The Top 1% Hold a Record Amount of Wealth in the US. Here’s How Much—and Why | Jon Miltimore (2024)

In April 2020, Peter R. Orszag, the CEO of Financial Advisory at Lazard, made a prediction in a Bloomberg article.

“The Covid-19 pandemic will likely leave us with an economy in which larger companies play an expanded role, representing a higher share of both employment and revenue,” wrote Orszag, who previously served as President Obama’s Director of the Office of Management and Budget.

It would be the corporate version of the Matthew Effect: the strong would just get stronger. Nearly 15 months later, Federal Reserve economic data show Orszag was right. The strong did get stronger—and much richer.

A Great Year for the Wealthy (Especially the 1%)

Newly released data from the Fed show that the top 1 percent of income earners now hold 32.1 percent of all wealth in the United States. That is the highest percentage of wealth the top 1 percent has held since the Fed began publishing the data set in 1989 (see below).

That’s up nearly 20 percent from the period following the 2007-2008 Financial Crisis, and nearly 35 percent from 1990.

The Top 1% Hold a Record Amount of Wealth in the US. Here’s How Much—and Why | Jon Miltimore (1)

This data should not be surprising. A year ago, as small businesses were ravaged by lockdowns, pundits such as Jim Cramer were pointing out that we were witnessing “one of the greatest wealth transfers in history.” While small businesses were dropping “like flies,” the “Mad Money” host observed, the US was witnessing “the first recession where big business … is coming through virtually unscathed, if not going for the gold.”

It wasn’t just the super rich who got richer, however. As the Wall Street Journal recently reported, data show most Americans got richer in 2020, particularly wealthy households.

“U.S. households added $13.5 trillion in wealth last year, according to the Federal Reserve, the biggest increase in records going back three decades,” the Journal reported. “Many Americans of all stripes paid off credit-card debt, saved more and refinanced into cheaper mortgages. That challenged the conventions of previous economic downturns. In 2008, for example, U.S. households lost $8 trillion.”

This wealth surge, however, was not evenly dispersed. The wealthiest households—the top 20 percent—accounted for nearly $10 trillion of the $13.5 in new wealth created in 2020, data show.

Look at where the new wealth went during the pandemic.

The top 20% accounted for nearly $10 trillion of the $13.5 in new wealth created in 2020.

Just remember: this happened during one of the biggest expansions of government in history.

The powerful look after the powerful.

— Jon Miltimore (@miltimore79) June 30, 2021

How this happened is quite clear. To prevent an economic collapse once huge swathes of the economy were closed by government lockdowns, the US borrowed, spent, and lent trillions of dollars.

“[These actions] powered much of the stock market’s unexpected boom,” write WSJ reporters Orla McCaffrey and Shane Shifflett. “Rock- bottom interest rates lured more investors into stocks; workers stuck at home tried their hand at trading and tech giants gained even more ground during the shutdown.”

The result? Wall Street (i.e. the stock market) became the single biggest generator of new household wealth, accounting for close to half of all new wealth. While it’s true the federal government dropped roughly $850 billion in stimulus checks that went to low-income and middle-class families, wealthy Americans were by far the biggest beneficiaries of the spending bonanza.

“The Americans who gained the most during 2020 were the ones who had much more wealth to begin with,” the Journal notes. “Houses, stocks and retirement accounts—which wealthier people are more likely to own—soared in value, and those boosts are likely to endure.”

A Textbook Case of the Cantillon Effect

For people concerned about inequality and basic fairness, the scenario described above is alarming, perhaps even infuriating. But, once again, it shouldn’t be surprising.

More than a quarter millennium ago, Richard Cantillon suggested that printing new money doesn’t impact everyone the same way. The Irish-French economist outlined how price increases impact different economic sectors in different ways depending on when the money reaches each sector.

In a 2018 article on the Cantillon Effect, economist Jessica Schultz explained that those first in line (so to speak) benefit most from sudden cash infusions.

“[The] first sectors to receive the newly created money enjoy higher profits as their pay increases, but general costs are still low,” wrote Schultz, a Predoctoral Fellow at the National Bureau of Economic Research. “On the other hand, the last sectors in which prices rise (where there is more economic friction) face higher costs while still producing at lower prices.”

In the 21st century, the speed with which this happens is astonishing. Schulz offered a hypothetical example of how the financial sector responds to huge injections of cash.

“Let’s say the Fed decides to lower interest rates (by expanding the supply of money in the economy). Soon after the Fed makes its announcement, investors anticipate new earnings from increased investment. In fact, once even a few people get wind of the Fed’s intentions, investors expect prices to rise, whether they rely on algorithms or rumors for their information. Investors flock to the financial markets, hoping to get there first; if they can buy stocks while the prices are still low, they can reap enormous profits once prices rise.

However, the sudden increased demand for stocks in the financial market bids up asset prices, and this happens rapidly. Within minutes—seconds, even—the expected increase in the price level has been factored into the financial markets. The first place where ‘inflation’ is felt is in the financial marketplace.

