"If the poor people knew how rich the rich were, there would be riots on the streets," one famous actor said, referring to data on the huge gap between rich and poor.
What is the best way to measure it?
Most studies of inequality focus on income levels that are widely available.
However, to be rich means not to earn your money overnight, but to accumulate wealth for quite some time.
The rich would probably prefer that we were not aware of their level of well-being, probably in order to avoid the above disturbances. Nevertheless, there are always those who are interested in this topic and seek to find more data on this issue, as well as clearer and more accurate ways of measuring the gap between rich and poor. And although no one needs unrest in the streets, one still needs to realize the level of inequality in society.
And the first thing to do in such a situation is to realize the level of inequality in welfare.
Measuring the gap between rich and poor
As we said, one of the most popular ways to measure inequality is to measure income. This is largely due to the fact that there is more data and it is much easier to get.
Such data is something like a slice at a certain moment, they do not show the whole essence.
On the other hand, wealth is a complex of data that depends not only on current income, but also on accumulations for previous years and previous generations.
By studying the level of inequality in wealth, scientists and politicians receive the most profound and widespread indicators of the gap between the rich and everyone else.
Wealth is also the best indicator of quality of life and opportunity. It determines the ability to invest in education, financial assets, comfort, and secured old age after retirement. Wealth levels also reduce anxiety about possible changes in salary or unforeseen expenses.
If you are a rich enough person, the sudden cost of replacing a broken water heater or paying a medical bill will not be such a shock for you as it might turn out for a poor person.
"The Conservative Hudson Institute in 2017 reported that the richest US households, which is 5% of the total number of households, had 62.5% of all US assets in 2013, compared with 54.1% for 30 years As a result, the wealth of the remaining 95% of households fell from 45.9% to 37.5%.
As a result, the median wealth of high-income families (an average of $ 639,400) was seven times higher than the average income of middle-income households ($ 96,500) in 2013, which is the widest gap in the last 30 years.
Moreover, researchers of the inequality problem Emmanuel Saes and Gabriel Zutzman found that in 2012 the richest 0.01% of households controlled 22% of all wealth, compared to 7% in 1979.
If we take only data on income inequality, you can see a completely different picture. For example, in 2013, the richest 5% of households received only 30% of total income in the United States (compared with the fact that they own almost 63% of all wealth).
The United States is not the only developed country in which wealth inequality has been observed over the past 30 years, but it remains an outcast. The wealth of the richest 5% of households in the United States is almost 91 times greater than the wealth of American middle-income households, which is the widest gap among the 18 most developed countries in the world. In second place after the United States in this regard are the Netherlands.
Will the situation in the US only get worse?
The recently adopted tax cut law will exacerbate this problem.
The main points of the law include doubling the standard deduction for individual taxpayers, reducing the maximum marginal tax rate from 39.6% to 37%, significantly reducing the number of families subject to real estate tax, and reducing the main corporate tax from 35% to 21%.
The main influence will not affect the rich. For example, the poorest 20% of households will have to pay a lower tax of about $ 40 on average, compared with $ 5,420 thousand for those who belong to the 5% of the richest households.
At the same time, the richest 0.1% will save $ 61.920 thousand. By 2025, the income of the richest will grow to $ 152,200 thousand, while all other significant changes will not affect. All cuts will expire by 2026.
Richer taxpayers will benefit from other highlights of the new law. For example, studies show that most of the benefits of lowering business taxes will come from the rich. And the fact that less property will be subject to inheritance tax means an increase in wealth accumulation in different generations.
Proponents of the new tax law argue that it will not affect levels of inequality because the money that the rich save will go to other US households.
However, empirical evidence suggests otherwise. In particular, redirecting more money to the rich through tax cuts will not improve economic growth; on the contrary, it will reduce educational opportunities for poorer Americans and even reduce the life expectancy, which fell for the second year in a row in 2017.
Participants in a 2011 nationwide survey “strongly underestimated” levels of wealth inequality in the United States.
The survey and other studies partially confirmed the second half of his quote, showing that many Americans are concerned about the problem of inequality, and they would prefer it to decline.
Whether the current welfare inequality in the United States will become socially sustainable or will it lead to unrest – this question remains open.