Wealth Inequality (was Henwood on Blackburn pension)

[Paul <paul_@xxxxxxx>]

Doug's fine presentation was accompanied by a couple of other valuable
papers at the New School Conf.

One was a paper, by Ed Wolff, presented an eye-popping chart of the
redistribution of wealth in the 1980s and 90's based on data that has never
been presented before (AFIK).

We have seen (a bit) published on the extraordinary shift in income
inequality in these years.  For example, from 1983 to 2001, Wolff
calculates that although the *mean* annual household income went up by 29%,
the *median* household income (what the typical household got) only went up
by 14%.  The 15% spread shows that much of the extra income went to the
better off.

Another measure of equality (but harder to estimate) is the 'Net Wealth' of
households:  home value, stocks, 'cash', etc.  Since the rich can use tax
deferrements, tax shelters, etc much of their money will not appear as
"income" or will only appear after retirement - so the true extent of
inequality is hidden.  The conventional version of 'Net Weath' does include
the new types of pensions ('defined contributions' such as 401ks or Keoghs)
since they are "individual", BUT this data does not include the traditional
type of pensions ('defined benefits').  In the past, Wolff (and some
others) have shown that by the conventional measure wealth distribution
over these years has perhaps been even MORE unequal than income
distribution: a mean growth of 65% versus a median growth of 24%.  A very
large percent of the household wealth created over these years went to the
rich.  [For data reasons, these numbers and below are for ages 47-65.]

NOW - for the first time - someone has calculated the full picture.  For
working-class households the 'defined benefits' pensions have traditionally
been a major source of wealth holdings - and this source has been savaged
over the last two decades.  At the same time, the 'new' sources of pension
wealth holdings (401ks, etc) are set up in ways that make them
exceptionally unequal.

The new picture shows that over these years there was a substantial
increase in household wealth - up by 43% -- but the median actually
DECLINED by 2%.  Yes, that is right.  After 18 years of hard work and
during prosperous times, the poorer half of the country actually lost
wealth.  ALL of the new wealth created went to the better off, principally
to the top 25%.  (Indeed, the top 1% enjoyed a 94% increase in their wealth
; the top 10% saw a 76% increase).  And if that was not enough, significant
amounts of already existing wealth was redistributed to the wealthy.  The
eye-popping chart of this change breaks down wealth in 5% increments,
poorest to richest - and the bars start deeply negative and march up to the
sky.  If Wolff were not one of the world's foremost "authorities" on this
issue, I might have suspected that it was made up.

Paul