Wealth And Distribution: II

A week and a half ago I posted about the distribution of wealth in a controlled population of people that were EXACTLY like one another.  Exactly.  They contributed to 401ks the same, they saved for houses the same, they worked at the same wages and got raises the same.  The result, after just 15 years of life?

…the poorest third of people control less than 20% of the net wealth while the richest 14% control more than 20% of the net wealth.

6/15th’s of the poorest control less money than the top 2/15ths.

I have expanded my model to include home ownership.  Again, this is done with the assumption that ALL people do the EXACT same thing in the same way.  They buy a house at the same time, in the same housing market and the home they buy is worth the same.

Here’s what we get:

Again, the money shot:

Total
Worth
$20,150.00
$41,065.00
$62,768.00
$85,282.81
$108,633.07
$132,996.30
$155,049.73
$178,141.44
$202,303.53
$227,569.27
$253,973.07
$281,551.59
$310,340.71
$340,378.62
$371,702.83
$414,013.44
$455,546.94
$498,681.75
$543,467.99
$589,958.54
$638,156.14
$687,997.39
$739,532.90
$792,816.28
$847,903.24
$904,848.64
$963,712.56
$1,024,553.38
$1,087,433.82
$1,152,418.08

The control of wealth explodes after year 15.  That’s when my peeps buy a house.  What was a net worth growing by about 30k a year now grows much quicker; near 40 or 50k a year.  And this is just by buying a home.

So, after 30 years, where is the wealth?

The total wealth is $14,112,947 with a quintile at $2,822,589.

The lowest quintile.  That group of people that control the bottom 20% of the wealth in this equal society, defined equal society, compromises fully HALF the people in that society.  The bottom HALF of our population controls just 20% of the wealth.    The top 3/30, or 1/10th or 10% control 20% of the wealth as well.  In fact, the top 3% controls as much wealth as the bottom 33%.

And we’re just 30 years into the life of the exactly average 18 year old.  We’re just at 48 years of age.  We haven’t even begun to take into account poor choices or good choices.  This model is assuming that all kids make the exact same choices with their money, career and finances.

And we STILL have “wealth distribution” issues.

7 responses to “Wealth And Distribution: II

  1. One can assume any kind of world one wants, it’s fiction. In the real world US income distribution has been skewing towards the wealthy and away from the middle class since 1976 and is the worst its been since the 1800s. Moreover, in comparison to other industrialized states ours is one of the worst. Our wealthiest are the richest and taxed the least. Our middle class is in the low middle (compared to other countries), our poor are worse off than those in Greece and the Czech Republic. That’s reality, compared to other countries and compared to our own past. Moreover, we don’t guarantee a basic service like health care meaning that while health care costs do not cause bankruptcy anywhere else, they cause up to 60% of the bankruptcies in the US, often of people who think they have insurance. These are real problems.

    • One can assume any kind of world one wants,

      The point is, however, that the Left wants to create a more equal world. You are trying to move from reality to your version of fiction.

      I’m simply pointing out that given such a world, one with perfect equality, wealth disparity exists.

      In the real world US income distribution has been skewing towards the wealthy and away from the middle class since 1976 and is the worst its been since the 1800s.

      I’m working on this. I happen to think that compensation began to look different in the mid 1970’s. That or some other phenomenon took place,

      Our middle class is in the low middle (compared to other countries), our poor are worse off than those in Greece and the Czech Republic.

      There is simply no way that our poor are worse off than the poor anywhere. In fact, I happen to feel that being poor in America offers a better quality of life than being Middle Class in some other nations.

      Our wealthiest are the richest and taxed the least.

      Taxed the least?

      Moreover, we don’t guarantee a basic service like health care meaning that while health care costs do not cause bankruptcy anywhere else, they cause up to 60% of the bankruptcies in the US, often of people who think they have insurance.

      We also don’t guarantee other things that are nice to have. Things like ice cream sundaes on Saturday afternoon, kites and puppies. That we don’t guarantee medical care seems like trivia.

