The rich keep getting richer, and that apparently holds true when it comes to estimates of their wealth.
While the top 1 percent of U.S. earners had been thought to control 30 percent of the country’s total wealth, it turns out that might be a lowball estimate, according to a new working paper from a European Central Bank senior economist.
There may be a problem with that 30 percent figure, given that wealthier households are less likely to respond to surveys about their assets than lower-income families, writes economist Philip Vermeulen. By using data from Forbes’ billionaires lists in a new analysis, he estimates that share of wealth controlled by America’s top 1 percent is between 35 percent and 37 percent.
“Our knowledge of the wealth distribution is less than perfect,” Vermeulen wrote. “Our results clearly indicate that survey wealthy estimates are very likely to underestimate wealth at the top.”
An accurate grasp of the wealth distribution is important for both economic research and policy makers, given that it helps calibrate macroeconomic models and guides fiscal policy, he added.
The paper, which reflects the view of the author and doesn’t represent the views of the ECB, found wealth estimates for the top 1 percent in other countries also undercounted their assets.
In the Netherlands, for instance, the top 1 percent of earners are estimated to control 26 percent of the country’s wealth, but Vermeulen’s analysis boosted that to 28 percent to 35 percent.
The gap between rich and poor has reached “spectacular” heights in the U.S., bestselling economist Thomas Piketty told CBS MoneyWatch last month. The thesis of his “Capital in the Twenty-First Century” holds that the rate of return on capital, such as real estate, is outpacing the rate of economic growth, leading to wealth inequalities that are likely to continue.
Amid growing concern over rising wealth inequality, the Obama administration is championing a hike to the minimum wage, seeking to raise it to $10.10 an hour. For his part, Piketty has proposed remedies such as a global tax on wealth. (Vermeulen doesn’t include recommendations in his paper.)
Previous research has found that America’s income inequality is on the rise. The top 1 percent of Americans now takes home one-fifth of all pre-tax income, or more than double their share in 1980, according to report earlier this year from the Organisation for Economic Co-operation and Development. That report found that the level of income inequality is much worse than in other countries.
The richest Americans hold a far greater share of the country’s wealth than the richest citizens in nine other countries, according to Vermeulen’s research. The next two countries where the richest residents hold the biggest share of the pie were Austria, with 33 percent to 36 percent, and Germany, with 32 percent to 33 percent of wealth share.