UPDATED: February 20, 2023

Lots of interesting and thought-provoking reactions to our post yesterday on how the gains in U.S. productivity are shared.

One aspect of the debate that is often over-looked is the concentration of financial asset holdings in the U.S. economy. Who owns financial assets such as stocks and bonds in corporations tells us who has a direct claim to the income generated by capital. Here is the distribution of financial asset holdings across the wealth distribution. This is from the 2010 Survey of Consumer Finances:

Who owns financial assets in the United States

The top 20% of the wealth distribution holds over 85% of the financial assets in the economy. So it is clear that the direct income from capital goes to the wealthiest American households. For more evidence on this pattern through history, see the working paper by Edward Wolff. He shows that the share of financial assets held by the top 20% of the wealth distribution has been increasing since 1983.

To further exacerbate this divide, remember that owing and owning debt are two side of the same coin. Lower income households are more likely to hold debt, which inadvertently is an asset to the people who provide the capital. Loan terms are less favorable to those with a weaker financial status, which widens the gap even more. It's no surprise that most Americans are searching for ways to get out of debt as the first step to gain a level footing against the wealthy.

Now, workers that have no financial asset holdings may still have an indirect claim on the income produced by capital in the economy–for example, if the government taxes the income earned by capital and then redistributes it to workers that own no capital, workers have a claim on capital income through the government.

There is also the question of incorporating housing wealth in the graph above. How should we think about housing which is more broadly held? But it’s important to have the basic facts established to begin the debate. If you think the above chart is misleading or incorrect in some way, we are happy to hear why.

By the way, we are going to do a follow up post to the post on productivity gains based on a number of responses we received. There are definitely some interesting issues worth going through in more detail. When we have some more time!