  2. I’m not sure the left ‘wants to create a more equal world’ but wants to simply have a world where the elites can’t use their situation to pad their own cages dis-proportionally. Yes, our poor far worse off than the poor in much of Europe and the rest of the industrialized world. Our wealthiest are indeed taxed the least, our tax rates are extremely low compared to the rest of the industrialized world — not just compared to the average rate, but compared to EVERY other country. We are a very low taxed public (and that includes all taxes, not just federal income tax). It isn’t even close; our wealthiest are also the wealthiest of the industrialized world — but not the rest of the population.

    Health care is considered an essential right in every other western industrialized state — even conservatives see it as akin to police protection, education and legal rights, not ‘kites, puppies and sundaes.’ After all not having those things won’t kill you, and trying to get them won’t drive you into bankruptcy.

    Moreover, the stats on income distribution are not even controversial, statisticians have studied this to death. There’s no ‘change of compensation’ that hides something. The fact is the US has seen a massive shift of relative wealth to the wealthiest over the last thirty years as government deregulation along with tax cuts helped undercut the middle class (globalization and de-industrialization plays into this as well). The evidence is overwhelming — I’ve posted evidence many times on my blog, charts, stats, comparisons. That’s why I believe that the current crisis is going to lead to a shift away from the anti-government deregulatory tax cutting mood of the last thirty years.

    • I’m not sure the left ‘wants to create a more equal world’ but wants to simply have a world where the elites can’t use their situation to pad their own cages dis-proportionally.

      This is what this whole “increase their taxes” is about. By relieving the wealthy of the burden of their wealth and then delivering that money to the poor, either directly or through programs, is what the Left is after.

      Health care is considered an essential right in every other western industrialized state

      It is every industrialized nation that we fought to be independent from. The government could vote that high speed broadband internet access is a right as well. However, that doesn’t mean it’s consistent with what people feel is Liberty. Most of the things that people consider to be “rights” require that someone else do something on their behalf.

      The evidence is overwhelming

      I think we’re gonna disagree on that point.

  3. The wealthy pay very, very low taxes in the US. If we have a debt crisis and need to balance the budget should it all be on the backs of the poor and middle class, or should those who benefit the most from the system and have the easiest lifestyle pay a little more, recognizing that they’ll still be much wealthier than everyone else? How can anyone object to that? If we had a totally balanced budget and no crisis you could make a strong case for no tax increases, but given the circumstances I suspect the public ultimately will demand the wealthy pay a little more.

    We did not fight to become independent from every other industrialized country, that’s a bit silly. Health care is different than other things because without it people die, have severe problems, or can go bankrupt. To me health care is akin to police protection, it shouldn’t be a privilege of wealth. Someone I know well had an accident that would send you or I to the ER. She refused to go. Yes, they’d treat her, but then the collection agencies would be after her and she’s unemployed and uninsured. So lack of wealth means she takes greater risk. That story can be repeated over and over…

    Also, you’ve probably heard about how poorly the USA does in PISA exams (comparison of education between us and the rest of the industrialized world). The place the US falls down on these is socioeconomic status. In no other country do scores fall so fast when socioeconomic status falls. That’s one reason there is low class mobility — even in schools wealth determines the quality of your education. Education and health care are areas where the rich have the best in the world, the poor and more often than ever the middle class are below average (in the industrialized world — we still do really well against third world scores!)

  4. My wife and I are frugal, if not cheap, yet I know that we would not be able to save $20,150 in year one with a gross salary of $30,000. One reason that wealth grows so quickly in your spreadsheet is that the virtual people are able to save far more than real flesh and blood humans.

    You need at least two additional columns to reduce the yearly assets.

    Add a column labeled “LIFE_HAPPENS”. It has a random value between $1000 and $30,000.
    Add a column labeled “FOOLISH_STUFF”. It has a random value between $500 and $50,000.

    “LIFE_HAPPENS” takes into account things like… car dies, roof leaks, extended sickness.
    “FOOLISH_STUFF” takes into account things like… drug & alcohol addiction, poor financial decisions, six wives and eight kids, and general laziness.

    • My wife and I are frugal, if not cheap, yet I know that we would not be able to save $20,150 in year one with a gross salary of $30,000.

      Oh, I know. But right now I wanna represent that everyone has that money. Later I’ll break down how they invest that money. Some will invest $3 in a beer, others in a share of stock.

      It’s coming. However, my main point is that even when we have a perfectly equal world, wealth tends to aggregate at the top.

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