Article: Income and Net Worth Inequality

For the purpose of this discussion, twenty percent of all families are categorized as either very poor or wealthy.- Of the remaining sixty percent, one-third each are the working poor, lower middle class and upper middle class.- The data and information presented herein are based on the mean average of pretax family income and net worth of each of the five quintiles.

The Federal Reserve System does a Survey of Consumer Finance each three years.- The survey for the year 2007 was completed this year, 2009.- For each one hundred dollars of pretax family income in 2007, the poor earned $1.80.- The wealthy earned what the poor would earn in the forty-two years from age 20 to 62; $75.70.

Of the wealthy income of $75.70, the bottom half or ten percent that might be thought of as fairly wealthy earned $17.10.- The top ten percent earned $58.60.- Thus the pretax earnings of the top ten percent of all families earned more than the bottom ninety percent and about equal to the bottom ninety-five percent of all families. Data for the top two, one, and one tenth of one percent are not yet available.

Of the one hundred dollars of pretax family income, the lower middle class earned $7.00 while the upper middle class earned sixty percent more; $11.30.

As you would expect, family net worth is also heavily biased in favor of the wealthy.- The top ten percent own almost seventy percent of the net worth of this nation.- Of each one hundred dollars of net worth of the nation, the top ten percent own $69.80.- They and their ten percent near neighbors together own $82.60.- This second from the top ten percent mostly won't live in a gated community in that they own only $12.80, about twenty percent of their very rich friends.- Of each one hundred dollars of national net worth just $12.30 is owned by four times as many families combined, the upper and lower middle classes.-- This is split so that the upper middle class owns $7.90, about eighty percent more than the $4.40 owned by the lower middle class which is sixty cents less than the $5.00 owned by twice as many families of the working poor and poor combined.

Less inequality existed particularly during in the third quarter of the twentieth century.- Then income taxes were significantly more progressive, corporate tax rates were higher, many fewer subsidies and loopholes existed, and union strength was much higher.- Not coincidentally that period marked a significant growth in the number of middle class families.

Comparatively, income and wealth inequality in the United States is much like that of Russia and closer to that which exists in Mexico than to either Canada or Western Europe.- Of all free or relatively free forms of economy, capitalism has proven to be the greatest creator of wealth.- So too is it the worst distributor of wealth.

Should you choose to verify the conclusion, google up Gini coefficient or Gini index which is the standard methodology of measuring the level national income or wealth inequality.-----