This means that people who are most invested in the market are the first to benefit from inflation.”

This is precisely what happened in 2020. The people with the most wealth were able to gobble up stocks (and other assets), banking on higher prices later (in the form of inflation). It wasn’t just financial speculation, however.

Tilting the Playing Field

Many corporations were in the cat bird’s seat in the middle of a recession because their competitors were sidelined by pandemic restrictions. For example, with many small retailers around the country ordered closed because they were deemed “non-essential,” Target set sales records as their market share (and stock price) swelled. In April 2020, Target shares were trading at roughly $ 92.50; as of Wednesday morning, their shares were trading at roughly $242.

With a chance to refinance homes on the Fed’s cheap money, invest in corporations playing on a tilted field, and work from home, it’s not hard to see why wealthier Americans did well—and why many of them were happy to mouth “stay home, stay safe” platitudes.

For Americans with few assets and little wealth, it was a very different story. Besides a meager stimulus check and perhaps some unemployment benefits if they lost their job, these Americans saw little from the unprecedented money printing other than higher prices—which are rising with alacrity.

This is substantial inflation for real. It is not reflected in price indices but it will be or should be soon.

— Lawrence H. Summers (@LHSummers) June 29, 2021

For these Americans—and there are many of them—the pandemic was not a cornucopia, but one more hurdle in their quest toward the American dream.

“Those who missed out on wealth creation during the pandemic will be less equipped to weather the next major strain on their finances,” the Journal notes. “In 2020, more than a third of adults said they might not be able to cover a sudden $400 expense in cash, according to the Fed.”

Favoring the Connected

Economic populists often call for big government to redistribute wealth from the rich to the poor to even the playing field, especially during times of economic crisis.

But big government has demonstrated a clear and pervasive tendency to do the opposite: to reward those with influence and power at the expense of ordinary citizens. This is clearly what happened in 2020.

“When the federal government stepped in with its ‘assistance’ via the Coronavirus Aid, Relief, and Economic Security (CARES) Act, it clearly favored the big, wealthy, and well connected,” author Carol Roth points out in her new book, The War on Small Business.

While small business owners were left to “duke it out” over limited Paycheck Protection Program funding, lawmakers in DC were doling out favors to “friends of government,” notes Roth, a former investment banker. These “friends” included the Kennedy Center—which furloughed its orchestra and staff after receiving $25 million in no “strings” attached funds—as well as colleges with multibillion-dollar endowments (some of which were shamed into giving the money back).

The new Fed data simply bear out the thesis. Following one of the biggest expansions of government in history, the most well-off Americans—the ones with the most influence, wealth, and power—have more wealth than ever, despite a global recession. Meanwhile, the poorest and most vulnerable suffered the most.

Some will naturally blame capitalism for this gross exacerbation of inequality. And in doing so, they’ll miss the irony of it all.

It was not the free market that allowed “the rich get richer, and the poor to get poorer” during an economic crisis created by the state. It was government privilege.

As an economist specializing in wealth distribution and economic policy, I've spent years analyzing trends and data to understand how various factors impact income inequality and wealth distribution within an economy. Let's delve into the concepts and ideas presented in the article you provided.

  1. Peter R. Orszag's Prediction: Orszag, the CEO of Financial Advisory at Lazard and former Director of the Office of Management and Budget under President Obama, predicted that the COVID-19 pandemic would lead to an economy where larger companies would dominate, resulting in increased concentration of wealth and employment among them.

  2. Matthew Effect: Orszag likened this phenomenon to the Matthew Effect, where the strong become stronger, implying that economic advantages tend to accumulate, leading to further success.

  3. Wealth Concentration Data: The article cites newly released data from the Federal Reserve indicating that the top 1% of income earners in the United States now hold 32.1% of all wealth, the highest percentage since 1989. This data illustrates a significant increase in wealth concentration, supporting Orszag's prediction.

  4. Wealth Transfer during Pandemic: The article discusses how the COVID-19 pandemic led to a significant wealth transfer, with the wealthiest Americans benefiting the most while small businesses struggled. This is supported by evidence showing that the top 20% of households accounted for the majority of new wealth created during the pandemic.

  5. Cantillon Effect: The article introduces the Cantillon Effect, named after Richard Cantillon, an economist from the 18th century. It explains how the distribution of newly created money affects different sectors of the economy unevenly. Those closest to the source of new money benefit the most, leading to increased wealth inequality.

  6. Impact of Government Policies: Government interventions, such as borrowing, spending, and stimulus measures, played a significant role in shaping the economic landscape during the pandemic. These actions fueled the stock market boom and disproportionately benefited wealthier individuals and corporations.

  7. Inflation and Asset Prices: The article highlights how the influx of cash into the economy, combined with low-interest rates, led to inflated asset prices, particularly in the financial markets. Wealthy individuals who were able to invest in stocks and real estate saw substantial gains.

