Wealth Distribution in 2022
Wealth inequality is as it has always been. But it doesn't have to be.
The Survey of Consumer Finances released its 2022 wealth distribution data late last week. The SCF is the nation’s preeminent survey of wealth and comes out once every three years. Below I summarize some of wealth distribution figures that I have tracked over the years and show how that distribution could be made much more equal.
Overall, wealth inequality remains quite high. The top 10 percent of households own 73 percent of the nation’s wealth while the bottom 50 percent of households own just 2 percent of the nation’s wealth.
Some people seem to think that overall wealth inequality is just a function of the fact that young adults own relatively little while older adults own much more. But this is not the case as we see similar kinds of wealth inequality within each age group.
When we decompose each overall wealth decile by age, we see a pattern where the lower the decile is, the younger it is. But there are still a lot of older people in and around the bottom of the wealth distribution. Around 39 percent of the bottom half, which collectively owns 2 percent of household wealth, are over the age of 50.
Some people also seem to think that overall wealth inequality is also driven by racial wealth inequality. But, as with age, we see that wealth inequality within each racial group mirrors wealth inequality overall.
When we decompose each overall wealth decile by age, we see a pattern where the lower the decile is, the less white it is. But the bottom of the wealth distribution is still thoroughly multiracial. Indeed, around 61 percent of the bottom half are white.
Some people also seem to think that educational differences drive overall wealth inequality. Yet, as with age and race, we see the same kind of inequality within each educational group as we see in society as a whole.
Wealthier deciles do tend to be dominated by those with college degrees, but the bottom of the wealth distribution is populated by people from all education levels. In fact, around 1 in 4 individuals in the bottom half of the wealth distribution have college degrees.
The fact that we see the same wealth distribution over and over again no matter how we slice the data is a pretty solid indicator that this particular distributive skew is driven by the rules of our economic system, not a contingent issue with one group or another.
Sometimes when I present this data, people will point out that it just reveals that the wealth distribution is an 80-20 Pareto distribution (80% of the wealth is owned by the top 20%). Individuals who point this out seem to think that this is some kind of natural law that we are helpless to resist rather than an observation about the distributions that inevitably flow from certain systems, which of course could be changed.
In an upcoming paper, I show that there is a way to break this 80-20 distribution by bringing some wealth into collective, public ownership. The state of Alaska has done this over the last half century through the creation and capitalization of the Alaska Permanent Fund. When APF assets are imputed equally to each household, the wealth share of the top 20 percent of Alaskans falls from 82 percent to 62 percent.
This kind of equalizing policy could be implemented nationally and could be scaled up much further than Alaska has scaled up its APF. Indeed, in Norway, which also has a large amount of collective, public ownership, the wealth share of the top 20 percent drops from 71 percent to 40 percent once the collective wealth is properly counted.
So, the level of wealth inequality that we have is not an inevitability of human society. It is an inevitability of a certain kind of economic system that is built upon the private ownership of return-generating assets. But that system is not the only system and even gradual incursions into that system, as in Alaska and Norway, have proven to be successful as disrupting its inegalitarian patterns.