Appalling wealth inequality even before pandemic windfall profits for a few
The divvying up of the “wealth pie” portrays a picture of profound inequality. In 2019, the Top 1% held one-third of all wealth. The next 9% controlled another 38%. Together they make up the Top 10%—a small group with a very large slice (71%) of the wealth pie. This left less than one-third (29%) to the Bottom 90%.
This analysis is based on 2019 Survey of Consumer Finances (SCF) data recently released by the Federal Reserve Board. The SCF is a (mostly) triennial survey that samples U.S. families and it is one of the best data sources on wealth. Wealth, otherwise known as net worth, is an accounting of assets minus liabilities.
Average family wealth in 2019 was $748,800 but at the median (the family right in the middle) it was considerably less at $121,700. This is due to a few families that have very high levels of wealth at the top of the distribution that pull up the average. For instance, the Top 1% averaged $27.7 million—or 228 times the wealth of the median family. The rich are getting relatively richer as this ratio—which stood at 125 in 1962—has steadily grown.
In early 2020, our response to the pandemic brought a halt to the longest economic expansion on record in the U.S. The COVID-driven recession continues to cause enormous pain and struggle for millions of workers and businesses. Nevertheless, as reported, for a few it has been a boom-economy on steroids.
As I’ve done in the past this post puts U.S. wealth into further context by using the most recent SFC data along with the Forbes 400 list, both from last year, for comparison. Forbes estimates the net worth of the wealthiest among us—all 400 would not be captured in the SCF. If we look at both we can glean some interesting insights.
The cumulative wealth of the richest Americans on the Forbes list 400 was $2.96 trillion last year. The wealth held by these 400 equated to the total wealth held by the entire bottom 58% of families in the U.S.
Heading up the list was Jeff Bezos at $114 billion—CEO of Amazon the largest e-commerce retailer. Also on the list are seven Waltons—six children, one grandchild, and one daughter in-law of Sam or James “Bud” Walton, the founders of Wal-Mart—the single largest corporate employer in the U.S. Amazon holds the second spot. The combined worth of the Walton-seven was $195.1 billion. Together Bezos and the Waltons amassed $309.1 billion. How much is $309.1 billion? It would take 2.5 million families all with the median wealth-holding of $121,700 to equal that held by these eight folks.
The SCF data are replete with summary statistics that highlight important nuances. For instance, the median wealth of Black families was $24,100 or just 12.8% of the $188,200 held by Whites, or that the Latino share of White wealth was 19.2%. For perspective, at Black median wealth, it would take 12.8 million families to equate to that held by Bezos and the Waltons.
Median net worth was just $310 for families in the lowest 25%. Average net worth for this group was negative $13,500—due to the fact that the bottom 10.4% of families all have negative net worth. By the way, yes those at the bottom have negative net worth—and, no they are not all young doctors and lawyers in debt but on their way to lucrative careers (although some are).
As my colleague Josh Bivens has pointed out, critics argue that the comparison above is unfair because families with negative wealth distort the calculation—after all, any family with one dollar of net worth would have more than the bottom 10.4%. So, while I certainly do not suggest ignoring the hardship for those with the least—for argument’s sake I’ve adjusted the data and set all negative values at the bottom of the distribution to zero. The adjusted data still show, for instance, that the wealth the Forbes 400 equates to the bottom 55.6%.
Now in 2020 as the stocks of Amazon and Walmart soar (up 92% and 43%, respectively, over their lows in March to December 1st.) Bezos and the seven-Waltons have gotten that much richer. As they tout the importance of their workers, Amazon fought yet again, as they and Walmart have done for decades, to break any attempts by their workers to unionize—at a time when workers desperately need a collective voice. Just months after Amazon ended the $2 hazard pay for essential workers—Bezos’ wealth surpassed the never-before-reached $200 billion mark in August.
Researchers at the Brookings Institution recently analyzed worker compensation against extraordinary profits since the pandemic. The report “Windfall Profits and Deadly Risks” includes Walmart and Amazon, the two companies that head up the top 20 retailers. Brookings ranked both in “the least generous” category. Enormous pandemic-profits have added tens-of-billions to the wealth tally of Bezos and the Waltons—not so much for their workers.
Wealth inequality is vast and growing. It is one reason families are not as economically resilient as they would otherwise be. Over the last four decades, there has been a massive redistribution of wealth to those at the top. And, the reality of decades of tax cuts for the rich, austerity for the rest became all too evident when COVID hit.
The U.S. is in need of a bold FDR-esque revival in the spirit and content of his proposed Economic Bill of Rights, sometimes referred to as the 2nd Bill of Rights, created after WW II and the Great Depression. Enumerated within was the right for all people to decent housing and wages, a good education, medical care, and protection from the economic fears of, among others, old age, sickness, accident, and unemployment.
The relevance of the 2nd Bill of Rights in our current context is every bit as urgent as it was during the Great Depression. The opportunity for a radical restructuring of our economy to foster a just and fair society for all is in front of us. We could have these things and more if we pursue a more just, fair and equitable policy agenda. It is not a lack of wealth, but will that stands in our way. It is far, so very far, past the time to reverse course and pursue economic policies that start to unwind plutocratic-America. After all, the enormous inequities of today derived from purposeful-policy designed to deliver them.