"The past 30 years have seen far greater wealth creation than the Gilded Age," the UBS annual billionaires report says.
Pundits usually have income in mind when they talk about the top 1 percent. And analysts sometimes rank our richest by wealth. But if we really want to understand privilege, new research suggests, we need to look at both.
By Lisa Keister
In the United States today, we usually define the “top 1 percent” as either those with the highest incomes or those with the most net worth. But an even smaller, more privileged group of Americans attracts almost no attention at all: those who simultaneously rank in the top 1 percent of both income and wealth.
We can think of these households as the “double rich.”
Why bother focusing any attention on this small elite group? We have three good reasons.
First, income and net worth are jointly determined: Having one can increase ownership of the other. Second, those at the top of both distributions have higher incomes and higher net worth than those who are merely at the top of one distribution.
Third, and perhaps most importantly, those with either high income or high net worth have advantages, but those at the top of both distributions have a qualitatively different and more elite set of privileges — and potential power.
As our first table shows, the double rich have had higher median incomes over recent decades than either those with only top incomes or those with only top net worth. Incomes for those at the top of both distributions increased from just under $800,000 annually in 1989 to a peak of nearly $1.6 million in 2007 (all numbers are 2010 dollars).
Median income for this exclusive group has fallen off some since then, but this median remains higher than the median for either of the other two top groups. The gap between those at the top of these distributions has also grown since 1989. This gap appears particularly pronounced in the lead up to the Great Recession.
Median Income for Three Top 1% Groups
Source: Survey of Consumer Finances, Keister and Lee 2014. Income in 2010 dollars.
The double rich have also had higher median net worth than either those with only top incomes or those with only top net worth. Net worth for those at the top of both distributions increased from approximately $8 million in 1989 to a peak of nearly $16 million in 2007. The median for this double rich group fell to just about $12 million in 2010, but still exceeds the median for the other two groups.
Median net worth for those who sit only in the top 1 percent by net worth still sits at a lofty level, at about $11 million in 2010, but this net worth falls short of the median for the double rich in every year included in the table. Median net worth for those who appear only in the top 1 percent by income has run considerably lower than the net worth of the other two groups in each year depicted here.
Median Net Worth for Three Top 1% Groups
Source: Survey of Consumer Finances; net worth is 2010 dollars; Keister and Lee 2014.
And the double rich receive higher percentages of total income and own higher percentages than those who sit merely in the top 1 percent by income or net worth.
In 2010, for example, the double rich received nearly 11 percent of total household income and owned nearly 20 percent of total net worth.
Those in the top 1 percent by income, by comparison, only received 6.6 percent of total income and owned only 4 percent of total net worth.
Those in the top 1 percent by net worth, meanwhile, took in less than 2 percent of total income and owned less than 15 percent of total net worth. Granted, this 15 percent of net worth — for just 1 percent of the population — still counts as an enormous proportion. But the 20 percent share of the double rich represents an even more impressive share.
What accounts for these patterns? We’re only beginning to understand the factors at play here, but we have clear evidence that inheritances make up one important part of the explanation. More than 41 percent of the double rich have inherited at least some wealth. Among the double rich who have inherited, the mean amount received totaled nearly $2.8 million, with a median just over $333,000.
Inheriting is actually even more likely to get you into the top 1 percent by wealth: 45 percent of those in the top 1 percent by net worth only have ever inherited, and the mean and median amounts inherited for this group stand at $2 million and $548,000.
In contrast, only 30 percent of those in the top 1 percent by income only have ever inherited, and the mean and median inheritance for top income earners sit at only $548,000 and $190,000 respectively.
The bottom line: The 1 percent looks quite a bit different if we disaggregate our various top 1 percent groups. Both income and net worth turn out to be even more highly concentrated than previous estimates suggest.
Lisa Keister is a Professor in the Department of Sociology at Duke University. Her recent paper co-authored with her colleague Hang Young Lee, “Is the One Percent Permeable? Ascribed and Achieved Traits in Top Incomes, Top Net Worth, and Both,” delves deeper into the research described here. http://wealthinequality.org/uploads/Keister_Lee_Is_the_One_Percent_Permeable.pdf