Inequality in One Easy Chart

A recent podcast pointed me to the Federal Reserve Bulletin of September 2020. The chart below plots average and median household net worth across age groups, based on 2019 data. If you can think back to math class, you will recall that the difference between an average and a median value is that the average is “pulled” in one direction or another by outliers in the data set. If you have a population of 100 people, and 10 of them are much wealthier than everyone else, the average wealth of this population will be higher than the median wealth. The average in this case does not reflect most of the population’s actual lived experience.

In the case of American net worth, inequality — a small percentage of people holding a large percentage of wealth — results in the chart we see here. As households age and earnings increase, wealth grows exponentially at the higher end (partially through the magic of compound interest). Yes, to be blunt, the rich get richer.

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