Economic Inequality

Politics & News
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I’ve always had a perhaps unhealthy obsession with statistics on income and wealth distributions. One of the best sources for that information in the U.S. is the Survey of Consumer Finances, which is conducted every 3 years by the Federal Reserve. They recently released the results of the 2019 survey, and I’m going to be sharing them here as I dig into them.

Here’s an incredibly high level summary of household income and net worth:

Percentile Income Net Worth
25 $30,544 $12,410
50 $59,051 $121,760
75 $107,921 $404,100
90 $191,406 $1,219,499
95 $290,164 $2,598,400
99 $867,437 $11,121,000

The 50th percentile (or median) is the dividing point between the top and bottom halves of a distribution. In other words, if your household income is $59,000, it’s higher than about half of all other U.S. households.

The 99th percentile is the threshold for the top 1% of the distribution. So members of the 1% based on net worth have at least $11.1 million. But the average net worth of someone in the top 1% is actually much higher than this.

Note that the income and net worth percentiles are calculated separately. That means that a household could be in a relatively high income range (say 90th percentile) while being at a lower net worth range (say 75th percentile).

If the 99th percentile for income and net worth seem high, that’s because they are. But they are also dominated by the olds. Later, I’ll post a breakdown of these numbers by age range so you can see how these numbers change as people get older.

This is a very rich dataset, so let me know if there are any other statistics you would like to see, and I’ll try to prepare them. And of course, the thread is open to a broader discussion about economic inequality.

Technical Details

I’m preparing these numbers using the Summary Extract Public Data file posted here: Federal Reserve Board - Survey of Consumer Finances (SCF)

The summary statistics I’m getting are very close to those contained in the Fed’s summary reports. For example, I’m showing a median net worth of 121760 vs. the Fed’s number of 121,700 on page 37 of this report: https://www.federalreserve.gov/publications/files/scf20.pdf

It seems like the difference could be due to rounding, but I’m not sure why they would round down. There could also be some difference between the full dataset that they use and the public data that I use. And of course, I could have some mistake in my analysis. To get these numbers, I’m using Stata with commands like this:

summ income networth [aweight=wgt], detail

Please let me know if you have any suggestions for improving the analysis.

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Very interesting. I read this recently which is on point.

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Household Income Distribution by Age Range

Percentile 18-25 26-35 36-45 46-55 56-65 66-75 >=76
25 $15,272 $34,616 $40,725 $39,707 $28,507 $27,489 $24,435
50 $30,544 $60,069 $73,304 $79,413 $61,087 $50,906 $42,282
75 $50,906 $94,612 $132,355 $147,627 $122,174 $99,776 $72,286
90 $75,341 $138,464 $223,986 $259,620 $238,240 $183,261 $122,480
95 $88,576 $171,044 $305,435 $407,247 $422,519 $254,530 $177,702
99 $145,591 $234,167 $671,958 $1,272,647 $1,272,647 $961,103 $463,244

Household Net Worth Distribution by Age Range

Percentile 18-25 26-35 36-45 46-55 56-65 66-75 >=76
25 $(1,730) $500 $10,000 $33,900 $42,340 $65,560 $104,000
50 $6,360 $24,800 $96,501 $173,200 $221,800 $267,500 $243,250
75 $25,005 $103,700 $299,400 $501,700 $723,900 $830,800 $584,300
90 $89,340 $244,750 $759,210 $1,547,020 $2,233,000 $2,070,100 $1,371,300
95 $131,670 $384,350 $1,265,800 $3,311,900 $4,833,300 $4,664,000 $3,173,100
99 $437,950 $866,960 $5,570,000 $13,213,300 $17,385,700 $16,089,810 $11,578,200

So income is generally highest from ages 46 to 65, but wealth is generally highest from 56 to 75.

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Great work!

Can you break out the 99.9%, or 99.99% level? Back during Occupy, “the 99%” was rhetorical. There was widespread consensus that the 99.9% y/o 99.99% levels are much more informative.

https://www.salon.com/2016/04/14/the_1_percent_are_the_real_villains_what_americans_dont_understand_about_income_inequality_partner/

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https://www.reddit.com/r/collapse/comments/j7emm8/the_50_richest_americans_are_worth_as_much_as_the/?utm_source=amp&utm_medium=&utm_content=post_title

https://www.bloomberg.com/amp/news/articles/2020-10-08/top-50-richest-people-in-the-us-are-worth-as-much-as-poorest-165-million

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The Fed survey only has 6,500 participants, so the results for fine cuts like 99.9 percentile are probably not super precise. But here is what I get based on the data.

Percentile Income Net Worth
99.9 $3.3 mm $43.9 mm
99.99 $9.6 mm $166.6 mm

To get more reliable numbers on the top end of the distribution, you need a much larger sample size. Academic economists Emmanuel Saez and Thomas Piketty have a large body of research on the distribution of top incomes that is based on non-public tax data. I will try to find some good summaries of their research to share.

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I guess that depends on your definition of “works.” Capitalism works very well for the top 1%, and tolerably well for the top 25%. So if you’re in one of those groups and don’t care about anyone else, why mess with a good thing?

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Excellent OP!

What do you think is the best way to look at inequality as a time series (like in 10 or 20 year increments)?

I’m curious about the idea that as capitalism and an accommodating/subservient regulatory state funnels wealth into a smaller and smaller group of people, it necessitates a political move away from democracy and towards fascism in order to perpetuate itself. And in America bigotry is the obvious motivation to aid the transition to fascism.

I’m guessing this has been well-studied.

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Percentile Net Worth
25 1x $12,410
50 10x
75 33x
90 98x
95 209x
99 847x
Top 50 3,223,207x $40,000,000,000

The reason for visualizing gradations above 99% is that our “wetware” fundamentally desires to view the world as linear, and inherently misunderstands exponentiality. The above is from WAG-ing the top 50 have $2t net worth, and there being 3.3m of “the 1%”.