How does the wealth of the poor in Great Britain compare with that in the US?

 

In my last blog I showed how, while the concentration of wealth at the top of the distribution was similar in both the UK and the US, wealth was vastly higher in the US than in the UK. It is often argued, in defence of these very high levels of wealth, that such wealth in the long run benefits all in terms of the jobs and incomes it creates. As I showed in that blog the wealth in the US has been growing far faster than in the UK. So how have the poor fared in both countries in terms, at least, of their wealth?

 In this blog I am going to use two data sources to answer that question. For the US I use the Federal Reserve's data on household wealth, which is primarily from the Financial Accounts of the United States and the Survey of Consumer Finances (SCF). For the UK I use ONS data for total wealth in Great Britain. From both data sources it is possible to derive information on net worth which is the value of total assets less liabilities. The most recent data from the ONS is for 2022 so I provide a comparison across the US and Great Britain for that year.

 While both data sources provide information of net worth across households they do not do so on a similar basis. So that we can compare directly I use a common basis, which consists of three categories – the top 10 per cent, those if the 60^th to 90^th deciles and the bottom 50 per cent. I present the average net worth for these three categories in a common currency which is purchasing power US$.

 Figure 1 below shows the result of this comparison As we would anticipate the top 10 per cent in the US are far richer than the top 10 per cent in Great Britain, about twice as rich on average. What might surprise is that the bottom 50 per cent are far richer in Great Britain than the bottom 50 per cent in the US, about three times richer. It is also the case for those in the 60^th to 90^th percentile that wealth is higher in Great Britain than in the US, although the difference here is only some 13 per cent.

 

In summary when comparing average household wealth in the US with that in Great Britain the bottom 90 per cent in Great Britian have higher average household wealth than the bottom 90 per cent in the US when we do this comparison for 2022. Table 1 below gives the data that underlies the averages shown in Figure 1.

Table1 Net Worth in the US and Great Britain in 2022

 Total Wealth and Wealth per Household in the US

	Total Wealth In trillions US$	Number of households In millions	Wealth per household  in US$
Bottom 50 per cent	3.55	65.601	54,000
Next forty	42.3	52.481	806,000
Top 10 per cent	90.5	13.120	6,898,000
Totals	136.4	131.2	7,758,000
Source: US Federal Reserve Board Data

 

 Table 1 provides the data for both total wealth and per household wealth for the US and Great Britain for the year 2022, which is the most recent year for which a direct comparison is possible. Total wealth is much higher in the US at 136.4 trillion dollars as compared with 13.6 trillion for Great Britain, a ten-fold difference. This, of course, is partly accounted for by the much larger size of the US economy with 131 thousand households compared with 24.7 thousand for Britain. There remain large differences across the economies when we look, in the final column of the Table, at wealth per household. This at US$ 7,758,000 is some nine times higher than the level in Britain at US$ (PPP) 835,916.

It is when we look at the breakdown by the deciles of the population we see how, for some 90 per cent of the population, wealth is higher in Great Britain than in the US. In the case of the bottom 50 per cent wealth is some three times higher in Great Britain than in the US as we have shown in Figure 1. We asked in the title for this blog ‘How does the wealth of the poor in Great Britain compare with that in the US?’ The answer is that it compares very well and looking at overall averages is very misleading.

 

Do you really want to get rid of the uber rich?

 

The uber-rich are both conspicuous and increasing in number. In this blog I am going to show one way it should be possible to reduce their number. Before doing that, we need to understand where they come from and why both their number and wealth is increasing.

I begin with the Forbes rich list for 2001 and 2024. This list seeks to rank billionaires from the richest to the ‘poorest’.  Forbes identifies 335 billionaires in 2001 with an average wealth of US$ 6.4 billion (in 2024 prices) and 2,781 billionaires for 2024 with an average wealth of US$ 5.1 billion. In 2004 the billionaire wealth ranged from US$ 233 billion to US$1 billion, this being the cut-off point to get into the Forbes rich list. In Figure 1 I show a histogram of the distribution of these billionaires.

Figure 1 

The height of the bars in a histogram tells you how often different billionaires appear in the data. So, the fact that the highest bar is for the lowest level of the net worth of billionaires tells you that across the distribution shown in Figure 1 billionaires with less than US$1.5 billion are the most common type of billionaires. Now clearly having a net worth of US$1.5 billion is a very rich person by any usual standards. However, within the class of billionaires, there are those who are very much richer.  In 2024 the four richest billionaires have wealth of US$ 177, 194,195 and 233 billion respectively, over 100 times the level of wealth of most of the billionaire class. We can see this in the pattern of the histogram shown in Figure 1. Those with net worth greater than about US$30 billion are nearly invisible on the chart.

There are two other implications we can draw from Figure 1. The first is that the average of wealth across the distribution is a misleading statistic as it is influenced by these very few very high wealth individuals. A better measure is the median which is the level of wealth by which 50 per cent have higher wealth and 50 per cent lower wealth. For 2001 the median wealth of the billionaires was US$ 3.7 billion and in 2024 the median value of wealth was US$ 2.4 billion, some 30 per cent lower than the 2001 number. Both year use 2024 prices.

The second implication we can draw from Figure 1 is that wealth within the billionaires in the data is becoming more unequally distributed. It is how wealth is distributed among the very wealthy that produces the uber wealthy. We can see these uber wealthy in Figure 2 which uses data from the World Inequality Dataset.

To find the uber wealthy we need to look not in the top 1 per cent or even the top 0.1 per cent but (at least nearly) into the top 0.007 per cent. Within this last category we have average wealth in the US of US$ 600 million, close at least to the billionaires in our Forbes data. For the UK the average wealth for this last category is just under US$ (ppp) 150 million. For the UK, even at his point, we are a long way from the Forbes billionaires, reflecting just how few there are of them in the UK compared with the US.

In Figure 2 we compare the US and the US in 2023. In Figure 3 we ask how wealth among the very wealthy has increased in both countries. Our data, which is all from the World Inequality Dataset, enables us to see a longer run of data for the US than for the UK. For both countries since the mid-1990s there was been a significant increase in average wealth among the top 1 per cent but more particularly among the top 0.1 per cent. Again, both the level and the increase in wealth has been much greater for the US than for the UK.

The key points that emerges from Figures 2 and 3 is that not only are the uber wealthy a tiny fraction of the top 10 percent but that this wealth is vastly greater in the US than the UK and has been increasing much faster in the US than in the UK. So, we have three questions to which we need answers:

(1) Why is wealth, among the wealthy, so concentrated? 

(2) Why are the wealthy in the US so much wealthier than the wealthy in the UK? 

(3) Why have the wealthy been getting richer so much faster in the US than the UK?

The possible answer to the first of these questions is in the nature of winners in the task of accumulating wealth. If the opportunities to acquire wealth were evenly spread and open to all we would expect to see a rising tide of the wealthy. That is not what we observe at all. We observe a few speculatively successful individuals who come to occupy the top of the top of the distribution.

The answer to our second and third questions is that, at least in the recent past, the US has been greatly more successful that the UK in generating wealth creating opportunities.

So, considering the question posed by this blog - Do you really want to get rid of the uber rich? – one answer may be to make your economy more like the UK than the US.