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The “Merely rich” versus the “Super-rich”

Posted By Barry Ritholtz On March 2, 2006 @ 6:29 am In Economy,Federal Reserve,Psychology,Taxes and Policy | Comments Disabled

Interesting article by David Wessel in the free section of the WSJ today: Rich Get Richer, But Not as Fast As You Think [1].

Its a follow up to the Federal Reserve’s recent triannual  study we discussed last week,  Stagnant Net Worth for Typical US Family [2].   

When looking at who has what share of America’s Net Worth, a few data points leap out: The Richest 10% owns 69.5% of the assets [3], up from 67.4% in 1989.

Note that the Fed survey explicitly excludes folks on the Forbes 400 list of the very wealthiest Americans. I believe the Fed eventually breaks down the latest numbers on the richest one million families [4], the top 1%. That group of Super Rich 1% holds about one-third of the total wealth in the nation; The next 9% also holds about a third.

The group below the top 10% –the 75% – 89.9%  slice — owns 17.6% — slightly more than their population percentage might suggest numerically. This group contains the heart of the middle class (and upper middle class), and as we have seen, they have been shrinking.

Wessel writes:

"The Federal Reserve does a lot of things. It sets interest rates. It issues dollar bills. It regulates banks. And once every three years it tells us how well America’s rich are doing and if they’re getting richer.

The word from the Fed’s new Survey of Consumer Finances: The rich are doing extremely well. But their slice of the pie doesn’t seem to be growing as fast as one might expect in light of the persistent widening of the gap between annual incomes of rich and poor.

American families had net worth — the value of houses, cars, 401(k) plans, stock portfolios and saving accounts minus mortgages and other debts — of $50 trillion in 2004, according to the Fed. Its estimate is based on surveys of 4,522 families, with special efforts to include the rich.

As New York University economist Edward Wolff observes, the Fed doesn’t count defined-benefit pension plans, money that, in a sense, belongs to the workers to whom pensions have been promised. Recent atrophying of these pension promises hurts the middle and upper-middle class more than the very top; ignoring that may understate the increasing concentration of wealth at the top."

Interesting stuff, to say the least.

Here’s the breakdown of wealth (net worth, not income), by quartile, over the past 4 surveys:

Share of the Wealth

Percentile Wealth in Millions of Dollars Share of Wealth in Percentage Terms
Bottom 25% n/a 0
24 to 49.9% 1,319,977.5 2.6
50 to 74.9% 5,195,835 10.3
75 to 89.9% 8,856,460.5 17.6
90 to 100% 34,910,182 69.5
Bottom 25% n/a 0
25-49.9% 1,251,375 2.8
50-74.9% 4,701,975 10.5
75-89.9% 7,645,635 17
90-100% 31,269,465 69.7
Bottom 25% n/a 0
25-49.9% 1,067,040 3.2
50-74.9% 3,824,415 11.4
75-89.9% 5,734,314 17.1
90-100% 23,025,492 68.5
Bottom 25% n/a 0
25-49.9% 930,600 3.6
50-74.9% 3,034,350 11.8
75-89.9% 4,359,960 16.9
90-100% 17,490,330 67.8

Courtesty of WSJ, Federal Reserve’s Survey of Consumer Finances


Rich Get Richer, But Not as Fast As You Think [1]
Capital column by David Wessel
WSJ, March 2, 2006; Page A2
http://tinyurl.com/k5fnh   (no sub required)

Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2006/03/the-merely-rich-versus-the-super-rich/

URLs in this post:

[1] Rich Get Richer, But Not as Fast As You Think: http://online.wsj.com/public/article/SB114126217049687080-0vVW58oMsBFezg9M9FlXzWQCBbI_20070302.html?mod=blogs

[2] Stagnant Net Worth for Typical US Family: http://bigpicture.typepad.com/comments/2006/02/fed_stagnant_ne.html

[3] wns 69.5% of the assets: http://bigpicture.typepad.com/comments/2005/09/read_it_here_fi.html

[4] richest one million families: http://bigpicture.typepad.com/comments/2005/10/top_of_the_top.html

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