Net Wealth Distribution: The Bottom 50% Have 1% of the Wealth

-edited

Those in the bottom half have nothing. The top 10% have 70% of the wealth.

Between the second quarter of 2010 and the second quarter of 2012, the bottom 50 had negative combined net wealth.

Here is the same chart in dollar terms.

Unfathomable?

Someone posted a similar chart on Twitter with the comment "this is unfathomable".

Why?

Many people have no savings and close to half the population (48%) own no stocks.

Please consider What Percent Of Americans Own Stocks?

As of 2019, the top 10 percent of Americans owned an average of $969,000 in stocks. The next 40 percent owned $132,000 on average. For the bottom half of families, it was just under $54,000. Stock ownership has fallen to only around 52% overall since the financial crisis.

It's easy to believe that those in the 40-50% range have nearly all of that $54,000 average. Then what about debt? How much mortgage debt does the bottom half have?

At the lower rungs, the balance sheet consists of nothing but credit card debt and auto loans.

Well over half the population is not prepared for retirement.

Fed Spotlight

Janet Yellen used to moan all the time about wealth inequality.

Ironically, the Fed is a sponsor of this setup.

Asset inflation does not benefit those with no assets. And inflation kills those on fixed incomes as well as those seeking to buy a home but can never afford one.

Mike "Mish" Shedlock

Comments (59)
No. 1-16
EdKennedy
EdKennedy

What is the population basis for these statistics? If these statistics are based on the ENTIRE US population, then the problem is nowhere as bad as they show. 38% of the Us population is under age 30 (US Census 2017). Children and young adults normally don't have significant financial assets. Even if it is all adults only, most don't show significant assets until middle age after student loans and mortgages are being paid off.

The real question is what is the financial situation for adults entering retirement, including the value of defined benefit retirement plans? That makes a huge difference in the amount of wealth one has to save before retirement. Does the 50% unprepared figure you stated include retirees who have generous pensions (like government workers) who have no need to build up large financial reserves?

GeeWiz
GeeWiz

The Fed's market manipulation policies obviously helped those closest to the Fed more than the rest of the population.

But the failed US education system is the reason the bottom 50% didn't benefit at all. Dozens of studies have shown US high school alleged graduates cannot (are not able to) do simple math, cannot balance a checkbook, cannot read and write at a middle school level. Students are so bad at solving "word problems" that the category was dropped from evaluation in recent years.

Schools in the US are about creating and protecting jobs for public unions. Teachers aren't very well paid, but administrators sure as $%(# are paid mad money. Janitors in schools get so much overtime one has to wonder when or if they sleep (they clock in for a lot of overtime, whether they work while clocked in is a different matter).

Poorly educated, or mis-educated persons are going to have low skills, and low earnings potential for life. Simple as that. Increasing welfare will not address a failed education system

themonosynaptic
themonosynaptic

"And inflation kills those on fixed incomes as well as those seeking to buy a home but can never afford one."

Hi Mish - I always thought inflation was the friend of the indebted. If I buy a house in 2020 for $300,000 with an $250,000 fixed-rate 30-year-mortgage and we had hit a bout of strong inflation for 10 years (e.g. 5%), then my salary will need to rise to cover the increases in inflation (granted an assumption, but it is basically what happened to my dad in the 1970s), then the mortgage payment stays the same, but is far less onerous.

JanNL
JanNL

Watched from Europe, it has been amazing how consumption debt was pushed from the 1960s onwards as a good thing.

ZZR600
ZZR600

Someone please explain to me how pension funds are meant to pay pensions when all they can buy a bonds yielding negative rates?

Mish
Mish

Editor

"Not in the US. There's lot of debt paying over 2%."

Unfortunately, pension plan assumptions are 7.5% or so on average

Curious-Cat
Curious-Cat

EdKennedy makes an excellent point about whether these stats include minors. And therefore I wonder if FRED didn't present the stats this way to make the situation look as bad as possible. I'm gonna have to consider FRED stats more carefully in the future.

GeeWiz
GeeWiz

A few instances of our "poor" public servants:

130 LIRR Employees Made More Than $200K Last Year https://patch.com/new-york/northport/130-lirr-employees-made-more-200k-last-year-0

LIRR overtime ‘cheat’ hung out at home on the clock, retired with full pension anyway https://nypost.com/2019/07/09/lirr-overtime-cheat-hung-out-at-home-on-the-clock-retired-with-full-pension-anyway/

Those are just two recent stories. NYC has a whole administrative floor of teachers who have been convicted, in a court of law, of various offenses. Some have been convicted of pedophilia. They remain on the NYC education payroll because they cannot be fired by spineless politicians. After sitting around reading the paper for a few years, these convicts will retire with full pensions.

And none of that will be reflected in these wealth distribution statistics

GeeWiz
GeeWiz

There are many areas of the country where so called non-profit organizations own a majority of the land, pay no income taxes and no property taxes.

Yale University in New Haven CT is a glaring example that was recently in (local CT) papers. They have a HUGE endowment, and pay no taxes on it at all. They are the largest land owner in New Haven, but pay no property taxes at all. They collect millions in tuition, much of it paid using tax subsidized student loans that the university knows cannot be paid back. They raise tuition 8-10% (3-4 times CPI inflation) every year.

The fact is: when parasites like Yale pay nothing, everyone else has to pay a lot more to make up for it. Property owners in New Haven that own less than 50% of the land pay 100% of the property taxes, while Yale pays nothing.

Anyone who doesnt believe this unfair distribution of costs leads to an imbalance of wealth needs to do a serious rethink.

How many locales around the US are dominated by tax evading non-profits? Every "college town" just for openers. Do we really need to subsidize organizations that radicalize young people, but don't teach them employable skills?

Brutus' Admirer
Brutus' Admirer

I suspect this does not include the capitalized value of transfer payments, which is considerable.

SMF
SMF

Historically, this figure hasn't changed much, if at all, during recorded history.

bradw2k
bradw2k

That breakout of the top 1% above the next 9% is quite something. They must be really really smart.

Sechel
Sechel

banruptcy laws are being re-written to create a permanent debtor class, which is basically one step above slavery. We're seeing similar things happen with consumer protection.

Je'Ri
Je'Ri

I don't know the fuller US stats, but in London the wealth held by the bottom 50% is a bit over 5%; the more interesting stat is that the bottom 10% are in a negative wealth situation. I would not be surprised if the bottom 10% in the US were also in negative territory.

offbyone
offbyone

I would like to measure the bottom as those not receiving entitlements. A little unfair to include those subsidized from above.

ebr fl
ebr fl

Your closing paragraph is exactly right, the Fed is directly at fault for manufacturing this asset inflation that benefited those at the very top. It's government intervention of the worst kind, one that takes from those who need it the most, and gives it to those who don't need it at all. Most young and poor people are now much further away from owning assets at this point, the homeownership rate is a near record lows. Those in the middle class who can buy, pay high and take on large debts relative to their stagnant salaries. I'm very afraid of communism, but this, in many ways, is worse. Pathetic.