, interests, capital gains, and social security payment; wealth is primarily the assets one owns minus the debt one owes. Things like savings, real estates, and stocks comprise one’s wealth.


In 2016, the top 10% of American households ranked by wealth had at least $1.2 million. During the same year, the bottom half of American households had $97,000 or less. In terms of their share in US wealth, the former accounted for 77% of the total while the bottom 50% only a paltry 1%.



The top 1% of households have their net worth largely tied to stocks (Elon Musk, Jeff Bezos, Bill Gates come to mind.) Actually this group owns 50% of total US stocks. The next rung, the top 90-99% have their wealth largely in pensions followed by stocks. For the bottom 50%, real estate is their largest asset. As more likely than not, they need to borrow to buy a house, this means their largest asset is also tied to debt.


Due to the disproportionately larger share of stocks in the top 10% households, one would think that the rising stock market since March, 2020 should enrich the wealthy substantially. Sure enough, the latest data from the Fed speaks to this fact. Wealth of the top 10% increased by 39.4% from $31.6 trillion in Q1 2020 to $44.06 trillion in Q2 2021, while the bottom 50% saw wealth rising by a smaller 21.8% during the same period from $6.88 trillion to $8.38 trillion.



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