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Inequality

The Wealth Inequality Problem in One Chart

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The Wealth Inequality Problem in One Chart

The Wealth Inequality Problem in One Chart

It’s clear that America’s financial and political systems are broken

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

It seems that people don’t agree on much these days, but there is one growing exception to that rule.

Across the board, Americans are finding that the “system” isn’t working for most people in its current state. Donald Trump and Bernie Sanders have locked into this sentiment to garner unprecedented support as outsider candidates, and there is an undeniable feeling in the air that something has got to give.

Why is there so much conviction that things must change?

The Wealth Inequality Problem

In today’s chart, we showcase the wealth inequality problem in the best way we could. The challenge with it was that literally the data goes “off” the chart with no easy way to show it.

On the chart, we plotted the “Median Net Worth” of different wealth groups between 1998 and 2013. This is based on a study that the Federal Reserve does about every three years on consumer finances.

When this data is compared in 2013 dollars:

  • The Lower Class: Wealth has decreased by 26.5% for the bottom 20% of incomes
  • The Working Class: Wealth has decreased by 52.7% for the second lowest 20% of incomes
  • The Middle Class: Wealth has decreased by 19.1% for the middle 20% of incomes

However, one segment has shot up “off” the charts:

  • The Top 10%: Wealth has increased 74.9%, soaring to a median net worth of over $1.1 million.

Then and Now

What’s changed between then and now?

We looked at this from a macroeconomic perspective to get a sense of what has changed between 1998 and today, using latest data from last month (May 2016).

  • Unemployment is relatively flat between 1998 and today, but the amount of people actively looking for work has dropped by 4.5%. With more workers discouraged since the 2008 crisis, Workforce participation has dropped steadily. Economists also say this is likely due to a rapidly aging population.
  • Inflation has averaged between 0% and 1% over the last three years. It is currently sitting at 1%. In 1998, inflation was closer to the Fed’s 2% target.
  • The Federal Funds Rate, which is the rate that generally acts as a backbone for interest rates across the country, has dropped like a rock. Right now it was effectively 0.37% in May 2016, way down from 5% to 6% that existed for most of the 90s.
  • National Debt has almost quadrupled in nominal terms from $5.5 trillion (1998) to $19.3 trillion today. In real terms, taking into account inflation, it has more than doubled.
  • Money Supply (M2) has increased from $4.2 trillion (1998) to $12.7 trillion today. About $5 trillion of this increase came after the 2008 crisis.

And while there are many factors that go into wealth inequality, we believe that some of the above factors are worth exploring and understanding in detail.

For example, who benefits from 0% interest rates the most?
Who owns assets like real estate or stocks that have their prices propped up by these policies?
Who can borrow capital at low rates to invest or speculate on rises in these prices – is it the people that already have money, or the people without any?
Where does all the extra money that is added to the system go?
What is each $1 trillion of new U.S. debt spent on, and do the benefits of this added debt outweigh the costs?

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Inequality

The Wealthiest and Poorest County in Every State

This infographic uses the measure of median household income to contrast the wealthiest and poorest counties in every U.S. state.

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The Wealthiest and Poorest County in Every U.S. State

View the high resolution version of today’s graphic by clicking here.

The average U.S. state is made up of 62 counties.

With so many counties spread throughout each state in the nation, it’s not surprising that we can find counties that exemplify almost any part of the American experience.

In this case, we’re comparing county-level data to look at the differences in economic opportunity within each state. More specifically, we are looking at the range of median household income, which is one proxy for the difference in economic status between counties.

Disparity by State

Today’s infographic comes to us from TitleMax, and it looks at the wealthiest and poorest counties in each individual U.S. state based on the measure of median household income.

Here are the five states with the biggest disparity between rich and poor counties:

1. Virginia: $102,800
Loudoun is about an hour’s drive to D.C., and it also happens to be the richest county in the U.S. in terms of median income. Further west in the state, bordering Kentucky and West Virginia, lies Buchanan County, which has a median household income of just $31,800.

