One of my google alerts, for the words "wealth distribution," took me to a blog post about the tragedy which has occurred in Haiti, which referred to America being different because it had a large middle class. Since I'd recently posted on this blog some new data about the distribution of wealth, I took a look at that data with the "middle class" in mind.
Here's the data on the distribution of Net Worth, copied from the post below:
|Next 4%:||26.4%||Top 5%:||61.0%|
|Next 5%:||10.8%||Top 10%:||71.8%|
|Next 10%:||13.3%||Top 20%:||85.1%|
|Next 30%:||12.4%||Top 50%:||97.5%|
Do we define as "middle class" the people who hold the middle third of our wealth? That's the 9% of us who hold 37.2% of our wealth. Those below that cutoff must be "lower middle class" or "poor."
Do we define as "middle class" the people between the 50th and 80th percentiles of the wealth distribution? That 30% has a mere 12.4% of our wealth. The 50% below them only have 2.5% of the net worth.
Do we define as "middle class" the people between the 50th and 90th percentiles? They hold 25.7% of the wealth.
If America's strength is its broad middle class, they certainly aren't reaping much of a reward. The Chartbook for the Survey of Consumer Finances, page 42, shows this:
From the following chart in the Chartbook, Mean Value of Net Worth for Families With Holdings, I calculate the following shares of Net Worth:
Share of Holdings, 1989, 1998 and 2007 -- by Income Quantile
||1989||1998||2007||1989 to 2007|
|Bottom Quintile||(20%)||2.65%||3.38%||3.77%||+ 1.12 percentage points|
|Second Quintile||(20%)||7.07%||6.80%||4.84%||- 2.23 percentage points|
|Middle Quintile||(20%)||10.90%||8.94%||7.54%||- 3.36 percentage points|
|Fourth Quintile||(20%)||14.64%||14.59%||13.48%||- 1.16 percentage points|
||11.53%||10.92%|| - 1.04 percentage points
||54.76%||59.45%||+ 6.67 percentage points|
By this standard, who is our middle class?
- The 20% of us between the 40th and 60th percentiles, who have 7.54% of the net worth?
- The 60% of us between the 20th and 80th percentiles, who have 25.86% of the net worth?
- The 70% of us between the 20th and 90th percentiles, who have 36.78% of the net worth?
- The 50% of us between the 40th and 90th percentiles, who have 31.94% of the net worth?
What does this suggest to you about how we might tax ourselves?
What does this suggest to you about who we might ask to support the aid to Haiti after its tragedy?
What does this suggest to you about the notion that the strength of America is its large healthy middle class?
What does this suggest to you about the notion that our taxes ought to be based on income?
Does it put Leona Helmsley's comment -- "WE don't pay taxes. The little people pay taxes." -- in a different light?
A caution about the data: This post shows two different distributions of net worth: according to net worth in the first part, and according to income in the second part. Don't confuse them -- it is easy to do. But all the data is based ultimately on the Federal Reserve Board's Survey of Consumer Finances, and I've never heard anyone claim that the SCF overstates the concentration of wealth. If you need help differentiating, post a question, and I'll try to help.