I'm having a hard time making sense of Oxfam's claim
Posted: Thu Jan 25, 2018 3:09 pm
World's Richest 1% Took 82% Of Wealth Generated In 2017 is the claim. But what does that mean? In The People's Economics I discuss the difference between wealth inequality and income inequality and conclude that wealth inequality is less meaningful. But wealth inequality has greater shock value, so it's what tends to be mentioned. The trouble with Oxfam's claim is that it makes wealth inequality look like income inequality, especially when it is repeated by news sources. This is highly misleading.
The 1% and where to find them
Another problem with the claim is that it compares the wealth of the richest 1% at the start of 2017 with the richest 1% at the end of 2017. But these aren't necessarily the same people. Some people will drop out of the 1% by losing money, others will die. Some people will enter the 1%. Since the 1% is based on individual adult wealth, death of a spouse may be the reason some people enter the 1%. I doubt that they're celebrating.
To get into the top 1% by wealth you need to own $770000, or about £550000. In Oxford that represents a 3 bedroomed house plus a reasonable pension fund. If that's the wealth of a couple they won't be in the 1%, but if it's just one person then they will. When you hear of the 1% you may well think of a yuppie. I think of a widowed pensioner - who won't think of themselves as particularly rich, but might well volunteer in one of Oxfam's shops.
What about the top 1% by income To get there you need about $35000 or £25000 a year. Coincidentally that is what Oxfam are offering for a Superstore Shop Manager. They certainly won't think they're rich - they'd find it hard to get a mortgage in Oxford on just that income.
So where might you find the 1%. Maybe working in Oxfam's shops.
Asset valuations
One trouble with looking an inequality by wealth is that it depends on asset valuations. Suppose your house is worth twice what you paid for it. You're a lot richer aren't you? But then again it's the same house that you bought - how can you claim to have gained anything? What seemed to have happened recently is that the price of property has stagnated, and people have moved their money to stocks and shares,pushing up the value relative to property. Since the top 1% own proportionately more shares than the rest, this has increase the value of their assets. But it all seems like numbers in a computer to me, only loosely connected to the necessities of everyday life.
We probably do need much more redistribution of wealth, but we need to move away from a scarcity mentality. To obsess over some sort of revenge on the rich, rather than on how to make the world a better place is just going to make the rich want to hold on to their money. Muddled thinking and dodgy statistics aren't going to do any good at all.
The 1% and where to find them
Another problem with the claim is that it compares the wealth of the richest 1% at the start of 2017 with the richest 1% at the end of 2017. But these aren't necessarily the same people. Some people will drop out of the 1% by losing money, others will die. Some people will enter the 1%. Since the 1% is based on individual adult wealth, death of a spouse may be the reason some people enter the 1%. I doubt that they're celebrating.
To get into the top 1% by wealth you need to own $770000, or about £550000. In Oxford that represents a 3 bedroomed house plus a reasonable pension fund. If that's the wealth of a couple they won't be in the 1%, but if it's just one person then they will. When you hear of the 1% you may well think of a yuppie. I think of a widowed pensioner - who won't think of themselves as particularly rich, but might well volunteer in one of Oxfam's shops.
What about the top 1% by income To get there you need about $35000 or £25000 a year. Coincidentally that is what Oxfam are offering for a Superstore Shop Manager. They certainly won't think they're rich - they'd find it hard to get a mortgage in Oxford on just that income.
So where might you find the 1%. Maybe working in Oxfam's shops.
Asset valuations
One trouble with looking an inequality by wealth is that it depends on asset valuations. Suppose your house is worth twice what you paid for it. You're a lot richer aren't you? But then again it's the same house that you bought - how can you claim to have gained anything? What seemed to have happened recently is that the price of property has stagnated, and people have moved their money to stocks and shares,pushing up the value relative to property. Since the top 1% own proportionately more shares than the rest, this has increase the value of their assets. But it all seems like numbers in a computer to me, only loosely connected to the necessities of everyday life.
We probably do need much more redistribution of wealth, but we need to move away from a scarcity mentality. To obsess over some sort of revenge on the rich, rather than on how to make the world a better place is just going to make the rich want to hold on to their money. Muddled thinking and dodgy statistics aren't going to do any good at all.