Why the Rich Are Losing Their Share of Wealth

[jeffrey]

Economic populism is back, with attacks against inequality and the “greedy rich” back in style. But at the very moment that the public is outraged over the rich getting richer, the rich might actually be losing their share of the nation’s wealth.

Fred Bell, a one-time millionaire and now unemployed, sells apples at his stand on a busy street corner in San Francisco, Ca., on March 7, 1931 during the Great Depression. Bell, known as “Champagne Fred” in the earlier days, has nothing left of his share of the Theresa Bell fortune as a result of the stock market crash in 1929. Of course, the economic crisis is affecting all income and wealth groups. But if history is any guide, the proportion of national income and wealth held by the richest 1%–decried for years as being close to pre-Depression levels–probably will shrink markedly in coming months.

To understand why I interviewed Emmanuel Saez, the income-share expert and economics professor at the University of California, Berkeley. Here is an edited excerpt:

ROBERT FRANK : Does history offer any guide for what will happen to wealth shares of the top 1% in the current crisis?
EMMANUEL SAEZ: Perhaps the best comparison is the Great Depression. During that period, the income share of the top 10% was stable. But that masked a sharp fall for the top 1%. The income share of the top 1% fell from 24% in 1928 to 15.5% in 1931...

The Wealth Report - WSJ.com : Why the Rich Are Losing Their Share of Wealth

[jIM_Ohio]

I liked the point that high income is now more closely ties to stock options than salary- so as market goes up, executive income goes up too.

I don't like comparisons of 1929 to 2008 as far as wealth gap. In 1929 the middle class was small, many more people were farmers (as a percentage of population), and taxes were much much lower. Government entitements also did not exist.

Whether the rich 10% have 24% of the wealth or 19% of the wealth is not the issue (to me)- the issue is more how many new people join the richest 10%. Bill Gates was not in richest 10% in 1980 and by 1990 he was... this is the issue which should be discussed (IMO).