The Growing Gap in the United States Between the Rich and the Rest

An Interview with Edward Wolff

Edward Wolff is a professor of economics at New York University. He is the author of Top Heavy: The Increasing Inequality of Wealth in America and What Can Be Done About It, as well as many other books and articles on economic and tax policy. He is managing editor of the Review of Income and Wealth.


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Multinational Monitor: What is wealth?

Edward Wolff: Wealth is the stuff that people own. The main items are your home, other real estate, any small business you own, liquid assets like savings accounts, CDs and money market funds, bonds, other securities, stocks, and the cash surrender value of any life insurance you have. Those are the total assets someone owns. From that, you subtract debts. The main debt is mortgage debt on your home. Other kinds of debt include consumer loans, auto debt and the like. That difference is referred to as net worth, or just wealth.


MM: Why is it important to think about wealth, as opposed just to income?

Wolff: Wealth provides another dimension of well-being. Two people who have the same income may not be as well off if one person has more wealth. If one person owns his home, for example, and the other person doesn’t, then he is better off.

Wealth — strictly financial savings — provides security to individuals in the event of sickness, job loss or marital separation. Assets provide a kind of safety blanket that people can rely on in case their income gets interrupted.

Wealth is also more directly related to political power. People who have large amounts of wealth can make political contributions. In some cases, they can use that money to run for office themselves, like New York City Mayor Michael Bloomberg.


MM: What are the best sources for information on wealth?

Wolff: The best way of measuring wealth is to use household surveys, where interviewers ask households, from a very detailed form, about the assets they own, and the kinds of debts and other liabilities they have run up. Household surveys provide the main source of information on wealth distribution.

Of these household surveys — there are now about five or six surveys that ask wealth questions in the United States — probably the best source is the Federal Reserve Board’s Survey of Consumer Finances.

They have a special supplement sample that they rely on to provide information about high income households. Wealth turns out to be highly skewed, so that a very small proportion of families owns a very large share of total wealth. Most surveys miss these families. But the Survey of Consumer Finances uses information provided by the Internal Revenue Service to construct a special supplemental sample on high income households, so they can zero in on the high wealth holders.

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