Wealth creation is on the rise around the world, but not everyone is sharing equally in the newfound riches.
Since the Great Recession, the richest global citizens have benefited far more from the worldwide increase in wealth than their poorer countrymen, according to a new report from investment bank Credit Suisse. The result? The top 1 percent of global citizens own 50.1 percent of all household wealth, up from 45.5 percent in 2000, the study found.
Widening wealth inequality has been a hallmark of the post-recession economy, causing policy experts and lawmakers to question whether the impact could do everything from stunt the U.S. economy to shorten people’s lives. The wealth gap recently spurred credit rating agency Standard & Poor’s to warn that worsening inequality could hamper long-term economic growth by dampening social mobility and creating a less-educated workforce.
Credit Suisse’s findings may add to the debate over tax reform and which groups stand to grab the lion’s share of benefits from Republican proposals to cut taxes. Critics say both the House and Senate tax reform plans will favor the rich over the middle class by taxing businesses at a lower rate and potentially lowering capital gains taxes for some households, which they say could exacerbate income inequality.
The wealth of the top 1 percent is being bolstered by the rising value of investments like stocks, bonds and real estate, Credit Suisse said.
“The value of financial assets — especially company securities — is likely to be an important factor, because wealthier individuals hold a disproportionate share of their assets in a financial form,” the report said.
That’s created a bumper crop of millionaires, with the bank estimating that 23.9 million new millionaires have been minted since 2000.
Source: Credit Suisse Global Wealth Report, 2017
By contrast, the impact of wealth inequality is hitting the millennial generation — those age 17 to 35 — particularly hard around the globe, the report said.
“Add rising student debt in several developed countries, tighter mortgage rules after 2008, higher house prices, increased income inequality, less access to pensions and lower income mobility and you have a ‘perfect storm’ holding back wealth accumulation by the millennials in many countries,” the report said.
It added, “The millennials are doing less well than their parents at the same age.”
Source: Credit Suisse Global Wealth Report, 2017
The benefits of the burgeoning wealth of the top 1 percent appear to be enjoyed chiefly by Baby Boomers, who are now between 50 to 70 years old and who hold many top jobs and much of the country’s housing, the study said.
Social mobility, or the ability to move up the income scale, is also declining. Credit Suisse notes that 90 percent of children born in the U.S. in 1940 had income that exceeded their parents’ earnings. By the 1980s, that had declined to 50 percent, which it attributed to the rise in inequality.
That’s not to say there aren’t successful millennials. Facebook (FB) CEO Mark Zuckerberg represents the sharp rise in young billionaires, buoyed by the increase in global wealth creation. In 2017, there were 46 billionaires under the age of 40, compared with just 21 in 2003, Credit Suisse found.
Despite the success of those young entrepreneurs, most millennials will likely “experience greater challenges in building their wealth over time” and face larger wealth inequality than in previous generations, Credit Suisse said.
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