Friday, 25 March 2016 00:00

United States Wealth Inequality Highest Since 1930

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I recently discussed in an article that the per capita income for US population has stagnated or declined in the last 15 years. A direct implication is that living standards have also stagnated or declined for an average middle-class family.

This article discusses the wealth inequality in one chart for the United States and the implications of the data when combined with per capita income growth in the last 15 years.

The chart below gives the wealth concentration by the top 1% and the top 10% population in the United States for period 1910-2010.

 

US Wealth Inequality Chart From 1930 to 2010

 

It is clear from the data that wealth inequality is currently at the worst level since 1930. Further, it is important to note that there has been significant credit expansion in the United States during the period 1980 to 2010 and during this period, the wealth concentration by the top 10% has increased from 67.2% to 71.5%.

What follows from this data is that per capita income on a broad basis might not show the real loss in purchasing power for an average American. With rising wealth inequality, I believe that the per capital income for the middle-class (lower income growth) will indicate in all probability that living standards have declined meaningfully in the last 15 years.

The analysis from BIS (March 2016 quarterly report) further indicates that asset prices have been one of the key drivers of increasing wealth inequality. While credit expansion and expansionary monetary policies support asset prices and benefit the top 10%, it erodes dollar value and is counter-productive for an average wage earning individual. Unfortunately, the trend is unlikely to change in the coming years.

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