A reminder that household wealth when compared to national income has risen. This is the thing that Piketty was telling us all about. So horrible is it that we’ve got to tax it all off people in order to have a truly just society. Or, of course, we could just note why it has happened – we’re living longer.
This is a huge deal for how society functions, particularly as wealth is more important in 21st-century Britain (growing from three to seven times national income since the 1980s). This lies behind the growth of “the bank of mum and dad” and the doubling of inheritances in the past two decades.
The left should worry about growing wealth gaps and remember that wealth inequality is twice as high as income inequality. The right should recognise that claims we are a meritocracy are a joke when “success” is determined by your parents’ bank balance. What can we do about this? Choose our parents carefully.
As the ONS points out the three major chunks of household wealth – and yes, all corporate wealth is in this because every corporation is owned by someone – are residential property, pensions and financial wealth.
That financial wealth is about 100% of GDP – just a number between friends you understand. Residential property is indeed a problem because of the limitations upon where you may build a house. It’s not the value of the houses, it’s of the planning permissions. The solution there is to issue more planning permissions of course – a few or five million should do it.
The other chunk of that household wealth is pensions. Which should be higher. We now tend to live to have two decades or so of retirement. Therefore we should all be saving more of our working life in come to finance those golden years than when we all dropped dead three years after receiving the gold watch.
This increase in the wealth to GDP ratio is not, therefore, something to worry about – except the planning permissions – nor is it something to be solved by more tax. Unless, of course, you’re just looking for an excuse to tax more that is…….
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As pensions have become rarer and rarer I assume by pensions you also mean accumulated retirement plan savings. A lot of people in good, but not necessarily elite, professions who are now of retirement age have over the course of perhaps 35-40 years saved hundreds of thousands or even a million or two in these plans. Some of these have increased dramatically in value over the past few years, in a generally upward but zig zagging mode. Often, the their retirement accounts make more than they do.
It’s been commented upon that 90% of Warren Buffet’s wealth has come since he turned 60. Should so many retirees not withdraw so much that their accounts can’t still grow in value or move it all into assets unlike to grow much in value (but not lose much either), in 20 years there might be a lot of oldsters out there with $10 million and with kids who may receive a real windfall.
Of course, not everyone has saved like that and some retirees will spend most of their accounts down. Not every millennial has parents with such retirement account balances.
You can reasonably expect that in the next few years oldsters with big retirement accounts will become a vilified class for having become unequal.
Saved wealth is a function of how long you've been alive, so this is just building up vilification of old people purely for being old people.