Wealth Distribution

Wealth versus Income

Wealth is also known as net worth. This is different from income, which includes wages and benefits from employment, pensions, interest and dividends, and transfer payments. While wealth and income constitute different types of money, both represent unique factors that ultimately contribute to accessing resources in the United States. The differences between wealth and income have not always been acknowledged in the social sciences. This has led to serious misunderstandings about wealth distribution in the United States, especially with regard to the wealth inequalities that exist between Whites and racial and ethnic minorities. While many researchers ask questions regarding income on survey questionnaires, very few ask questions of wealth and ownership.

Data from the Survey of Consumer Finances (SCF) in the 1980s suggest that the correlation between wealth and income is very low, with any small correlation between the two due to asset income. There are a number of reasons that might explain why wealth and income are not correlated. First, very wealthy families tend to have lower incomes and make more on the returns from their asset income. Conversely, less wealthy households may have more debt and fewer assets regardless of their income. In other words, income cannot significantly predict financial stability or wealth because it does not take household debt or assets into account.

In addition, data illustrate that wealth is more unequally distributed than income. SCF data from 2000 indicate that Whites' income earnings were approximately twice the earnings received by Blacks or Hispanics. However, these ratios are more equal than the ratios of wealth among these groups. Hence, income alone does not account for the significant wealth discrepancies among different racial groups. Non-White groups tend to have disproportionately low levels of wealth compared with Whites.

Data on Wealth Distribution

Estimates of wealth distribution and ownership in the United States come from survey data, estate tax information, and government aggregate estimates of household wealth ownership. In 1963, the Census Bureau released its first findings from the Survey of Financial Characteristics of Consumers (SFCC). This survey is considered the first to have measured the amount and composition of consumer wealth and was the first to point out discrepancies in wealth among families in the United States.

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