Kevin Williamson, a correspondent for National Review recently wrote an article titled, “Rich America is a Working America”. In it he quotes some interesting statistics that call into question the negative portrayal of the “rich” that has become an effective mantra to fire up supporters of various presidential candidates. The mantra:
“The rich haven’t really earned their wealth, they just inherited it. Therefore, they have had an unfair leg up on the “working person” and they must now pay their fair share in new taxes”.
According to Mr. Williamson, and more importantly, the U. S. Bureau of Labor Statistics, wealth transfers – defined as inheritances and gifts combined – constitute a small part of the holdings of the rich. He writes, “For the top quintile, gifts and inheritances amount to 13 percent of household wealth. For the hated 1%, inherited wealth accounts for about 15 percent of holdings.”
He further writes, “Meanwhile, inherited money makes up 43 percent of the wealth of the lowest income group and 31 percent for the second-lowest. Eliminating inherited wealth would have approximately twice as much of a negative effect on modest households as on wealthy ones. There is a reason that money earned from work accounts for a relatively large share of the holdings of rich Americans: They work more — a lot more.”
In our “new economy”, the work force participation percent is lower than it has been in many decades. This is especially true for the bottom income group. According to the U.S. Census Bureau, the bottom income group has an average of 0.42 workers per household with 68.2 percent in that house not working at all. In the highest income group, there are 1.97 earners per household with just 13.3 percent not employed.
Mr. Williamson also states that there is another big difference between high and low income families, “Not surprisingly, 78.4 percent of those highest-income families were married couples, as opposed to 17 percent for the lowest-income group. What this all means in brief is that the highest-income families are composed almost exclusively of two-earner households, the overwhelming majority of them married couples”.
So, the facts regarding this highest-income group do not match the populist, yet effective, “Wealth Inequality” campaign rhetoric we are hearing. There is no doubt that politicians will bang this inequality drum ever louder as we get closer to the 2016 election.
For the record, I acknowledge that there is wealth inequality in America. There always has been. It is the assertion that the rich have it easy compared to the “hard working Americans” that I don’t buy into. Figures don’t lie. Rather than a bunch of undeserving rich kids unfairly inheriting mom and daddy’s wealth, Mr. Williamson rightly points out that this “highest income group are married, working their butts off, saving and investing their money, and living within their means”. As a financial advisor, I work for many of these financially successful individuals. They are the hardest working people I have ever known. We should celebrate their success and hard work, not condemn it.