S TAT E O F T H E U N I O N
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wealth inequality The Stanford Center on Poverty and Inequality
BY GABRIEL ZUCMAN
KEY FINDINGS • Over the past four decades, only the very rich, the top 0.1 percent, have realized wealth increases in the U.S. In 2012, the top 0.1 percent included 160,000 households with total net assets of more than 20 million. • At the same time, the middle class, those in the 50th-90th percentiles, have experienced a decline in their wealth share. • Available data indicate that there is significantly less wealth inequality in Europe than in the United States. No other country analyzed has top wealth shares as high as the U.S.
W
ith the takeoff in income inequality by now well-known, attention has shifted of late to trends in wealth inequality. Until recently, it had been difficult to gather empirical evidence on wealth inequality. However, important new evidence on wealth inequality has now become available, evidence that suggests that wealth concentration is rising fast in the U.S. and has reached levels last seen only during the Gilded Age. According to the latest available data, in 2012 the top 1 percent owns 42 percent of total U.S. wealth, up from 25 percent in the 1970s.1 The simple purpose of this article is to ask how such wealth inequality, which would appear to be quite extreme, compares to that of other developed economies. Has there been a takeoff in wealth inequality in other countries? Is it as spectacular as the takeoff in the U.S.? Does the current level of wealth inequality in other countries match the current level in the U.S.? We take on questions of this sort in this article. What Is Wealth? To compare the distribution of wealth across countries, it is of course critical to use the same definition of wealth across countries. Wealth is defined as the current market value of all the assets owned by households, net of all their debts. Following international standards codified in the System of National Accounts, assets include all the non-financial and financial assets over which ownership rights can be enforced and that provide
PATHWAYS • The Poverty and Inequality Report 2016
economic benefits to their owners. This definition of wealth includes all pension wealth—whether held in individual retirement accounts or through pension funds and life insurance companies— with the exception of Social Security and unfunded defined benefit pensions. It excludes all promises of future government transfers. Including such transfers is analytically difficult because these types of assets lack observable market prices. The wealth definition excludes human capital for this same reason. New Data Sources on Wealth Inequality With this definition in hand, wealth concentration can be studied using different data sources.2 The ideal source would be high-quality wealth tax declarations for the entire population, with extensive and truthful reporting by financial institutions, domestic and foreign. No country in the world has such a perfect data source today. However, France, Spain, the Netherlands, Norway, and Switzerland all impose direct-wealth taxes that generate useful data on wealth. Among these countries, Norway’s data are of the highest quality, as extensive information on most assets is collected for all Norwegians (whether subject to the wealth tax or not). Although Denmark stopped taxing wealth in 1997, it also still collects detailed full-population administrative data on wealth. Other tax data can be used to estimate wealth indirectly. There are two main