WASHINGTON: Discussions of US economic inequality usually focus on income inequality (as in the case of a CEO who makes 300 times as much as his workers do). But there’s another type that gets less attention, yet may contribute far more to the gap between the haves and have-nots — wealth inequality.

Income is the amount of money you earn, whether from your work or your investments. But wealth is the amount of stuff you own, like your house, your car and your savings.

A new report by the Organisation for Economic Cooperation and Development finds that the richest 10 per cent of American households earn about 28pc of the overall income pie. This is a lot, but not when compared with another statistic: This same group has captured a whopping 76pc of all the wealth in the United States.

To give a sense of just how staggering these figures are, New York University economist Edward Wolff calculated exactly how the nation’s total wealth pie slices up among the population.

Let’s imagine that there are just 100 people in US. The richest guy (and, yes, he’s probably a guy) owns more than one-third of the total wealth in this country. He’s got a third of all the property, a third of the stock market and a third of anything else that can be owned. Not bad.

The next-richest four people together own 28pc of all the stuff. The next five people together own 14pc of all the things, and the next 10 own 12pc. We’ve accounted for just 20pc of the people but nearly 90pc of the total wealth. You can probably tell where this is going.

By the time we reach the bottom 40pc of Americans, guess what? We’ve run out of stuff. Sorry guys, you get nothing. In fact, Wolff calculates that this bottom 40pc actually has an overall negative net worth, which means that they owe more money than they own — and they probably owe that money to somebody at the top.

You’re not necessarily living in squalor if you have a negative net worth. Having some student loans or a brand-new mortgage can be enough to put you in that category temporarily.

By arrangement with Washington Post-Bloomberg News Service

Published in Dawn, May 24th, 2015

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