Do you really believe that rich get richer and the poor will get poorer? Well, in a recent survey, it shows that this saying is true for most people, particularly in the US households.
The recent survey conducted shows an increase in the historically high gap income and wealth between poor households and rich ones. Based on a speech given by Governor Lael Brainard of Federal Reserve, it showed that top one percent of households held a twenty-four percent share of every US household income as of year 2015 and a thirty-nine percent share of all US households wealthy. That is a 7 and 9 percentage point increase from values twenty seven years prior.
The rich may actually get richer, yet it does not necessarily mean that the poor will be poorer. The survey found that families with varied income saw a boost in average real incomes between year 2013 and year 2016. That is a contrast from the past three-year period when recession caused stagnant or low average incomes for every income group except one, which is the top of the income distribution. It only means that the financial gaps widen for the reason that while the finances of poor people improve slightly, the wealthy individuals are also making huge financial gains.
Federal Reserve is basically concerned regarding income and wealth gaps. Provided that 2/3 of the economy is actually consumer driven, it is essential that low income households have more discretionary cash to spend.
You could think that high income households would spend more cash since they could afford to do so. The wealthiest people are likely to save bigger portion of any extra incomer they earn relative to the households in low income groups. Aside from that, high income households are more likely to invest in extra funds into the equities and some vehicles that build wealth faster, widening wealth gap further.
Low income families don’t have that luxury. They spend since they should and they cannot afford investing in high return ventures like stocks since they might have to access to their funds anytime to handle unexpected expenses. Low income families will be likely to use the traditional bank accounts with the negligible interest rates.
What could close the wealth and income gap? Generally, recessions do a good job of leveling playing fields, yet a healthier way to close income gap is through the targeted policy. More works at higher wage would bring low income classes up at higher rate, particularly if the jobs as well as stimulus programs are targeted toward the minorities.
No matter what your wealth status is, you could make most of what you currently have through wise financial decisions. Budgeting basically applies whether your household income is a thousand dollar or a million dollar. Keep your spending under control and invest wisely. If you are struggling to make the ends meet, concentrate on your situation. Let the top one percent drive the economy with their spending for the meantime. They could afford extra spending within their budget.