Ed Lotterman: Wealth and income tabulations are greatly misunderstood | Ed Lotterman

Also understand that, on both wealth and income, tabulation may be challenging. Definitions pose traps for the uninformed.

For example, it is relatively easy for the Fed, in its “flow of funds” studies, to keep track of prices and ownership of stocks, bonds and funds. But what about the value of farmland in Burleigh County? Or fine art owned by brain surgeons and fund managers? What about housing?

One must make simplified assumptions and informed estimates. The quarter-to-quarter fluctuation in the value of all the trailer houses in the country isn’t going to change anything. Ditto for farmland, although changes for the latter across the whole United States from say, 2012 to 2020, can amount to trillions. The value of family owned small businesses is never measured directly but is important.

Moreover, some estimates of household wealth, as this Fed one, try to include all assets. But there are others that say, in small print, “assets not including personal residences.” These may show that over half of all the households in the country have less than $5,000 in assets. And, if we average the wealth of that group by including debts exceeding assets, we are near zero.

As ever, the meaning of the term “household” itself causes confusions. This is not necessarily Beaver Cleaver’s family. A freshman student living in an apartment is a household. Four unrelated workers renting an apartment together are four households. Three siblings in the same situation are one. A 90-year old in assisted-living may be a household. Many of the least-wealthy households are students with no savings and $120,000 in student debt. Yet their future may be bright.

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