A Surge in Wealth Inequality

There was a fair amount of media coverage of the new data  on assets and debt from the 2005 Survey of Financial Security released by Stats Can last week (Daily, December 7); less so of the very useful companion research paper on wealth inequality by StatsCan researchers Morissette and Zhang published in the latest issue of Perspectives.
http://www.statcan.ca/english/freepub/75-001-XIE/11206/high-1.htm

As noted in the original release, wealth inequality measured by quintile shares – surprise, surprise – increased from 1999 to 2005. The share of net assets held by the top 20% of families rose from to 68.5% to 69.2% over this period. (This seems to include registered pension plan assets.)  The small wealth share of the bottom 60% fell, from 11.5% to just 10.8%.

Slightly buried in the new paper is evidence that wealth inequality is  increasing at an even faster rate than was the case in the 1990s,  and that the distribution is becoming ever more skewed to the very affluent.

The paper (Table 1) shows wealth shares of families for different parts of the distribution, for 1984, 1999, and 2005. Slightly misleadingly, Chart C “The Distribution of Wealth Has Again Become More Unequal” shows a sharp increase in the gini and the wealth share of the top 10% of families since 1984.  Why do I say “slightly misleadingly”? Not becasue of lack of  a sharp trend line up which is clearly shown, but because the horizontal scale is not adjusted for the number of years between surveys. In fact, wealth inequality rose by almost as much between the 1999 and 2005 surveys (six years) as it did between the 1984 and 1999 surveys (15 years.)

The wealth share of the top 10% (this time excluding registered pension plan assets) rose from 51.8% in 1984, to 55.7% in 1999, to 58.2% in 2005.  The annual rate of increase of the share of the top 10% rose from .26 percentage points per year, 1984-to 1999, to .41 percentage points per year, 1999 to 2005.  Median wealth of the top 10% of households is now over $1 Million ($1,194,000.)

Calculations from the data in the Table further show that the wealth share of the top 1% grew twice as fast between 1999 and 2005 as did the share of the top decile minus the top 1%. Of the 2.5 percentage point increase in the wealth share of the top 10%, 0.5 percentage points or one fifth went to the top 1%. (However, these sample surveys generally under-state the share of the very top since their wealth far eclipses their numbers.)