Inequality – Part 1

February 22, 2014

Inequality has become the new buzzword.[1] I have plenty to say about this issue. We live in a society that, less and less, aggregates at the mean, which is fancy talk for “the very rich are outdistancing us, as we all run in place.” Expect several posts in the coming weeks. In the meantime, one of the problems with the inequality discussion involves a lack of information, Herewith, some information:

We hear plenty about the middle class, protecting the middle class, building the middle class, the evaporating middle class, etc. So who belongs in the middle class?

Income and wealth get very much blurred in our discourse. But for the lucky few with inherited wealth, wealth is a function of income. For those with investment assets, income is also a function of wealth. Both are, thus, important.

For 2011, the middle quintile of American households—households between the 40th and 60th percentiles—had a mean (average) income of $49,842. Those households at the top end of the quintile earned $62,434. By way of comparison, $186,000 per year puts a household at the 95th percentile. (Those in the top 5% have an average household income of $311,444, a mean that includes the very few who earns tens or hundreds of millions of dollars per year.) Here’s the link to the income data for 2000-2011:  2000-2011 US Household Income by Quintile.

Wealth statistics are harder to capture so neatly. Every bit of information, however, demonstrates that households in the middle—50th  percentile—have almost no wealth, and that what wealth they do have correlates highly with the equity in their homes. Table 721, reflecting 2007 (pre-crash) Census data shows a median net worth for all families of $120,000 and a mean net worth of $556,000. Here’s the link:  Table 721. For a discussion about wealth issues, Professor G. William Domhoff’s article, Who Rules America?, is worth a look-see! (Professor Domhoff is not without a position on wealth and its role in and on society, but he relies on plenty of authorities in advancing his views.)

In 2013, anyone can call him/herself anything, I suppose. That said, it seems fair to wonder how anyone whose household income greatly exceeds about $50,000 per year can fairly fall within the middle class! You may not feel wealthy if you earn $150,000 or more per year, or if your net worth exceeds $500,000 because you have a home with plenty of equity, but you are far from the middle, relative to your fellow Americans.

Why does any of this matter? People live the lives they see and know. To start shifting the inequality arc, people need to understand its composition.

[1] Stay tuned for a post about how we, collectively, can’t stay “on message” for long enough to do anything about anything

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