What is the difference between "income" and
"wealth"? What is your income? What is your wealth?
Which is a better measure to use when assessing the degree of
inequality in a society?
There is very little data about the distribution of wealth in America. There is one source, the Survey of Consumer Finances, sponsored by the Federal Reserve Board, that does provide data from 1983.
These data suggest that wealth is concentrated in the hands of a small number of families. The wealthiest 1 percent of households owns roughly 33.4% of the nation's net worth, the top 10% of households owns over 71%, and the bottom 40% of households owns less than 1%.
What is happening to the concentration of wealth in
America?
Are we experiencing increasing equality, increasing
inequality,
or not much
change?
As with the case of income, the evidence suggests an increase in inequality over time.
The distribution of wealth is much more unequal than
the
distribution of income, especially when focussing on the bottom 60% of
all households. The bottom 60% of households possess only 4.2% of
the nation's wealth while it earns 26.8% of all income.
Can you think of any reason for the much greater inequality in wealth than in income?
What do we tax more in the US: wealth (assets) or income?
Think of all kinds of "income" taxes that exist --
federal,
state, and (in some cases) local. Think of the very few kinds of
assets that are taxed: property taxes, in some states taxes on
the
value of cars. If you own considerable assets do you have
a reason to keep them in forms that will not be taxed?
Looking at the distribution of wealth and looking
at the distribution of income gives the researcher two quite different
views of the amount of inequality in American society.
Which
economic measure -- wealth or income -- should be emphasized?
Those who argue for the greater importance of income make the case that for wealth to actually have a significant impact on one's standard of living it has to be translated into higher income.
Alan Greenspan, chairman of the Federal Reserve Bank, make the case for wealth:
"Ultimately, we are interested in the question of relative standards of living and economic well-being. We need to examine trends in the distribution of wealth, which, more fundamentally than earnings or income, represents a measure of the ability of households to consume."
