They say that money goes to money - and if you don’t believe this maxim, take a look at the statistics compiled by the Fed for the first half of 2020. They show that the 50 richest Americans have almost as much money as the 165 million poorest.
Numbers make the disparity in income even clearer. According to the Bloomberg Billionaires Index, the combined wealth of the 50 richest people in America is nearly $2 trillion. By comparison, the poorest 50% of the country has $2.08 trillion, only slightly more.
The Fed’s data also show that the super-rich are becoming even wealthier while poor people are getting an even smaller share of the pie.
Bloomberg broke down statistics about the nation’s wealth by race, age, and other factors, making them even more interesting. It found that COVID-19 has exacerbated this problem, with job losses falling heavily on low-wage service workers, and the virus disproportionately infecting and killing people of color.
Winners And Losers On Wall Street
The very rich have profited handsomely from the longest bull market in history. Most people, however, have not, and the explanation is very simple: The amount of stock owned by those with the lowest income has been dropping for almost two decades.
Since peaking at 21.4% in 2002, upper middle class people have experienced a 10% drop in the amount of stock they own, and the pattern in the bottom half of earners is very similar.
“The wealthiest 1% own more than 50% of the equity in corporations and in mutual fund shares, the Fed data show,” reports Bloomberg. “The next 9% of the wealthiest own more than a third of equity positions - meaning that the top 10% of Americans hold more than 88% of all shares.”
Tens of millions of people have suffered terrible financial hardships this year, but the richest have done very well. As a group, they made $339 billion since the beginning of 2020.
No one else is doing nearly as well. Take Millennials, the babies born between 1981 and 1996. With 72 million members, they make up the largest sector of the workforce. True, some are doing great: Facebook head Mark Zuckerberg, co-founder Dustin Moskovitz, and Walmart heir Lukas Walton are among those. But, as for the economy as a whole, a disproportionate amount of the wealth Millennials own is concentrated in relatively few hands. Despite their large numbers as a group, they own just 4.6% of the nation’s wealth.
African Americans are doing even worse. Their share of the pie hasn’t increased in the last 30 years. White Americans hold 83.9% of the nation’s wealth, compared with 4.1% for Black households. White Americans’ share of the total has dropped somewhat but that’s because the nation has become more diverse. Black people, on the other hand, still hold the same low percentage of assets they did in 1990.
Of the 25 richest Americans, only one is not White. He is Eric Yuan, the chief executive officer of Zoom Video Communications Inc.; his fortune has soared by almost seven times this year and now stands at $24.2 billion.
The Virus And Money
Fed Chair Jerome Powell has warned that unless another government stimulus package is passed, the economy will not be able to make a sustained recovery, which “could continue to exacerbate existing disparities in our economy.”
Meanwhile, the pandemic has been doing exactly that. While tens of millions of people have experienced terrible financial losses since the virus became a crisis, some businesses and billionaires have benefitted big time, particularly those involved in high tech, online shopping, and social media. The fortune of Amazon founder Jeff Bezos has increased by approximately 64% so far this year to $188.5 billion.
“Income inequality is the primary reason why the vast majority of Americans experienced disappointing growth in their living standards over the last four decades,” said Elise Gould, an economist at the Economic Policy Institute. “Most Americans are seeing slow income growth because most of overall income growth is going to households at the top.”
The Fed data show that Gen X, those born between 1965 and 1980, has made some progress building wealth in recent years, doubling their collective net worth since mid-2016. But this represents only a small change in the overall disparity, and for the most part, more of the nation’s wealth continues to end up in fewer hands.
It is possible that going forward income inequality will change. President Trump said he wants to cut taxes for low and middle income people and so has former Vice President Biden. If either of their plans is enacted into law it would help reduce income disparity - at least in a very small way. And with calls for the super-rich to pay more tax becoming louder and more frequent, this too could become a reality relatively soon. Also, the great deal of attention that has been focused on racism and privilege could bring change to ownership of wealth in the US.
The extreme division in wealth we see now did not come about overnight - and it won’t be corrected any time soon, either. And until this happens there’s one thing you could be sure of: The rich will continue to get richer.