Deep pockets have displaced modest-income people from plenty of prime urban terra firma. Could our offshore be next?
In our deeply unequal age, we’ve become accustomed to talking about concepts like income and wealth, affluence and poverty. Researchers at the OECD, the developed world’s official economic research agency, would like to toss another concept into the inequality mix: economic vulnerability.
Why do we need to talk about vulnerability? Wealth and income stats alone, a new OECD study points out, often don’t tell us the whole story about who’s prospering and who’s not.
One example: Households with decent incomes often don’t have much in the way of assets. In these asset-poor households, any serious disruption — a sudden job loss, a family breakdown, a disability — could bring economic disaster.
How many households are living at the precipice of this disaster? The OECD’s new economic vulnerability study has an alarming answer.
The study covers the United States and 27 other major developed nations. Within each nation, the OECD analysis identifies both the “income poor” and the “asset poor.”
The OECD researchers rate as “income poor” any households that are making less than half what their nation’s most typical households make. “Asset poor” households don’t have enough cash on hand to maintain themselves above this “standard poverty line if their incomes stopped for three months.”
These two categories do certainly often overlap. Across the developed world, the new OECD stats show, 11 percent of people rate as both income and asset poor.
But the two categories frequently don’t overlap. Many millions of households across the developed world have above-poverty incomes but qualify as “asset poor.”
A whopping 36 percent of people across the developed world, the new OECD research notes, find themselves in this situation. They rate as “economically vulnerable.” If their above-poverty-line incomes should stop for three months, they’ll sink into poverty.
In other words, on average across the developed world as a whole, over a tenth of the population is already living in poverty and over another third is living at the economic razor’s edge, in danger of falling into poverty at any moment.
But averages can deceive. “Economic vulnerability,” the new OECD research shows, varies widely within the developed world.
Only a little over 10 percent of people in Japan, for instance, rate as economically vulnerable. Just about 40 percent of Americans, by contrast, live at that razor’s edge.
What do nations with high levels of economic vulnerability seem to share? In high-vulnerability nations, wealth tends to concentrate at the economic summit. In the United States, the OECD notes, the top 1 percent hold 42.48 percent of the nation’s wealth.
In low-vulnerability nations, the rich typically stamp a smaller footprint. In Japan, the top 1 percent holds only 10.77 percent of national wealth.
Policy makers, the OECD study concludes, need to address the reality that “so many individuals who are not income poor are still vulnerable to sudden losses of regular income.” Policy makers surely do need to do that addressing. But that task can be devilishly difficult in nations where so much wealth — and political power — rests with the rich.
Sam Pizzigati co-edits Inequality.org. Among his books on maldistributed income and wealth: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. His latest book, The Case for a Maximum Wage, will appear this spring. Follow him at @Too_Much_Online.