Bottom Half of U.S. Owns २.५% of Wealth

The Bottom Half Own 2.5%,
and Earn 15% Yearly:
Wealth and Income Distribution in the U.S.A.

Economic Apartheid in America is the title of a very good book, and summarizes this essay’s title. Here I provide a snapshot of income and wealth distribution to make it easy to remember. Without obscurity of massive details we can think about improving the basic reality.

Wealth
Wealth is fairly simple. Wealth distributes or breaks down into four sectors, 1/3, 1/3, 1/3, and zero. The four sectors are the top 1%, the next 9%, the percentiles 50 to 90, and below the 50th percentile. The zero goes to the bottom 50% who only have 2.5%, of the national net worth, really almost unnoticeable among the other sectors. Total wealth is a little above $50 trillion in 2006, which is $17 trillion per 1/3rd.

The ratio between the bottom 50% and the top 50% is 1 to 39, or 2.5% to 97.5%. The average household wealth is about $440,000 per household. The median is $78,000 (SWA, 2006/2007, p255). The average wealth for the bottom 50% is $22,000. For the top 50% the average is $855,000. The ratio for bottom and top averages is 1 to 39.

The ratio between the lower 50% and the top 1% is almost 1 to 700. The lowest half on average own $22,000, the top $15,400,000. (In my essay “A Wealth Tax to Eliminate Poverty” I show clearer data on this point. Remember that if you convert all the wealth into $100 dollar bills, half the households will have a stack one inch high, the top one percent will have stacks 60 feet high, and Bill Gates and Warren Buffett will have stacks 30 miles high.)

It is so lop-sided that we don’t need to know any more. See Currents and Undercurrents, 2006, Federal Reserve Board, Report of Consumer Finances, Arthur Kennickell. Also look at the lcurve.org for a graphic.


In a just society what should the ratios be? Quintile {1 -- 5%}, {2 -- 15%}, {3 -- 20%}, {4 -- 25%}, {5 -- 35%}. I have no idea. But the present ratios and distributions are not condusive to security for millions of working people.

Warren Buffett is quoted saying, “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning।” (Quoted in The Big Squeeze, Steven Greenhouse, p.41)
(Source: Federal Reserve report Currents and Undercurrents, Arthur Kennickell, २००६, available online)

Income

Let’s explain how the income is distributed so that you and I can remember.
Line 100 people up and prepare 100 pennies. You give the first 20 3 cents, then the next 20 7 cents, then the next 20 10 cents. That’s 20 cents and 60 people have walked by. Then the next 20, #s 60-80, you give them each a penny or 20 cents total. That’s 80 people walking by, 40 cents distributed. And finally the last twenty, you give the first 19 2 cents a piece, and the final person gets 20 cents. So it’s 3, 7, 10, 20, 40, 20 for six sections, the last section being one person, the top one percent. Did I lose 2 cents there? That’s my 2 cents.

That’s as simple as I can get it। The ratio between the bottom 50% and the top 50% is 15% to 85%, hard to believe but true. Look at sections one, two and three again and you’ll see why it’s only 15%. (Data comes from State of Working America, 2006/2007, p 79) What should our income quintiles be? But our today’s 3, 7, 10, 20, 60 income distribution is ridiculous.
(Source: State of Working America, 2006/2007, page 79, Mishel, Bernstein, Allegretti, Economic Policy Institute publication)

A Little More

This data comes from page 79 of SWA, 2006,2007, a condensation of a report by the Brookings Institute and the Urban Institute for 2006. The highlights I want to bring out are the following: 64.5% of the national income derives from salaries and wages. Business and capital income make up 18%. And “other income” makes up 17.3%. The owners concentrate in the top income groups. Ownership could be widespread. Why could not ownership be spread among the majority of the households? Concentrated ownership will someday be an anachronism, it seems unhealthy for a society, especially when Congressional elections and many other elections are controlled by donations to candidates. Hughie Long and Eugene Debs are the only names who advocated this common sense idea.

The “other income,” 17.3% of all income, is listed, and maybe in order of amount, as Social Security income, pension income, IRA distributions, unemployment compensation, TANF, workers’ compensation, energy assistance, veterans’ benefits, SSI, disability income, child support and alimony received.

So wages equals 65%, ownership equals 18%, “other” equals 17%।

(Divide the GDP, $14.2 trillion, by the number of workers, 141 million actually working, and arrive at a mean average of $100,000 per worker, yet median income (half earn less) is below $33,000.)

This data is very complicated, but it originates from the Urban-Brookings Institute Tax Policy Center। The ratios are still amazing, the bottom 50% receiving 15% of all income, the top half receiving 85%; and for wealth the ratio is 1 to 40. Amazing. As far as mobility out of one’s income or wealth quintile, again very complicated analysis, but page 95 states that “a son whose father is at the 10th percentile ($16,000 a year) has a 5% chance of earning over $55,000 per year.” If you were 30 years old in 1954 by 1974 your income had increased by 119%. If you were 30 years old in 1984 your income had increased in 2004 by 63%. (SWA, ‘06-’07, p 95, 103)

Confused yet? The main picture should be very clear.