Let's all share.
February 10, 2011 11:57 AM   Subscribe

Pinko-filter: If all wealth in the US were completely evenly distributed how much would a given person have?

A friend and I were discussing the unequal distribution of wealth and about the crazy billionaires that have so much and the poor who have so little. You've heard it before.

This got me wondering: If all wealth in the US were magically spread out overnight so that it was perfectly evenly distributed how much would a given person have? What if it were all wealth in the world?

Is median income the figure I'm looking for here or does that not quite capture it?
posted by cirrostratus to Law & Government (19 answers total) 3 users marked this as a favorite
 
According to this December 2010 Federal Reserve document (p104), the total net worth of all US households and non-profits is about $54.9 trillion. That's about $179k per person (based on 307 million people).
posted by Perplexity at 12:02 PM on February 10, 2011 [2 favorites]


I guess maybe wealth was the wrong word for me to use. I think I'm looking more for an income type number.

Also, I'm a total economics noob, which is why this is probably a question that Google could answer if I knew what terms to use..
posted by cirrostratus at 12:05 PM on February 10, 2011


Yeah you can't use net worth here unless we're going to make all property common...cars, houses, boats, guitars, etc. So the numbers from perplexity above don't work. You need total liquid cash plus total annual income divided by population.
posted by spicynuts at 12:08 PM on February 10, 2011


Overall, the mean household income in the United States, according to the US Census Bureau 2004 Economic Survey, was $60,528, or $17,210 (39.73%) higher than the median household income. [source]
posted by AceRock at 12:09 PM on February 10, 2011


Is median income the figure I'm looking for here or does that not quite capture it?

No, it doesn't quite capture it. Average income would, however. But spreading out across all individuals doesn't give one a good sense of things, since it would be odd to give, say, a newborn infant the same share as an adult. In practice the parent or legal guardian would control the money.

So instead one could distribute the GDP evenly across households. The US GDP is approximately $14.6 trillion and there are about 114 million households. That works out to $128,000 per household per year, more or less. Compare that to the approximately $44,500 or so that is the current median household income.
posted by jedicus at 12:10 PM on February 10, 2011 [6 favorites]


Tangentially, love this:
Imagine people's height being proportional to their income, so that someone with an average income is of average height. Now imagine that the entire adult population of America is walking past you in a single hour, in ascending order of income.

The first passers-by, the owners of loss-making businesses, are invisible: their heads are below ground. Then come the jobless and the working poor, who are midgets. After half an hour the strollers are still only waist-high, since America's median income is only half the mean. It takes nearly 45 minutes before normal-sized people appear. But then, in the final minutes, giants thunder by. With six minutes to go they are 12 feet tall. When the 400 highest earners walk by, right at the end, each is more than two miles tall.
posted by AceRock at 12:11 PM on February 10, 2011 [41 favorites]


Median means the number in the middle of the extremes. So if peoples income ranged between 0 and 1,000,000 but most people made 50,000, median would be 500,000. So not what you want.

Median is one of three common averages. Mode is the most common number; 50k in the above example. Mean is what most people think of when they say average. It is all values added together and then divided by the count of the values. I think this is what you want.

Wikipedia say: "Overall, the mean household income in the United States, according to the US Census Bureau 2004 Economic Survey, was $60,528" if that helps.
posted by d4nj450n at 12:21 PM on February 10, 2011 [1 favorite]


d4nj450n: Your example is wrong or misleading.

The way to get the median is to sort the whole list, and take the one in the middle. With your 0-1,000,000 example if "most people made 50,000" the median would likely be close to 50,000. The median is barely affected by the outliers at the top and bottom, which is why it's sometimes a better representation of a 'typical' value than the mean. The mean can be heavily skewed by a few top earners, which produces the odd situation where virtually everyone is "below average". With the median exactly half the population is above or below average.
posted by aubilenon at 12:29 PM on February 10, 2011 [3 favorites]


Of course, as soon as anyone spent any of the money the balance would be lost forever (or until the next re-distribution).
posted by The World Famous at 12:31 PM on February 10, 2011


The question assumes that all the wealth of everyone is fully known. Best guess: it is not and much is concealed offshore or hidden via other means. If though you consider only income, then remember that some positions come with perks, example: a college president gets (say) one million in salary. Additionally, he gets a car, a house, rent free, and a maid and gardener. Is that income? No. So you will count only his actual pay (salary). But often, less pay is made up by greater peripheral benefits. In the question you pose, that would not count. But for the recipient, it sure does.
posted by Postroad at 12:33 PM on February 10, 2011


It's revealing that the mean and median have diverged in recent years. Ezra Klein does interesting writing on this.
posted by idb at 12:45 PM on February 10, 2011 [1 favorite]


aubilenon: Ah damn. You are right. Sorry everyone. Still my point with regard to this issue stands; median is not the number he wants.
posted by d4nj450n at 12:47 PM on February 10, 2011


This might be nitpicking, but...

