The commentary shows how wealth inequality varies by type of wealth – Property, Financial, Physical and Pension components.
The wealth discussed here is net personal wealth – the wealth of all the individuals or households in the economy, defined as the value of their stock of assets net of any liabilities. Data on wealth is generally patchy and difficult to obtain. The main sources are sample surveys, such as Britain’s relatively new Wealth and Assets Survey, and tax records.
Both sources tends to show that for most countries wealth is highly unequally distributed. One reason for this is that individuals typically build up assets over their entire working life, so wealth holdings represent an accumulation of inequality. If the distribution of income becomes more unequal this will tend to produce increasingly unequal wealth holdings.
A B Atkinson and colleagues, using tax records, have derived for the years 1950 to 2005 the holdings by individuals (not families or households) of marketable wealth, i.e. financial and property assets and other physical wealth such as cars, works of art and durables, but not pension wealth. They report that in 2005 the richest half of the British population owned 93% of total wealth, leaving only 7% for the poorer half. But there is great inequality within the richer 50%, with the top 5% owning about 40% of all wealth. For this reason, the series chosen here presents the wealth share of the richest 1% of wealth-holders.
This simple measure may appear to be a very partial summary of wealth inequality but it is valid precisely because the degree of wealth inequality is so marked. It shows that between 1950 and 2005 the share of the richest 1% of the British population exhibits short-term fluctuations and an apparently declining trend which slowed down and then went into reverse at the end of the twentieth century. It has never fallen below 17%, a level far in excess of the group’s “fair share” of wealth, which would of course be 1%.
Over the whole period the most striking feature is the decline in the wealth share of the top 1% between 1950 and 1990. Over those 40 years this share fell from about one third to about one sixth. Many social and economic changes underlie this trend, including falling income inequality, changes in relative asset prices, the long-term improvement in the economic position of women, changing family size, demographic change and changes in taxes affecting wealth accumulation and transfer.
The rise in inequality since the late 1970s is probably mostly due to the considerable increase in income inequality in Britain during the 1980s. While it is by no means true that the richest 1% of income earners are the same people as the top 1% of wealth-holders, it is still likely that the rising income share of the top 10%, 5% and 1% of income earners over this period got converted into rising wealth shares at the top, as shown here.