Perception of wealth inequality.

[N.E. Brigand]

I just read this, and found it fascinating. On average:

-Americans think that the wealthiest 20% of the population should control about 32% of the nation's wealth,

-but they believe that the wealthiest 20% actually control about 58% of the nation's wealth.

-However, in reality, the wealthiest 20% control about 84% of the nation's wealth.

Charts at the link show that these perceptions are not particularly dependent on gender, party affiliation, or even income, varying by 10% or less.

For instance, people earning more than $100K feel that the poorest 20% should hold 8% of U.S. wealth, while people earning less than $100K feel that the poorest 20% should hold 12% of U.S. wealth. Both sets feel that the poorest 20% actually hold 3% of U.S. wealth. (And the reality is that they hold less than 1% of U.S. wealth.) And even those with higher incomes believe the rich should hold about half as much wealth as they actually do.

[Dave_LF]

When I saw the thread title, I was ready to come in and say that even a pessimist's perception doesn't typically jive with how bad the reality is. But it looks like that's the whole point.

[Voronwë the Faithful]

I'm surprised that people are so uniformly uninformed about this. I know I shouldn't be.

[halplm]

I find the concept that what someone should have is in any way based on what they already have, to be entirely incomprehensible.

[yovargas]

Um, yeah, I'm with hal. People should have...whatever they've earned, no?

[Voronwë the Faithful]

Um, yeah, I'm with hal.

Just thought I would mark that one down, for posterity's sake.

[Frelga]

Um, yeah, I'm with hal. People should have...whatever they've earned, no?

Earned?

Actually, this came up in my son's class and he wanted help. I cheated - I googled. The results were telling.

Wealth, Income, and Power

Granted, this did come from UC Santa Cruz.

In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers).

/snip/

Figures on inheritance tell much the same story. According to a study published by the Federal Reserve Bank of Cleveland, only 1.6% of Americans receive $100,000 or more in inheritance. Another 1.1% receive $50,000 to $100,000. On the other hand, 91.9% receive nothing (Kotlikoff & Gokhale, 2000).

/snip/

Of all the new financial wealth created by the American economy in that 21-year-period, fully 42% of it went to the top 1%. A whopping 94% went to the top 20%, which of course means that the bottom 80% received only 6% of all the new financial wealth generated in the United States during the '80s, '90s, and early 2000s (Wolff, 2007).

I also suggest scrolling down to the section on the CEO pay, which came up in a different discussion

The ratio of CEO pay to factory worker pay rose from 42:1 in 1960 to as high as 531:1 in 2000, at the height of the stock market bubble, when CEOs were cashing in big stock options. It was at 411:1 in 2005 and 344:1 in 2007, according to research by United for a Fair Economy. By way of comparison, the same ratio is about 25:1 in Europe.

[vison]

Thank you ever so much, Frelga.

What is particularly distressing to me is the fact that many of those men who got those incredible compensation packages actually led their companies into extreme debt and in some cases, bankruptcy.

The idea that a CEO will be "punished" if the company doesn't make money is an extremely naive idea. It doesn't happen very often. It should.

[yovargas]

Um, yeah, I'm with hal. People should have...whatever they've earned, no?

Earned?

Ok, earned as in "money exchanged freely with others for goods and services". I suppose there's might be the odd exception I'd make to that, maybe illegal or willfully damaging actions or something, but mostly, yeah, what you should have is what you've "earned".


Oh, and V-dude, since me and hal are both pretty much libertarians (economically) the surprise should be that that happens so rarely.

[Aravar]

What is wealth, though? That seems to be counting the current market value of assets. If you change, for example the tax regime or the intellectual property regime the market values themselves will also be changed in reaction. The assets themselves won't alter. It's not perhaps the best measure.

To give a concrete example two identical houses built in the same year in London and Liverpool will have vastly different values. Do you asses the occupants, who need them to live in as being different in wealth becuase of the difference in market value, or equally wealthy because they have something which, for the practical purposes of living in, is identical?

