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Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

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Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#11

Post by araes »

cwal37 wrote: post #3
alexeisadeski3 wrote: post #2

Long story short: The wealth of non rich Americans is almost entirely contained in their highly leveraged houses. If housing prices collapse, their wealth collapses. In 2008, housing prices collapsed.

Not exactly. The 25th percentile's wealth was dropping even before the recession, which suggests some additional downward pressure, although I am not sure what that could be off the top of my head.

My suspicion is that it may be due to the inflation adjusted real wage effects, which hit the bottom 25th percentile the hardest, as that is generally their only source of income, and their resulting margin for wealth storage is so much closer. [1] Honestly, real wage income has been flat since about 1965, and for many has been going down since the great recession. [2] And if you only got high school or less, well, you're just boned. [3] (Note, take sources with a grain of salt, as they're 5 minute Google searches)

[1] http://1.bp.blogspot.com/-aGE47oMJAQw/UhZtjjtKorI/AAAAAAAAJz...

[2] http://www.pgpf.org/Chart-Archive/~/~/media/A130E85DDC064B81...

[3] http://www.frbsf.org/wp-content/blogs.dir/1/files/1106bb.gif

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#12

Post by Paul_Dessert »

araes wrote: post #5

Project it back a few years, and I'd bet we're poorer on average as a country than we were when I was born. Man, 43% decline for the median? Ouch. I also like that the mean wealth in America is 6x the median wealth. Actually, I find the numbers for the 75th+ percentiles a bit surprising, as my mental model had them with significant uptick after about 2011 or so. Kind of a wealth transfer from the lower percentiles. W…

I saw a chart a few weeks back depicting this. Starting in the early 80's it started heading downward. I can't find it at the moment, but if I do, I'll post a link.

A lot of factors contribute but housing was one of the major factors. "Net worth" was/is tied directly to their home and the 2006/07 crash. With the government screwing with the markets and investors buying homes as rentals, we just might see another sharp decline shortly...

http://www.zerohedge.com/news/2014-06-24/americas-most-impor...

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#13

Post by alexeisadeski3 »

anigbrowl wrote: post #6
cwal37 wrote: post #3

Earlier quoted context omitted.

Not exactly. The 25th percentile's wealth was dropping even before the recession, which suggests some additional downward pressure, although I am not sure what that could be off the top of my head.

Wage freezes at nominal values which did not keep pace with inflation during the 2000s, I'd guess.

Converting home equity to consumption is my guess.

Remember HELOCs?

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#14

Post by epistasis »

breischl wrote: post #9
epistasis wrote: post #8

Earlier quoted context omitted.

Wow, very interesting that GINI by individual is fairly constant. However, household GINI is definitely the more relevant figure, as most big economic decisions (where to work, where to live) are made at the household level rather than at the individual level.

But the number of households is strongly influenced by people's personal social decisions such as divorce or living with relatives. Thus the household GINI is strongly influenced by people's personal decisions in addition to their economic circumstances. More concretely, if I divorce my wife and we become two households does that mean that US economic inequality has increased? I would say not, but the household GINI…

I would say that yes, US economic inequality has increased, quite concretely! Unless you both have precisely the same income post-divorce, as a couple you were more equal than when single.

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#15

Post by alexeisadeski3 »

alukima wrote: post #10

The wikipedia article on Income inequality in the United States is surprisingly detailed and I highly recommend it if you have any interest on wealth. It's such a polarized topic that the comments almost immediately turn into inaccurate or out of context talking points. http://en.wikipedia.org/wiki/Income_inequality_in_the_United...

Income and wealth are quite different topics...

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#16

Post by Retric »

nickff wrote: post #4

This study is misleading, because it uses 'household' wealth, instead of individual wealth, and may be incorrectly interpreted as showing a decline in the middle class, when it is really showing the results of changes in family structure over the past 50 years. This graph shows how this choice affects the results: http://1.bp.blogspot.com/-g3WZGpDibPM/Up3ZAPRtScI/AAAAAAAAJq... The following blog-posts go in to more d…

Supporting 1 person on x income is harder than supporting two people on 2x income. Put simply, a couple does not need two stoves, and any shared trip is less expencive etc. There are a few edge cases at the individual level for things like end of life care and taxes, but the overall economic bennifits are huge.

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#17

Post by jacobolus »

nickff wrote: post #4

This study is misleading, because it uses 'household' wealth, instead of individual wealth, and may be incorrectly interpreted as showing a decline in the middle class, when it is really showing the results of changes in family structure over the past 50 years. This graph shows how this choice affects the results: http://1.bp.blogspot.com/-g3WZGpDibPM/Up3ZAPRtScI/AAAAAAAAJq... The following blog-posts go in to more d…

Your chart shows income distribution, while the linked study is talking about net worth.

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#18

Post by Daishiman »

breischl wrote: post #9
epistasis wrote: post #8

Earlier quoted context omitted.

Wow, very interesting that GINI by individual is fairly constant. However, household GINI is definitely the more relevant figure, as most big economic decisions (where to work, where to live) are made at the household level rather than at the individual level.

But the number of households is strongly influenced by people's personal social decisions such as divorce or living with relatives. Thus the household GINI is strongly influenced by people's personal decisions in addition to their economic circumstances. More concretely, if I divorce my wife and we become two households does that mean that US economic inequality has increased? I would say not, but the household GINI…

If social circumstances make for a increase in divorces or a change in the fundamental structure of the family, I don't see why it's not something to take into consideration beyond "personal decisions".

Could it be that conservatives might actually be right about that?

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#19

Post by alexeisadeski3 »

mattm wrote: post #7

It's depressing how 1/4 households basically have no wealth at all.

If you take a minute to consider the demographics involved and the nature of wealth, it is neither depressing nor surprising nor even "bad".

Consider, for example, that many people have negative wealth.

Re: Wealth Levels, Wealth Inequality, and the Great Recession [pdf]

#20

Post by thrownaway2424 »

Retric wrote: post #16
nickff wrote: post #4

This study is misleading, because it uses 'household' wealth, instead of individual wealth, and may be incorrectly interpreted as showing a decline in the middle class, when it is really showing the results of changes in family structure over the past 50 years. This graph shows how this choice affects the results: http://1.bp.blogspot.com/-g3WZGpDibPM/Up3ZAPRtScI/AAAAAAAAJq... The following blog-posts go in to more d…

Supporting 1 person on x income is harder than supporting two people on 2x income. Put simply, a couple does not need two stoves, and any shared trip is less expencive etc. There are a few edge cases at the individual level for things like end of life care and taxes, but the overall economic bennifits are huge.

On the other hand, 1 person with x income pays less income tax than 2 people with 2x income.
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