A new academic study confirms what most Americans have known for a long time — the super-rich have rigged the system in their favor and are taking advantage of a broken system to continue to pile up more wealth. The consequences of this wealth inequality are the decimation of the American middle class and the emergence of a new underclass of impoverished service workers.
The authors of the new study — Emmanuel Saez and Gabriel Zucman — highlight that wealth inequality was high in the beginning of the twentieth century, decreased steadily from 1929 to 1978, but has continuously increased since then. Moreover, the increase in wealth inequality is almost completely due to the increase in the top 0.1% wealth share from 7% in 1979 to 22% in 2012, nearly as high as in 1929. The study also showed that the wealth share of the bottom 90% wealth edged up until the mid-1980s, and has been declining steadily since then.
Both income inequality and wealth inequality are close to all-time highs
Some apologists for the super-rich have argued that the growing income inequality in the U.S. and globally is not a big deal as wealth inequality (wealth concentration) is not growing at the same pace as income inequality. Saez and Zucman rebut this theory by clearly showing that wealth inequality is actually near all-time highs.
They note: “Our paper, however, challenges this view. On the basis of new, annual, long-run series, we find that wealth inequality has considerably increased at the top over the last three decades. By our estimates, almost all of this increase is due to the rise of the share of wealth owned by the 0.1% richest families, from 7% in 1978 to 22% in 2012, a level comparable to that of the early twentieth century (Figure 1).”
More on the top 0.1%
According to the analysis of tax records in the study, the top 0.1% includes about 160,000 American families with net assets above $20 million in 2012. Saez and Zucman highlight why understanding the wealth concentration of the .01% is important.
First, the distribution of economic resources is a matter of public interest as it impacts all American families. They note is is nearly impossible to get truly accurate results with survey data which is why they chose to use tax records covering all the richest families.
The top 0.1% is also important from a macroeconomic perspective. These 160,000 super-rich families control a sizable share of aggregate wealth and accounts for a large fraction of its growth.
Saez and Zucman note: “Over the 1986-2012 period, the average real growth rate of wealth per family has been 1.9%, but this average masks considerable heterogeneity: for the bottom 90%, wealth has not grown at all, while it has risen 5.3% per year for the top 0.1%, so that almost half of aggregate wealth accumulation has been due to the top 0.1% alone.”
The full study can be found here