Who is wealthy?
Date posted: November 10, 2011
There’s been a lot of recent comments and concerns not only about the distribution of income in the country, but also about the distribution of wealth. What is the difference between income and wealth? And how has the distribution of wealth changed over time? N.C. State University economist Mike Walden answers.
“Oftentimes … in discussions people use wealth and income interchangeably. Income is what economists call flow. It’s what you earn, for example, from your job. You get a paycheck every month, et cetera.
“Wealth is what we call stock. It’s what you invest … and then to calculate your wealth (you) take the value of your investments and minus any debts that you have and that’s actually … your definition of wealth. Or some call it net worth.
“Actually we don’t have as good of data for wealth as we do for incomes. But we … can … say a couple of things. Wealth has become more concentrated. For example, a hundred years ago the top 1 percent of households had 40 percent of the wealth. Today it’s not quite this high, but it’s still high. It’s somewhere in the 20 to 25 percent range for that top 1 percent.
“And also comparing shorter periods of time, if you look at, say, the change in wealth concentration over the last 20 years, it has moved up somewhat. It’s moved up about 5 percentage points in terms of the wealth held by the top 1 percent of folks.
“And we’ve seen these trends moving in a similar direction to income. Income has become more concentrated. So, those people who are concerned about wealth and wealth concentration, they do have the data on their side. Of course that still begs the bigger question of why has this happened and what, if anything, we should do about it.
Category: Economic Perspective