Why wealth inequality isn’t much of a thing
From a press release by Hargreaves Lansdown but interesting for all that:
If you were to quantify it (wealth that is - Ed) as being the age group with the most assets, it would be those aged 60-64, who have nine times as much as the aged 30-34.
If you were to quantify it as the individuals holding the most assets, those with the top 10% of assets hold £90,000 in the bank, £310,000 of property, and £627,000 in pensions.
The two groups are not wholly the same of course but there’s a very large overlap there.
One point to make is that getting into that top 10% by wealth isn’t all that exclusive a club. Yes, £90k in the bank seems a bit de trop but £300k in equity is a provincial house with the mortgage paid off. £600k in pension is middle ranking civil servant sort of territory. Schoolteacher, senior nurse, that sort of level. This is not an exclusive club. It’s also, as it happens, about the global 1% by wealth that has Oxfam spitting with rage in those annual reports.
The other thing that is obvious is that there are large lifecycle effects in play here. People who’ve paid off their mortgage and saved into their pensions are richer - wealthier - than those just starting that process. Shocking finding, eh?
But there’s more to it than this. D’ye remember Piketty and all that fuss that wealth was now a higher portion of GDP than it used to be? It was 300 to 400% of GDP a couple of generations back it’s now 500 to 600%? This was a terrible thing and taxes must rise substantially to take care of it?
But there’s our explanation. Lifecycle effects in an increasingly long lived population. Back two generations average lifespan in retirement was some handful of years. Now it’s a handful of decades - meaning that rational people save more for those golden years. That rise of wealth to GDP can be described as just the natural outcome of increasing lifespans. Thus not, in fact, something that needs to be taxed away.
But the larger point we want to make. Wealth and wealth inequality have huge, vast even, lifecycle effects in them. Anyone who starts talking about wealth and wealth inequality without including, discussing, those lifecycle effects can be safely ignored. In fact, not just should be ignored but also spanked and sent to bed without any supper. It’s entirely possible that there will still be things to complain about - when isn’t there? - after they’re included but not including lifecycles in an analysis is to be deliberately misleading. And why should we pay attention to anyone lying to us - even by omission - in the first place? All that before we even begin to discuss Frenchmen.
Tim Worstall