Last week, the Federal Reserve released the latest version of the Survey of Consumer Finances (SCF), the premiere source of information on the distribution of household wealth in the United States. The new SCF data confirms much of what we already know about who owns America — but it also helps dispel some common misconceptions about demographic disparities in wealth holdings.
Millionaires and Billionaires Own Almost Everything
In 2019, families with net worths exceeding $1 million owned 79.2 percent of all the household wealth in the country. The bottom half of American families held just 1.5 percent of the wealth.
While astronomical, this level of inequality should come as no surprise. Capitalist economies contain feedback loops that tend to accumulate wealth in the hands of a small number of families at the top of society.
This fact has been understood for a long time, even among non-socialist economists, but it often gets overlooked in mainstream outlets. Instead, most journalists prefer to focus on wealth disparities that exist between demographic groups.
Demographic Disparities Can Be Misleading
Although wealth differences absolutely exist between demographic groups, and represent a pressing problem we need to solve, the way those disparities are discussed often confuses more than enlightens.
The standard way to talk about intergroup wealth differences is to compare the median or mean wealth of various groups to one another. In the graphs below, I do this for age, education, and race.
These overall statistics appear to tell a simple and intuitive story. Older people are wealthier than younger people because they have had longer to accumulate wealth and because they had better economic experiences than younger generations today. White people are richer than black and Latino people because of past and present racism in America. And individuals with college degrees are wealthier than those with less education because of the earnings premium that college graduates enjoy.
All of these things are true to some extent and help explain overall differences. But this sort of analysis can cause some people to think that overall wealth inequality in society is primarily an artifact of racial, educational, and age-base disparities. In reality, the level of wealth inequality within each group is virtually identical to the wealth inequality that we see in society as a whole.
In basically every demographic group, the top 20 percent owns around 80 to 85 percent of the group’s wealth, while the bottom half owns zero to 5 percent of it.
The overall demographic disparities that we talk so much about are almost entirely driven by gaps between the top 10 percent of each demographic group. This is not to say that there is no difference between the bottom half of various demographic groups, but just that those differences are a tiny fraction of the whole and basically amount to table scraps in all cases.
To give a concrete example, consider perhaps the most commonly discussed demographic wealth disparity in America: the gulf between middle-class white families and middle-class black families. In 2019, the median black family had a net worth of $20,730 while the median white family had a net worth of $181,440.
The difference between the two — $160,710 — seems like a lot of money and, to most families, it is a lot of money. But this is because we often don’t realize how much wealth there really is in America. The $181,440 net worth of the median white family is less than one-fourth of the $746,821 they would have if all the country’s wealth were distributed evenly.
Across the entire society, over 84 percent of families are on the losing side of wealth inequality in that they have net worths that are below the national average. This means that the vast majority of the people in every demographic group are on the losing side of wealth inequality, and often by a lot.
We should keep this in mind when thinking about socialist and other egalitarian political projects. As we can see in the graphs below, the richest 10 percent of families, which collectively own 76.5 percent of all wealth, are overwhelmingly white, higher-educated, and old. But the bottom half of society, which owns just 1.5 percent of all wealth, is thoroughly mixed. Specifically, 57 percent of the bottom half are white, 38 percent are over the age of fifty, and 55 percent have completed some college or have a college degree.
Given the demographic composition of the different economic classes, it really is the case that class-based wealth redistribution will also heavily reduce the disparities between different demographic groups.
Every $1 redistributed from the top 10 percent to the bottom 50 percent reduces the class gap between those groups by $2 while also reducing the white/black gap by 52 cents, the old/young gap by 57 cents, and the college/high-school gap by 75 cents. This kind of leveling is where our focus should be.