New Wealth Inequality Paper Confirms: Saving in Decline for the 90%
October 24, 2014
A new paper on wealth inequality from economists Emmanuel Saez and Gabriel Zucman – who have written frequently on the subject – was released earlier this month. This paper is far better than previous attempts to measure inequality. It includes pensions and other sources of wealth not taxed by the IRS – a shortcoming for which I have previously criticized measurements of inequality.
One of the most interesting findings in the paper was the finding that the saving rate had fallen extremely far for the lower 90% of America’s income distribution:
This is a trend I wrote about in a recent paper on the decline of saving and investment in America. It is worrisome that saving – which I believe is beneficial to society at large, but even more beneficial to the saver – is becoming an activity only for the rich.
Saez and Zucman further found that “saving inequality” actually drove wealth inequality even more than income did:
This is a problem worth correcting.
Some people simply earn too little to save. This is a problem that can only be addressed with a stronger, more competitive labor market. But the “bottom 90%” is a group that, as a whole, earns a lot of income. It includes plenty of people with six-figure salaries. It is puzzling and distressing to see savings so low for people who are, by all means, some of the richest on earth. Many of these households have six-figure incomes. One would think that they could put aside more. Increasing the caps on IRA contributions – or finding a more comprehensive tax treatment of saving – would probably help.
Saving cannot and should not be for the rich only.