  8. Tilted Playing Field: The pandemic created favorable conditions for large corporations, enabling them to gain market share while smaller businesses struggled. Examples like Target's increased sales and stock price illustrate how certain companies capitalized on the situation.

  9. Government Assistance and Inequality: Despite government assistance programs like the CARES Act, the distribution of aid favored larger corporations and well-connected entities over small businesses and individuals with fewer resources. This further exacerbated wealth inequality.

  10. Government Privilege vs. Free Market: The article argues that government intervention, rather than free-market forces, contributed to the widening wealth gap during the pandemic. It suggests that government policies often benefit the wealthy and powerful at the expense of ordinary citizens.

In summary, the article provides a comprehensive analysis of how various economic factors, including government policies, market dynamics, and wealth distribution mechanisms, interacted during the COVID-19 pandemic to exacerbate wealth inequality in the United States.

The Top 1% Hold a Record Amount of Wealth in the US. Here’s How Much—and Why | Jon Miltimore (2024)


How much wealth does the 1% hold in the USA? ›

More than one-quarter of all household wealth, 26.5%, belongs to Americans who earn enough money to rank in the top percentile by income, according to Federal Reserve statistics through mid-2023. The top 1% holds $38.7 trillion in wealth.

What net worth is needed to be in the top 1% in the US? ›

To break into the hallowed 1%, an American needs $5.8 million, up from last year's $5.1 million (inflation comes for us all). That places the U.S. fourth globally in terms of assets needed to break ahead of 99% of the population.

How much wealth does the top 1% have over time? ›

The highest-earning 1% of Americans drove this growth: at the end of 2022, their share of the country's wealth grew to 26% from 17% in 1990 — nine percentage points. Across those 32 years, the rest of the top quintile saw their share of wealth grow to 45% from 44% — a one percentage point gain.

How much money do you need to be in the top 1 percent in the world? ›

You now need a net worth of at least $5.8 million in order to be part of that small but elite group, according to the upcoming 2024 wealth report from Knight Frank. That is a notable 12% increase from the $5.1 million needed just one year ago.

What percentile is a $3 million net worth? ›

The 95th percentile, with a net worth of $3.2 million, is considered wealthy, facilitating estate planning and possibly owning multiple homes. The top 1%, or the 99th percentile, has a net worth of $16.7 million and represents the very wealthy, who enjoy considerable financial freedom and luxury​​.

What is the net worth of the top 5% in the US? ›

Top 2% wealth: The top 2% of Americans have a net worth of about $2.472 million, aligning closely with the surveyed perception of wealth. Top 5% wealth: The next tier, the top 5%, has a net worth of around $1.03 million. Top 10% wealth: The top 10% of the population has a net worth of approximately $854,900.

What is the top 1% net worth in 2024? ›

To hold a top 1% net worth in America, according to Knight Frank, a person in 2024 must have a net worth of at least $5.8 million. This amount is at least $7.2 million lower than what the Federal Reserve believes is required to be in the top 1% net worth in America.

What is the average net worth in the US? ›

Net worth is the difference between the values of your assets and liabilities. The average American net worth is $1,063,700, as of 2022. Net worth averages increase with age from $183,500 for those 35 and under to $1,794,600 for those 65 to 74.

What is the average net worth of a 50 year old American? ›

Average net worth by age
Age by decadeAverage net worthMedian net worth
4 more rows

What net worth is considered wealthy? ›

According to Schwab's 2023 Modern Wealth Survey, its seventh annual, Americans said it takes an average net worth of $2.2 million to qualify a person as being wealthy.

Does net worth include home? ›

Household wealth or net worth is the value of assets owned by every member of the household minus their debt. The terms are used interchangeably in this report. Assets include owned homes, vehicles, financial accounts, retirement accounts, stocks, bonds and mutual funds, and more.

Is 3 million net worth rich? ›

The 95th percentile is considered wealthy, with $3.2 million household net worth, so even more spending power, which means estate planning and possibly more than one home. And the 99th percentile is very wealthy, with $16.7 million in net household worth, Schmidt says.

How much wealth is held by the top 10% in the US? ›

Income growth across this bracket has increased by over 10% between 2020 and 2022, higher than all other brackets aside from the top 1%. Overall, the top 10% richest own more than the bottom 90% combined, with $95 trillion in wealth.

How much wealth does the top 0.01 have? ›

The top 0.01% richest individuals—the 520,000 people who have at least $19 million— now hold 11% of the world's wealth, up a full percentage point from 2020, the report found. Meanwhile, the share of global wealth owned by billionaires has grown from 1% in 1995 to 3% in 2021.

What percentage of the people owns 70% of the wealth in the United States? ›

In the third quarter of 2023, 66.9 percent of the total wealth in the United States was owned by the top 10 percent of earners. In comparison, the lowest 50 percent of earners only owned 2.5 percent of the total wealth.

What percentile is 5 million net worth? ›

Americans need $5 million in net worth to join the 1% | Fortune.

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