Subject: Wealth and Income (was: The Richest Are Getting Poorer) Date: Sun, 27 Sep 1998 06:18:08 GMT From: oldnasty@mindspring.com (Grinch) Organization: Happy Skeptics of America Newsgroups: alt.politics.economics, sci.econ, alt.politics References: 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 jim blair wrote: >As C. Post has pointed out, income is not the same as wealth. But income >is often used as an indicator of 'economic well being'. And I don't know >if there are as reliable numbers on "total wealth", and even if there >were, would they be skewed by age? The best sources on wealth v. income in the U.S. are the Fed's Survey of Consumer Finances, and the National Science Foundation's Panel Study of Income Dynamics. A couple of Fed papers analyzing their findings: http://research.mpls.frb.fed.us/research/qr/qr2121.html http://www.stls.frb.org/research/wp/96-012a.html These show the flaws in measuring poverty by looking at the reported average income for the bottom income decile (or quintile or whatever), and in "counting the poor" by looking at how many people have income below a given dollar amount -- the standard methods used by the Census and reported in the press. For example, from the first study above: "A surprising fact is that the income-poor own above average wealth... Households that are in the lowest 1 per-cent of the income distribution own wealth [...] which puts them in the 85th percentile of the wealth distribution. Moreover, the households that are in the lowest 1 to 5 percent of the income distribution own wealth [...] which puts them in the second quintile of the wealth distribution." This is because the lowest income percentiles include not only the truly poor. They also include wealthy business persons who are having an off year, large numbers of retirees who have little income but substantial assets (paid-off homes, pension benefits, investments, etc.), students in medical school, law school, etc. who are in the "little income yet" stage of prosperous careers, and so on. Subtract these people from the bottom income decile and the number of truly poor living only on that decile's average income add up to substantially less than a full decile of the population. Include them in a purely income-determined definition of "the poor", and the wealth of the poor is well above average.