 County NameMedian Income
Differential$102,800
RichestLoudoun$134,600
PoorestBuchanan$31,800

2. New Mexico: $86,500
In Los Alamos, known as the birthplace of the atomic bomb, median household income has exploded to $114,700 – meanwhile, along the Mexico border lies Luna, the poorest county in the state.

 County NameMedian Income
Differential$86,500
RichestLos Alamos$114,700
PoorestLuna$28,200

3. Colorado: $85,200
Just like the Colorado has a difference in elevation, it also holds a large difference in median income. Folks in Douglas County, which lies between Denver and Colorado Springs, take home $112,400 in income on average, while folks in Costilla bring in about $27,200 per year.

 County NameMedian Income
Differential$85,200
RichestDouglas$112,400
PoorestCostilla$27,200

4. Maryland: $80,900
Howard County, which lies between Baltimore and Washington D.C., has the highest median household income in the state. Meanwhile, it’s Somerset County at the south of the Delmarva Peninsula that has the lowest.

 County NameMedian Income
Differential$80,900
RichestHoward$119,400
PoorestSomerset$38,500

5. Tennessee: $79,700
Just to the south of the Music City sits Williamson County – a wealthy part of the state with $107,900 in median income. Hancock County is the poorest, and it’s tucked away in the northeast corner of the state.

 County NameMedian Income
Differential$79,700
RichestWilliamson$107,900
PoorestHancock$28,200

A Note on Cost of Living

While median household income can help point to disparities between counties, it is just one indicator.

It’s worth noting that the cost of living can often be cheaper in counties with lower median incomes, and this can partially offset the difference in some instances. For example, while Trinity County is the poorest county in California by median income, it’s also far away from San Francisco, Los Angeles, or Sacramento, and has a much cheaper cost of living and a different way of life.

In some ways it is comparing apples to oranges. Trinity County is completely rural, holds zero incorporated cities, and holds just 3,600 people in its largest community (Weaverville) – a far cry from the urban sprawl of L.A. or the booming Bay Area.

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Economy

Visualizing the Extreme Concentration of Global Wealth

A data-driven snapshot of global wealth distribution. The average person around the world is doing better, but big-picture inequality is still staggering.

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In recent decades, extreme world poverty has declined significantly and many millions of people have joined the swelling ranks of the middle class – particularly in China.

While these economic shifts are positive, it’s the other end of the global wealth spectrum that attracts the most attention. A high degree of wealth creation is amassed by those at the top of the economic pyramid.

The Top-Heavy Wealth Spectrum

Today, slightly less than 1% of the world’s adult population occupies the $1M+ wealth range. Despite their small numbers, this elite group collectively controls 46% of the world’s wealth, valued at approximately $129 trillion.

Concentration of Global Wealth

On the flip side of the equation, 70% of world’s population fall into the sub-$10K wealth band. This majority of people around the world collectively control a mere 2.7% of the world’s wealth.

Even as “the rich get richer”, there is good news for the majority. The percentage of people in that lowest wealth band has been shrinking over the years.

Moneyed Metropolises

Not only is money concentrated among a small portion of the population, those people tend to gravitate towards global cities such as London, Hong Kong, and New York.

In fact, 70% of ultra high net worth individuals (UHNWIs) – persons with investable assets of $30 million or more – reside in just ten cities around the world.

global wealth concentration map

According to Credit Suisse, emerging markets now account for 22% of growth in the UHNWIs category – up from just 6% growth in 2000 – with China alone adding over 16,000 UHNWIs to the mix. Many members of this elite class may generate their wealth in emerging economies around the world, but as we can see from the map above, the world’s richest people end up very concentrated, geographically speaking.

Global Wealth, by Continent

As the visualization below demonstrates, wealth accumulates in Europe and North America. This trend is so pronounced that it only becomes evident once the scale is adjusted to see the detail in the upper percentiles.

wealth distribution by continent

One thing is for certain – the world is changing quickly, and just as this graph would have looked very different 20 years ago, global wealth will almost certainly look different in 20 years time.

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