Inequality Report Offers Misleading Numbers

A new report from Oxfam International made headlines when it concluded that half of the world’s wealth is owned by a mere one percent of the world’s population, but the numbers are misleading.

The study takes into account people’s debts, meaning that many Americans with student loans or credit card debt are found among the report’s poorest people. Jim Pagels, writing at Reason.com says, “Many of these world’s ‘poorest’ are people from the most wealthy portions of the world who are simply underwater on mortgages, student loans, or credit card debt.”

Tim Worstall, senior fellow with the Adam Smith Institute, writes at Forbes, “[I]t’s possible to have negative wealth: more debt than the value of whatever it is that you own.” Moreover, he says getting into Oxfam’s top 1 percent requires wealth of less than $800,000, which can be derived from home equity, savings and pension value.

Pagels also says the study distracts from the fact that Americans move up and down the income ladder — the people in the top 1 percent today are not necessarily going to be there tomorrow. In 2005, just 40.4 percent of Americans in the top 1 percent of earners had been there in 1996. This echoes a point made by NCPA Senior Fellow Richard McKenzie in a study on income gaps, noting that over a 44-year period, 12 percent of 25- to 60-year-olds moved into the top 1 percent for at least one year; 39 percent reached the top 5 percent; over half reached the top 10 percent; and nearly three-fourths were in the top fifth of the income distribution.

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