U.S. Has Worst Wealth Inequality of Any Rich Nation, and It’s Not Even Close
I’ve discussed the Credit Suisse Global Wealth Reports before, an excellent source of data for both wealth and wealth inequality. The most recent edition, from November 2016, shows the United States getting wealthier, but steadily more unequal in wealth per adult and dropping from 25th to 27th in median wealth per adult since 2014. Moreover, on a global scale, it reports that the top 1% of wealth holders hold 50.8% of the world’s wealth (Report, p. 18).
One important point to bear in mind is that while the United States remains the fourth-highest country for wealth per adult (after Switzerland, Iceland, and Australia) at $344,692, its median wealth per adult has fallen to 27th in the world, down to $44,977. As I have pointed out before, the reason for this is much higher inequality in the U.S. In fact, the U.S. ratio of mean to median wealth per adult is 7.66:1, the highest of all rich countries by a long shot.
The tables below illustrate this. First, I will present the 29 countries with median wealth per adult over $40,000 per year, from largest to smallest. The second table also includes mean wealth per adult and the mean/median ratio, sorted by the inequality ratio.
|5. New Zealand||$135,755|
|9. United Kingdom||$107,865|
|12. France||$ 99,923|
|13. Canada||$ 96,664|
|14. Netherlands||$ 81,118|
|15. Ireland||$ 80,668|
|16. Qatar||$ 74,820|
|17. Korea||$ 64,686|
|18. Taiwan||$ 63,134|
|19. United Arab Emirates||$ 62,332|
|20. Spain||$ 56,500|
|21. Malta||$ 54,562|
|22. Israel||$ 54,384|
|23. Greece||$ 53,266|
|24. Austria||$ 52,519|
|25. Finland||$ 52,427|
|26. Denmark||$ 52,279|
|27. United States||$ 44,977|
|28. Germany||$ 42,833|
|29. Kuwait||$ 40,803|
Source: Credit Suisse Global Wealth Databook 2016, Table 3-1
Now that I’ve got your attention, let me remind you why this low level of median wealth is a BIG PROBLEM. Quite simply, we are careening towards a retirement crisis as Baby Boomers like myself find their income drop off a cliff in retirement. As I reported in 2013, 49% (!) of all private sector workers have no retirement plan at all, not even a crappy 401(k). 31% have only a 401(k), which shifts all the investment risk on to the individual, rather than pooling that risk as Social Security does. And many people had to borrow against their 401(k) during the Great Recession, including 1/3 of people in their forties. The overall savings shortfall is $6.6 trillion! If Republican leaders finally get their wish to gut Social Security, prepare to see levels of elder poverty unlike anything in generations. It will not be pretty.
Let’s move now to the inequality data, where I’ll present median wealth per adult, mean wealth per adult, and the mean-to-median ratio, a significant indicator of inequality. These data will be sorted by that ratio.
|1. United States||$ 44,977||$344,692||7.66|
|2. Denmark||$ 52,279||$259,816||4.97|
|3. Germany||$ 42,833||$185,175||4.32|
|4. Austria||$ 52,519||$206,002||3.92|
|5. Israel||$ 54,384||$176,263||3.24|
|6. Kuwait||$ 40,803||$119,038||2.92|
|7. Finland||$ 52,427||$146,733||2.80|
|8. Canada||$ 96,664||$270,179||2.80|
|9. Taiwan||$ 63,134||$172,847||2.74|
|11. United Kingdom||$107,865||$288,808||2.68|
|12. Ireland||$ 80,668||$214,589||2.66|
|14. Korea||$ 64,686||$159,914||2.47|
|15. France||$ 99,923||$244,365||2.45|
|16. United Arab Emirates||$ 62,332||$151,098||2.42|
|20. Netherlands||$ 81,118||$184,378||2.27|
|21. New Zealand||$135,755||$298,930||2.20|
|23. Qatar||$ 74,820||$161,666||2.16|
|24. Malta||$ 54,562||$116,185||2.13|
|25. Spain||$ 56,500||$116,320||2.06|
|26. Greece||$ 53,266||$103,569||1.94|
Source: Author’s calculations from Credit Suisse Global Wealth Databook 2016, Table 3-1
As you can see, the U.S. inequality ratio is more than 50% higher than #2 Denmark and fully three times as high as the median country on the list, France. As the title says, this is not even close.
The message couldn’t be clearer: Get down to your town halls and let your Senators and Representatives know that it’s time to raise Social Security benefits and forget the nonsense of cutting them.
Cross-posted from Middle Class Political Economist.
We need to construct the formulae that relates social security earnings amounts for retirees to Net Wealth and also to GDP success. These are metrics that reflect the actual economic outcomes to which a person’s household contributed.
Measuring on the basis of wage contribution amounts only completely misses the point that these specific measures of outcomes, all very good now, were earned by society – earned, I say – and if you are still alive as a retiree you are probably still contributing (wisdom to your children, care for your partner, care for grandchildren or others, charitable including religious organization participations, maintenance of your dwellling, management of whatever net worth you have, and daily management of your consumption). Many retirees were in compensated employment for fifty years even, while spouses contributed to society in other ways. The Social Security system should pay out earnings, respectful of these contributions, and very much related to the Net Wealth and GDP success.
Can we not shift the discussion to this view of the modern Social Security system as one that calculates these checks as being earned returns on the success of our society? Please.
Oh and financing the outlays for this, just do this fairly using the broadest possible revenue system regimes.
The largest tax base we can define is Net Worth above the basic accumulations, though we cannot tax this directly by court holdings at the national level. The next broad tax base is income, so look to the income tax regime for financing, in all fairness, imo.
The first thing that must be done is election finance reform. We must get private and corporate money out of the political process.
What is interesting is that the U.S. has the sixth-highest median household income — not mean, median.
So if our median wealth is so much out of line, it is because of culture. We do not have a culture of saving in the U.S.
The New York Times just ran a piece profiling people living on close to the median household income in various parts of the country. They are not saving, even with good incomes. Culture.
2, 3, and 4 on the second table are also quite interesting. So are 7 and 8. five of the top 10 are countries that have a reputation for being very egalitarian.
Perhaps talk is not always put into practice, or belief is not always true.
It doesn’t make sense that you would use a post about net worth inequality to argue for no change in social security. In general the older you are, the higher your net worth: http://i0.wp.com/www.freedomthirtyfiveblog.com/kj4tv8dlagreat/wp-content/uploads/2013/07/13_07_networth_agestats.jpg?resize=451%2C350
and social security is a direct transfer of money from the younger to the older generation. So your conclusion doesn’t follow logically.
Oh, I thought we still had a TF which needed to be paid back.
In fact, it should be the other way around. If you want to reduce net worth inequality, social security recipients should be sending checks to the younger generations.
“[Social Security] is a direct transfer of money from the younger to the older generation.”
Prepare for the Wrath of Coberly!
My statement was 100% fact. No one can dispute it. They may justify it, but they can’t dispute it. Even someone as delusional as coberly.
And what are the numbers when you remove 13m illegal immigrants from the bottom of the data?
You should be able to work that out for yourself instead of asking it as a rhetorical question. There are 250 million adults in the USA, so 13 million moves both the median and the mean by a small amount, both in the same direction, changing the ratio hardly at all, even if you make the assumption all illegal immigrants have zero wealth.
So much for getting any closer to Denmark, which in any case also has its share of immigrants legal and illegal. Wah, America is the only country in the world with immigration! is a complaint with no foundation.