People don't typically understand what wealth is though. It's kind of a dumb thing to measure. My 4yo with $5 in birthday money has more wealth than my wife and I with college loans, car loans, house loans all offsetting our assets. But you'd be hard pressed to say he's wealthier than we are in anything other than strict accounting terms. Income is a far more reliable source of measurement to determine how well off people are.
Originally Posted by Lord Ben
That the bottom 40% own .3% of the wealth is actually surprising to me, I figured enough people had debt that it would be a negative number. I assume that with the .3% number that the bottom 25% at least is in the negatives meaning my 4yo son is wealthier than 1 in 4 Americans! How unfair, tax the children!
First of all, economists in the study of wealth distribution define wealth in terms of marketable, liquid and saleable assets: real estate, stocks, and bonds (and other like property), not illiquid goods such as cars, and other assets that are more utilitarian than saleable. This makes wealth comparisons more meaningful.
Second, income distribution in the States also features widespread inequality. While not as shockingly skewed and unequal as its wealth distribution, it is still awful, with the States having the greatest inequality of income distribution in the first world both before and after transfers and taxes, and it's _growing_.
Before transfers and taxes, US income inequality via the Gini coefficient
is worse than that of third world countries (.45), beaten out by such lustrous nations as Iran, Uganda, and Nigeria. After transfers and taxes, it fairs better at 0.378, but is still outperformed by the entirety of the first world. Of the OECD countries, only Mexico, Turkey and Chile are worse off.
Third, income is closely correlated to wealth.
Fourth, while income is an important part of the overall picture, it does indeed make sense to focus on wealth because wealth captures inequality and income/asset growth over a longer time frame, whereas simple income is volatile and temporal. Further, wealth can be easily expended and liquidated to provide for lifestyles. Wealth is also a _creator_ of income. For all of these reasons wealth thus inherently offers a more accurate insight to the distribution of economic power; this is why it is the gold standard of economists for evaluating economic inequity.
It should also be noted that some definitions of income, including that of the US Census Bureau, do _not_ include the likes of capital gains and dividends, which are the predominant source of income amongst the rich.