[vison]

An interesting question, but a mere house, unless it's Chatsworth or the Biltmore estate, is not a measure of "wealth" in the sense of putting its owner into the "top" echelon.

Around the turn of the 20th century, 1% of the British population controlled 80% of the nation's wealth. Almost all that 1% consisted of aristocrats, especially the nation's dukes and earls. Earl Fitzwilliam, for instance, lived in the largest private house in England (Wentworth), and was fabulously wealthy from mining the coal seams that underlay the surrounding enormous estate.

The 20th century saw the transfer of wealth out of the nobility - mostly. The imbalance was found to be unfair. Taxes and death duties took care of the problem.

I wonder what will happen in the US if people ever really absorb the statistics on this subject?

[Aravar]

That's true Vison, when we're talking about the very top, "The Upper Ten Thousand".

Howver the top 20% is a different matter. I'll try to find the figure, but if IIRC the net asset value in the UK to be in the top 20% was such that certainly in London merely owning a modest house would put you in that bracket.

EDIT to add I've found the ONS report I was thinking of. The top 20% have average wealth of about £1m but a large chunk of that appears to be pension rights. In terms of property wealth the graph on p9 puts an average property wealth of about £400K. That will get you a 3 bed semi in SW15, not rolling acres.

[vison]

Hm. I would not have included "pension rights", that's a new one on me. But I really don't know very much about this sort of thing. I guess pension rights are wealth - as long as the pensions will get paid.

"Owing" a house is usually "having a mortgage". Monetary wealth, to me, is what you actually own. Outright. Or, maybe, Net Worth: the difference between what you own and what you owe. For an awful lot of people these days, that's a negative figure.

Land values are usually fairly stable, are they not? I don't mean as in a housing bubble, where people pay inflated prices for houses on a lot. Where I live land is valuable, BC being a province consisting mostly of mountains, the bits of flat arable land tend to be worth a lot of money. But while I do own a largish chunk, it's the old axiom: land rich and money poor.

The value of our land would put us up high in a list of people who have a lot, but it's meaningless since it's money we can't or won't spend. But a lot of people get these "home equity" loans, at ruinous interest. A sad situation, all round.

[Aravar]

Hm. I would not have included "pension rights", that's a new one on me. But I really don't know very much about this sort of thing. I guess pension rights are wealth - as long as the pensions will get paid.

Very true, especially in the current climate.

"Owing" a house is usually "having a mortgage". Monetary wealth, to me, is what you actually own. Outright. Or, maybe, Net Worth: the difference between what you own and what you owe. For an awful lot of people these days, that's a negative figure.

Yes, but house prices in the UK have risen massively, especailly in the past decade. someone could have bought a house in the mid eighties, have a modest mortgage and still have very high equity. If the bought earlier than that the mortgage should be paid off.

Land values are usually fairly stable, are they not? I don't mean as in a housing bubble, where people pay inflated prices for houses on a lot.

Part of the problem in the UK is the planning laws, which are restrictive of development. This means that land which can only be farmed is relatively cheap, in the single or teen thousands per acre. If planning permission is granted that land value can rocket to the hundreds of thousands or millions.

Where I live land is valuable, BC being a province consisting mostly of mountains, the bits of flat arable land tend to be worth a lot of money. But while I do own a largish chunk, it's the old axiom: land rich and money poor.

The value of our land would put us up high in a list of people who have a lot, but it's meaningless since it's money we can't or won't spend. But a lot of people get these "home equity" loans, at ruinous interest. A sad situation, all round.

And that's the nub of the problem with these studies. You control a large part of Canada's assets, at least compared with other people, by this measure.The statistics don't translate to what that actually means in the real world.

[vison]

Farmland is that cheap in Britain? Wow.

Here in BC we have The Agricultural Land Reserve. This means that land in the Reserve cannot be developed. But here in the Fraser Valley even that reserved land is enormously expensive - so expensive that I honestly don't know how a young family that wanted to start out farming could possibly afford it. Many Indian families do so - but that's a whole family enterprise as a rule, not just one guy.

