Using data from the Survey of Consumer Finances, I find that wealth inequality continued to rise in the United States after 1989, though at a reduced rate. The share of the wealthiest 1 percent of households rose by 3.6 percentage points from 1983 to 1989 and by another 0.7 percentage points from 1989 to 1998. Between 1983 and 1998, 53 percent of the total growth in net worth accrued to the top 1 percent of households and 91 percent to the top 20 percent. Another disturbing trend is that median net worth (in constant dollars), after growing by 7 percent from 1983 to 1989, increased by only another 4 percent by 1998. Indeed, the average wealth of the poorest 40 percent fell by 76 percent between 1983 and 1998 and by 1998 was only $1,100. Moreover, the financial resources accumulated by families in the bottom three income quintiles were very meager and dwindled between 1989 and 1998. The new figures also point to the growing indebtedness of the American family, with the overall debt-equity ratio climbing from 0.151 in 1983 to 0.176 in 1998. The ownership of investment assets was still highly concentrated in the hands of the rich in 1998. About 90 percent of the total value of stocks, bonds, trusts, and business equity were held by the top 10 percent. Despite the widening ownership of stock (48 percent of households owned stock shares either directly or indirectly in 1998), the richest 10 percent still accounted for 78 percent of their total value. With regard to racial and ethnic differences, the results show that over the period 1983 to 1998 non-Hispanic African American households made some gains relative to whites in median net worth and home ownership but remained the same in terms of mean net worth. Hispanic households made significant gains on non-Hispanic white households in terms of mean net worth and home ownership but not in terms of median wealth.
This paper describes how German households save and how their saving behavior is linked to public policy, notably pension policy. The analysis is based on a synthetic panel of four cross sections of the German Income and Expenditure Survey ("Einkommens- und Verbrauchsstichproben," EVS, 1978, 1983, 1988, and 1993). The paper carefully distinguishes between several saving measures and concepts. It separates discretionary savings from mandatory savings and uses two flow measures: first, the sum of purchases of assets minus the sum of sales of assets and, second, the residual of income minus consumption. Our main finding is a hump-shaped age-saving profile with a high overall saving rate. However, savings remain positive in old age, even for most low-income households. How can we explain what may be termed the "German savings puzzle"? Germany has one of the most generous public pension and health insurance systems in the world, yet private savings are high until old age. We provide a complicated answer that combines historical facts with capital market imperfections and a distinction between the role of discretionary and mandatory savings.
The Census Bureau's annual Current Population Survey (CPS), which serves as the basis for its income distribution data, collects data on the receipt of many additional types of income beyond those included under "money income." These additional income data, however, are excluded from Census's official income distribution figures, which are based on money income only. The Census Bureau does publish data using expanded concepts of income in technical tables in some publications; however, these tables, which offer 17 alternative definitions of income, are bewildering even to professionals in the field. Yet in its texts describing inequality, and in briefing materials given to the press, the Census Bureau continues to promote figures based on limited "money income." As a result, nearly all discussions of income inequality in the popular media and among policymakers and government officials rely on data that can be misleading.
An interesting study (Norton & Ariely, 2010) reveals that Americans have no idea that the wealth distribution (defined for them in terms of "net worth") is as concentrated as it is. When shown three pie charts representing possible wealth distributions, 90% or more of the 5,522 respondents -- whatever their gender, age, income level, or party affiliation -- thought that the American wealth distribution most resembled one in which the top 20% has about 60% of the wealth. In fact, of course, the top 20% control 85% of the wealth. (Table 2 and Figure 1 in this document show the Top 20% owning 89% of the net worth, rather than 85%; the discrepancy is mostly due to Ariely & Norton's data being about 10 years older.)
Purposive diachronic redistribution is usually associated with (butis certainly not limited to) changes in systems of taxation andproperty rights. Changes in the structure of markets, the productionsystem, monetary policy, the allocation of public funds for primary andsecondary education, or the level of the minimum wage have all beenadopted at least partly for the purpose of bringing about changes inthe pattern of holdings. In a recent study, for instance, AlbertoAlesina et al. (1999) have argued that Italy's practice of heavilyconcentrating public sector jobs in the poorer Southern regions is‘redistributive’ in that it is adopted for the purpose ofcreating a more egalitarian distribution of economic opportunitiesbetween Northern and Southern Italy. Purposive diachronicredistribution involves the successful implementation of institutionsand policies whose purpose is to bring about changes in the holdings ofdifferent subjects. On this interpretation, determining whetherredistribution has taken place involves identifying (1) the holdings ofa set of subjects at time t1; (2) the holdings ofthese subjects after the policy or institutional changes att2; (3) an agent or set of agents who have enactedthe policy or institutional changes that have engendered changes inholdings; and (4) the purposes of these agents in bringing thesechanges about.
The argument for using the wealth distribution as a power indicator is strengthened by studies showing that such distributions vary historically and from country to country, depending upon the relative strength of rival political parties and trade unions, with the United States having the most highly concentrated wealth distribution of any Western democracy except Switzerland. For example, in a study based on 18 Western democracies, strong trade unions and successful social democratic parties correlated with greater equality in the income distribution and a higher level of welfare spending (Stephens, 1979).
The distribution of benefits, services, and taxes is examined among conventional Census income quintiles of households for the year 2004. Of particular concern is the fiscal balance within each quintile. A quintile is in fiscal deficit if the sum of benefits and services received by households within the quintile exceed the sum of taxes paid. A quintile is in fiscal surplus if the taxes paid exceed the cost of benefits and services received.
The income distribution also can be used as a power indicator. As Table 7 shows, it is not as concentrated as the wealth distribution, but the top 1% of income earners did receive 17.2% of all income in 2009. That's up from 12.8% for the top 1% in 1982, which is quite a jump, and it parallels what is happening with the wealth distribution. This is further support for the inference that the power of the corporate community and the upper class have been increasing in recent decades.
This paper examines the fiscal balance in the U.S. by income class. It estimates the distribution of a wide array of government benefits and services including cash and near cash benefits, means-tested aid, education services and general social services. It also estimates the distribution of direct and indirect taxes to finance government expenditure.
With respect to the question of whether the redistribution of incomeoccurred in the U.S. between 1979 and 1987, for example, we mightspecify the subjunctive baseline scenario in terms of what incomedistribution would have been like (1) had policy changes, such as taxcuts, reduction of commercial regulations, and increases in militaryexpenditure not been implemented; (2) had there been no income tax; (3)had all persons and groups received what they contributed toproduction; (4) had all persons received their gross incomes minus whatis required to cover the costs of the public benefits that they havereceived and the value that they have extracted from the commons; or(5) what they would have received had their holdings reflected whatthey were entitled to.
The organization of this paper is as follows. Section I begins with a literature review of U.S. fiscal incidence or distribution studies. Section II describes the general methodology and data sources of the present study. Section III describes the procedures for calculating total expenditures and revenues for federal, state and local governments which are used in the analysis. Section IV describes types of government expenditures. Section V describes adjustments to the conventional count of households. Section VI describes the procedures used to allocate estimated spending and tax collections among the household quintiles. Section VII reports the results of the analysis and provides a brief discussion. Specific calculations are detailed in the Appendices.
This paper examines the distribution of income and income inequality with data extracted from the March Current Population Survey of 1998. Like the Census Bureau, this report studies income at the household level. Group quarters are not included in this survey. The authors also used data extracted from the Internal Revenue Service's Public Use File for 1995 (IRS SOI), containing a sample of actual tax returns designed to replicate the total tax returns received by the IRS. In general, this study does not account for the underreporting of income to the Census Bureau.