Chart shows growing gap between inequality of income and inequality of wealth

December 7, 2012 at 10:19 am

The Telltale Chart has come up with another great interactive chart showing trends in income and wealth distribution between 1962 and 2010. The three measures that you can take a look at are income, net worth, and non-home wealth. The chart shows the distribution of wealth and income across the population, so each bar totals to 100 percent. The color blocks represent the portion of total income and wealth held by groups, from the poorest 40 percent (the yellow block) to the richest 1 percent (the black block). The red line is the gini coefficient, which indicates the level of inequality. The greater the gini coefficient (the higher the red line) the greater the inequality. Here’s what it looks like when you compare income, net worth, and non-home wealth (click on an image to see it enlarged):

What is striking about these graphs is the jump in inequality when looking at net worth and non-home wealth. In fact, when looking at net worth and non-home wealth, the bottom 40 percent are actually negative in several years. Poor households are  not only challenged by low incomes, but also face barriers in building up assets that can help create long-term wealth.

The Corporation for Economic Development (CFED) publishes an Assets & Opportunity Scorecard, which examines financial insecurity across the country. The scorecard measures “asset poverty”– which is when a household does not have enough net worth to live at the poverty level for three months in the absence of income. Nationally, 27 percent of households are asset poor. When assets such as homes or businesses are excluded– those assets which cannot be converted to cash quickly, 43 percent of households are “liquid asset poor.” This is a measure of the resources that households can rely on quickly to meet emergency needs. CFED reports that in North Carolina, 28 percent are asset poor, and 46 percent are liquid asset poor.

The implication from the charts above is that raising incomes may not enough to level the playing field, or to create opportunities for long-term financial security. Low income families need opportunities to build up their assets and wealth to sustain them through economic cycles, and to pass down to future generations. The flow chart below from CFED provides a good summary of what a system for building financial security should look like.

Financial Security Framework CFED

 

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Entry filed under: Economic Development, Economy, Jobs & Employment. Tags: , , , .

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