Wealth Inequality and The Top 1%

Business Insider: Myth Busting: The Wealth Gap Isn't at a Record High

The article says:

A National Bureau of Economic Research paper by Edward N. Wolff, a New York University professor and one of the leading U.S. experts on wealth shares, shows that in 1998, the richest one percent of Americans owned 38.1 percent of the nation's wealth. It has fallen fairly steadily since then to the current level of 35.4 percent.

And then shows this graph:

The preceding sentence doesn't match the data. The percentage dropped nearly five points between 1998 and 2001, and then began to slowly rise again, though it is true that it has not risen to all-time highs.

The Edward Wolff article, The Asset Price Meltdown and the Wealth of the Middle Class, has the following abstract.

I find that median wealth plummeted over the years 2007 to 2010, and by 2010 was at its lowest level since 1969. The inequality of net worth, after almost two decades of little movement, was up sharply from 2007 to 2010. Relative indebtedness continued to expand from 2007 to 2010, particularly for the middle class, though the proximate causes were declining net worth and income rather than an increase in absolute indebtedness. In fact, the average debt of the middle class actually fell in real terms by 25 percent. The sharp fall in median wealth and the rise in inequality in the late 2000s are traceable to the high leverage of middle class families in 2007 and the high share of homes in their portfolio. The racial and ethnic disparity in wealth holdings, after remaining more or less stable from 1983 to 2007, widened considerably between 2007 and 2010. Hispanics, in particular, got hammered by the Great Recession in terms of net worth and net equity in their homes. Households under age 45 also got pummeled by the Great Recession, as their relative and absolute wealth declined sharply from 2007 to 2010.

I'm having trouble with my SSRN account so I haven't yet been able to look at the article. Lots of interesting facts that need to be reconciled.

Comments

[Mike Aubrey]

Note that the drop is during the 2000-2001 economic problems, but there was no equivalent drop during the Great Recession that we've just been through. That says to me that the most wealthy didn't really aren't the suffering job creators that they're pretending to be. Rather, they've been enjoying a profoundly successful and profitable period while everyone else has been struggling.

[Michael W. Kruse]

The 2000-2001 bubble was tech stock related. I suspect it hit the wealth of people at the top harder because they are the ones who own stocks and mutual funds. This recession is different. It was a housing bubble.

Hinted at in the abstract, is that homes made up nearly all of wealth of many people in the bottom half of the distribution. Homes are not the only, or even the biggest, asset in the portfolio of the top half. So housing bubble bursts and economy tanks. Investment income has seen a recovery but homes have not. That has a disproportionate wealth impact on folks at the bottom. That would mean a thinning in the middle of the wealth distribution. Some going up in the continuum and and some going down, but the middle shrinking. Not certain, but I strongly suspect it.