What happens a lot is that some rich city guy buys acreage and builds a mansion. Some go to the trouble of "farming" something in order to get the farm tax rate, but if he's rich enough he won't care, he'll pay the property tax. If a rich guy in Britain bought a large tract of farmland, would he have to prove he's farming it?

Some people get their land out of the reserve, usually people with some political connections. Although the Land Reserve committee occasionally digs in its heels and refuses to grant an exemption even for close friends of important politicians. I would have no chance of getting such an exemption, I live too far from town and have no political clout at all.

Now and again I watch those TV shows about people looking to buy houses, generally these are British people. What strikes me is how much money they have to spend!!!! Where the hell do seemingly ordinary people get a million pounds to buy a house? And often, a second house at that.

Is that still going on? Or has the bust put a stop to it?

[Aravar]

Farmland is that cheap in Britain? Wow.

Yes it is,. I did a quick search and the average is just over £5,000 per acre.

What happens a lot is that some rich city guy buys acreage and builds a mansion. Some go to the trouble of "farming" something in order to get the farm tax rate, but if he's rich enough he won't care, he'll pay the property tax. If a rich guy in Britain bought a large tract of farmland, would he have to prove he's farming it?

There is, to my knowledge, no separate farm tax so that wouldn't arise.
Howver building a mansion would eb difficult under the planning laws. There is a small exemption for truly exceptional buildings but it is very strict. A recent episode of the programme Grand Designs showed the effect of the control. A couple bought land with a derelict barn: literally ruined walls. The were not alllowed to rebuild and convert the barn into a house, they were allowed to jack up the barn and build an eco-house underground.

You would have to show you were farming to get some EU grants: milk quotas are valauble assets in their own right. Of course there was also the EU idea of "set aside" or paying farmers not to farm, but that went in 2008.

Now and again I watch those TV shows about people looking to buy houses, generally these are British people. What strikes me is how much money they have to spend!!!! Where the hell do seemingly ordinary people get a million pounds to buy a house? And often, a second house at that.

Is that still going on? Or has the bust put a stop to it?

The bust has largely put a stop to the buying because banks want 25% deposits. House prices have gone absolutley mad. I don't know where the money comes from, although in some cases people will have done well out of the London property market which allows them to do well moving outside.

[vison]

5 thousand pounds an acre isn't even $10,000 CDN. Holy cats. That's like Saskatchewan prices, almost.

But I would be interested in knowing what size farm is viable, what crops, etc., what kind of income you would get per acre.

Milk quota is hugely expensive here, as are chicken and egg quotas. We enjoy an orderly marketing system which means farmers can actually make a living farming.

[Maria]

What are milk, chicken & egg quotas?

[Aravar]

But I would be interested in knowing what size farm is viable, what crops, etc., what kind of income you would get per acre.

.

I'm afraid I can't help you on that. Most of the complaints by farmers which are reported in the press are about the supermarket chains' buying practices which hit incomes.

Maria, as I understand it a milk quota is the right to produce a certian amount of milk. Each EU member state has a limit imposed on it as to how much it can produce and farmers buy the right to produce a certain amount.

[vison]

What are milk, chicken & egg quotas?

Farmers in BC (and other provinces) get quotas setting a limit on the amount of eggs, milk, or various sorts of meat chickens they can produce. Marketing boards allot the quotas and have the protection of the law - they aren't exactly arms of the government but have the sanction of the government. The marketing boards also set the prices that farmers get for their products.

Quota becomes very valuable and often costs more than building the sheds, etc.

It's a good system for farmers and, I believe, for consumers. Farmers have some security of income and consumers get good food.

Farmers who wish to operate outside the quota system may do so, but it's not easy. The system won't work if it's sidestepped.

There is always an outcry about this, some people think it's wrong, that "the free market" should rule here, but in jurisdictions where there is a "free market", food is no cheaper and there are many other problems. Canadians have the same cheap food as Americans with fewer issues surrounding overproduction and price crashes.