December 7, 2017[caption id="attachment_22069" align="alignnone" width="1024"] Luxury yachts in Monaco: The surge in top incomes, combined with high savings, has resulted in growing wealth inequality (photo: Eric Gaillard/Newscom).[/caption]
Income inequality among people around the world has been declining in recent decades. But the news is not all good. Inequality within many countries has increased, particularly in advanced economies.
In addition to income inequality, wealth inequality—what you have accumulated, as opposed to what you earn—is closely related, and reflects differences in savings, inheritances, and bequests.
In our Chart of the Week from the October Fiscal Monitor, we zoom in on inequality of wealth—the distribution of wealth across households or individuals at a given time.
Wealth is more unequally distributed than income. As the chart shows for the countries listed, all part of the Organization for Economic Cooperation and Development, the average share of wealth held by the top 10 percent of households is 50 percent, which by far exceeds the average share of income, 24 percent, held by the top 10 percent. In the United States, the top 1 percent holds nearly 40 percent of total net wealth. Financial assets, such as equities, life insurance, and pensions, to name a few, make up a large share of household wealth at the very top.
The latest Fiscal Monitor shows that wealth inequality has risen considerably in recent decades. The surge in top incomes, combined with high savings, has resulted in growing wealth inequality.
Fiscal policy is a powerful tool for governments to address high and rising income and wealth inequality. The Fiscal Monitor shows that equity and efficiency can and must go hand-in-hand. Policymakers need to consider both taxes and transfers, and have many policies from which to choose. The Fiscal Monitor focuses on three policy debates: progressive taxation, universal basic income (UBI), and public spending on education and health.