Wealth distribution in the U.S.

The story for U.S. wealth distribution is similar to that for income: more inequality in the last few decades.

Inequality from the St. Louis Federal Reserve

But wealth is much more unequally distributed than income. For example, the U.S. wealth Gini is about 0.9, whereas the income Gini is closer to 0.5.

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Looking at the top 20% of the population distribution, we can see that wealth is dramatically uneven. The top 1% have about 40% of all wealth. The very richest Americans, the top 0.000003% have about as much wealth as the bottom one-half of all households (remember that this bottom one-half has very little wealth once debt is taken into account.)

For details on the richest Americans see the annual Forbes 400, topped in 2018 by Jeff Bezos at $160 billion. The Walton family (of Wal-Mart fame) had even greater wealth, estimated at $170 billion.

Why is Wealth is Difficult to Measure

Wealth is difficult to measure. Unlike income for which we have extensive survey and tax records, there are fewer attempts to measure wealth. Every five years the U.S. Federal Reserve Board does a survey of wealth.

But because wealth is so unevenly distributed, that survey cannot accurately gauge the wealth held by the small number at the top. For those estimates, economists rely on studies such as the annual Forbes 400 Richest Americans. Researchers at the magazine estimate wealth by looking and stock-holdings and other public records.

Even when we have good surveys, the meaning of household wealth can be tricky to define. For most households, most of their wealth is in a home, values that have increased for many in recent years even taking into account their mortgages. But is a family owning a $300,000 home really that wealthy? Unlike money in the bank or stocks or bonds, housing wealth can’t easily be spent. Economists call this illiquid wealth. If a family sold their home to collect the $300,000, they would need those funds to purchase another place to live.

As a result, economists studying wealth look a financial wealth, the numbers used above that count only wealth such as bank account, stock and bonds, assets that can be used more easily. This wealth is considered more liquid or easily converted into spending. By this measure, financial wealth is significantly more unequally distributed than it would be if one counted housing wealth.

Consider the following data on wealth for the top 1% and the middle 60%.

Which of these assets are least liquid? Which are more liquid?

Wealth Owned by Top is in the form of stock and business and wealth owned by the middle is in the form of homes and pensions

(Source: Wolff Table 7)