The wealthiest 1 percent of American households own 40 percent of the country’s wealth, according to a new paper by economist Edward N. Woolf. That share is higher than it has been at any point since at least 1962, according to Woolf’s data, which comes from the federal Survey of Consumer Finances.
From 2013, the share of wealth owned by the 1 percent shot up by nearly three percentage points. Wealth owned by the bottom 90 percent, meanwhile, fell over the same period. Today, the top 1 percent of households own more wealth than the bottom 90 percent combined. That gap, between the ultrawealthy and everyone else, has only become wider in the past several decades.
Let’s talk a bit about that wealth gap. Wealth, often described as net worth, describes how much stuff you actually have: It’s the value of your assets minus the value of your debts. If you have a $250,000 house but you still owe $200,000 to the bank on it, and you have no other debts or financial assets, that means your net worth is $50,000.
In the United States, the distribution of that wealth is even more skewed toward the top than the distribution of income. For the sake of illustration, let’s say that America is a country of 100 people, and all of the wealth in the country — the homes and land and financial assets — is represented by 100 slices of pie.
That works out to an average of one slice of pie per person, which is exactly what everyone would get if we lived in a society where wealth was equally distributed.
But that’s not the society we live in, and indeed that’s not the society that most of us want to live in either. People generally agree that if you work harder you’re entitled to more of the pie, and that if you don’t work at all, well, barring certain circumstances, no pie for you.
In 2010, Michael Norton and Dan Ariely surveyed more than 5,500 people to find out how they thought wealth should be distributed in this country: How much of the pie should to go the top 20 percent of Americans, and to the next 20 percent, and so on, all the way down to the bottom of the distribution?
On average, respondents said that in an ideal world the top 20 percent of Americans would get nearly one-third of the pie, the second and middle quintiles would get about 20 percent each, and the bottom two quintiles would get 13 and 11 slices, respectively.
In an ideal world, in other words, the most productive quintile of society would amass roughly three times the wealth of the least productive.
Now, let’s take a look at how the pie is actually distributed. These figures come from Wolff’s working paper, and he expands on them further in his new book A Century of Wealth in America.