The 400 richest Americans — the top 0.00025 percent of the population — have tripled their share of the nation's wealth since the early 1980s, according to a new working paper on wealth inequality by University of California at Berkeley economist Gabriel Zucman.
Those 400 Americans own more of the country's riches than the 150 million adults in the bottom 60 percent of the wealth distribution, who saw their share of the nation's wealth fall from 5.7 percent in 1987 to 2.1 percent in 2014, according to the World Inequality Database maintained by Zucman and others.
Overall, Zucman finds that "U.S. wealth concentration seems to have returned to levels last seen during the Roaring Twenties." That shift is eroding security from families in the lower and middle classes, who rely on their small stores of wealth to finance their retirement and to smooth over economic shocks like the loss of a job. And it's consolidating power in the hands of the nation's billionaires, who are increasingly using their riches to purchase political influence.
Zucman, who advised Sen. Elizabeth Warren, D-Mass., on a recent proposal to tax high levels of wealth, warns that these numbers may actually understate the amount of wealth concentrated in the hands of the rich: It has become more difficult to account for the true wealth of the ultra-rich in recent decades, in part because many hide their assets in offshore tax shelters.
Wealth, here, is roughly synonymous with net worth: the value of everything a family owns, minus the value of any debt. Assets such as homes, land, rental properties, stock holdings, business equity and bank accounts are included.
The definition excludes personal possessions like cars and furniture. They're difficult to measure, don't produce income and would amount to a tiny fraction of the nation's net worth if they were included, according to Zucman.
Consider a person who owns a $250,000 house with $200,000 in mortgage debt. She has $5,000 in her bank account and $25,000 in a 401(k). She has a net worth of $80,000, a figure derived from the sum of all her assets ($250,000 + $5,000 + $25,000) minus the sum of all her debts ($200,000). That $80,000 puts her close to the national median of household net worth, according to previous research by Edward N. Wolff of New York University.
American wealth is highly unevenly distributed, much more so than income. According to Zucman's latest calculations, today the top 0.1 percent of the population has captured nearly 20 percent of the nation's wealth, giving them a greater slice of the American pie than the bottom 80 percent of the population combined. That bottom 80 percent figure includes the 1 in 5 American households that has either zero or negative wealth, meaning that its debts are greater than or equal to its assets. According to NYU's Wolff, the share of U.S. households with zero or negative wealth has risen by roughly one-third since 1983, when it was 15.5 percent.
The top 10 percent of individuals, meanwhile, own more than 70 percent of the nation's wealth, more than twice the amount owned by the bottom 90 percent. The top 10 percent have increased their share of wealth by about 10 percentage points since the early 1980s, with a concomitant decline in the share of wealth owned by everyone else. In some ways, Zucman finds, the distribution of wealth in the United States more closely resembles the situation in Russia and China than in other advanced democracies such as the United Kingdom and France.
Rising wealth inequality may not necessarily be a zero-sum game: The rich gobbling up a larger share of the pie may not be a problem if there's still more pie left for everyone else. There's good reason to suspect this may be the case for income: While incomes at the top have risen dramatically, incomes in the middle have risen, too, just much more slowly.
But the same dynamic is not occurring with household wealth. According to Wolff, the median household wealth in the U.S. in 2016 ($78,100) was slightly lower, in inflation-adjusted dollars, than it was three decades ago in 1983 ($80,000). Over the same time period, the average wealth of the top 1 percent of households more than doubled, from $10.6 million to $26.4 million.
The wealthy are becoming wealthier, in other words, and there's good reason to think it's happening at the expense of everyone else. The interplay between money and power, Zucman writes, may be self-reinforcing: The wealthy use their money to buy political power, and they use some of that power to protect their money.