Do keep in mind that this question is more of an intellectual exercise than anything practical. Any numbers you get will tend to be exaggerated and a bit meaningless unless you account for the (very significant) elimination of incentives caused by perfect equality of income.

If you want meaningful numbers, you should probably abandon the constraint of perfect equality, and instead look at countries that attain high standards of living with significantly less inequality than the US.
posted by ripley_ at 1:48 PM on February 10, 2011


Thanks for the math lesson guys. I totally forgot about the difference between mean and median. While it's not capturing every aspect of the issue I suppose mean income is close enough for my purposes.
posted by cirrostratus at 1:50 PM on February 10, 2011


According to the IRS Link (new window) Adjusted gross income on these 93 million returns totaled more than $7.4 trillion, per person = $24,104.23 (307M) per household = $64,912.28 (114M).


Beyond that prices, will go wild shortly after redistro day, no one could afford to buy a Maybach but the price of rice would go up.
posted by kanemano at 3:02 PM on February 10, 2011 [1 favorite]


Adjusted gross income on these 93 million returns totaled more than $7.4 trillion, per person = $24,104.23 (307M) per household = $64,912.28 (114M).

That's good data, but note those are individual tax returns. There's also corporate income that doesn't get distributed to employees or shareholders and so wouldn't be represented in individual tax returns.

For example, Apple keeps quite a lot of its corporate profits to itself and has accumulated about $40 billion in cash reserves that way. Theoretically that cash is part of the valuation of the company, and in a sense shareholders derive value from that, but it's not like a dividend. In order to realize their share of the value the shareholders would have to sell their shares. Since many shareholders hold their shares from year to year, their gains aren't realized and so wouldn't show up in their individual tax returns.

Of course, whether you want to count that corporate income as part of your income redistribution calculation is up to you.
posted by jedicus at 3:37 PM on February 10, 2011


If we are talking about income, retained cash doesn't count. If we are talking about all wealth, a number I've heard bandied about is that corporate america has about a trillion laying around in cash. Compared to the $59 trillion number, it is a drop in the bucket.

Another comparison: look in the tax form instructions. There are pie graphs. Corporate taxation accounts for 4% of federal revenue. For all the money wasted in collecting those taxes, we could just eliminate the corporate tax and the extra dividends paid out by those more efficient corporations would probably make revenue go up.

And the $174k average net worth seems about right. Note: that includes everything you own, including your houses. If they redistributed everything tomorrow, you'd end up with a 1/5th paid off mortgage and a couple of cars.

Final note: the mentions and implications of income disparity being a problem are bunk. It doesn't matter what the top end makes, it only matters what the bottom end can get their hands on. If everyone can mostly pay their bills, it doesn't really matter that the Monopoly Banker guy is lighting his cigars with big screen TVs.
posted by gjc at 7:17 PM on February 10, 2011


Additionally, he gets a car, a house, rent free, and a maid and gardener. Is that income? No. So you will count only his actual pay (salary). But often, less pay is made up by greater peripheral benefits. In the question you pose, that would not count. But for the recipient, it sure does.

Yes, it is income. That is, the amount that is above and beyond what is done for the convenience of the employer. If he gets a car, and cannot use it for anything but college business, then it isn't income. But if he gets to use it for anything he wants, anything that isn't college business should be reported as income. A free house can be iffy. If the person's job REQUIRES that they be on call and available all the time, the house might be a cost of doing business for the college. But if it is a perk, then its value must be reported as income.

Because income isn't the number of dollars that flows around. It is the value that flows around, denoted in dollars. Otherwise, my boss could pay me in $20 gold pieces and my income would only be $1000 a year.
posted by gjc at 7:29 PM on February 10, 2011


And the $174k average net worth seems about right. Note: that includes everything you own, including your houses. If they redistributed everything tomorrow, you'd end up with a 1/5th paid off mortgage and a couple of cars.

Net worth is assets minus liabilities. That suggests the $174k figure accounts for debts, and so you'd actually end up with no debt and $174k in the bank.

Final note: the mentions and implications of income disparity being a problem are bunk. It doesn't matter what the top end makes, it only matters what the bottom end can get their hands on. If everyone can mostly pay their bills, it doesn't really matter that the Monopoly Banker guy is lighting his cigars with big screen TVs.

That's true only in the very limited sense that 'the bottom end' may have all of their essential needs taken care of. But if one puts a high priority on justice and fairness, then income disparity is indeed a problem, no matter how well-off the bottom end is. It may help to remember that people intuitively measure wealth on a relative rather than absolute basis.

Of course, in the US the bottom end very much does not have all of its essential needs taken care of, so it's a moot point anyway.
posted by jedicus at 6:54 AM on February 11, 2011


« Older Um, didn't we bail you jerks out???   |   Looking For Companies Who Use Statistical Process... Newer »
This thread is closed to new comments.