The Mass Affluent according to TSYS

One of the many things I like about Capital in the Twenty-First Century by Thomas Piketty is his willingness to stare at class issues. In the US, we like to talk about the middle class as if everyone were a member, because it’s all about aspirations, according to the Middle Class Task Force of the Department of Commerce (which is currently run by billionaire Penny Pritzker):

Middle class families are defined by their aspirations more than their income. We assume that middle class families aspire to home ownership, a car, college education for their children, health and retirement security and occasional family vacations.

That kind of trash doesn’t cut it in Piketty world. He says that these mushy definitions that include people near the top 1% are meant to “reflect an implicit or explicit position concerning the justice and legitimacy of the amount of income or wealth claimed by a particular group.” Page 251. He defines the class structure as follows:

1. Lower class: the bottom 50% by net worth. In the US, the average person in the bottom 25% was a negative $12,800 according to the 2010 Federal Reserve Board Survey of Consumer Finance. The next 25% had an average net worth of $35,600; the median was $32,000. See Table 4.

2. Middle class: the next 40% by net worth. The average net worth in the lower 25% of this group in the US was $168,900, and the median was $157,200. The next 15% had an average net worth of $527,900, and a median of $482,700.

3. Upper class: the top 10%. The average net worth in the top decile in the US was $3,716,500, with a median of $1,864,100.

Two things should be noted about these figures. First, the wealth of the top decile is probably understated, because it underrepresents billionaires and centi-millionaires who, in any event, are probably hiding some of their assets. Second, these figures include housing assets. That figure represents a big part of the wealth of the middle class, and a much smaller portion of the top decile. But it isn’t liquid, and it’s subject to mortgages and the vagaries of the housing market and to the continued employment of the owners. See Sheet 9 of the 2010 Survey of Consumer Finance, available here.

Piketty’s class definitions match those of financial service marketers who also divide society by net worth. Here’s a typical site. It defines a group called “mass affluent”, with household investable liquid assets between $100K and $1 million. This method of counting ignores housing and other assets like cars and computers. They estimate that there are 22 million mass affluent households in the US, representing about 14% of all households. In this group, liquid assets total about $11 trillion; to which we should add several trillion more in real estate and other assets.

Then there are the High Net Worth Individuals, those with investable assets of at least $1 million. CapGemini provides an overview of this group. They estimate that the population of HNWI in the US is 3.44 million, holding a total of $11.8 trillion dollars total wealth. It’s fun to google up these terms and see the kinds of marketing materials and thinking that goes on among the people trying to sell to these groups. Here’s a discussion of a survey of HNWIs by PriceMetrix:

…the study found that just 3% of households with less than $500,000 when a relationship began, became high net worth clients over the subsequent five years.

At a slightly higher level, US Bank produced a survey of HNWI using a minimum of $3 million in total assets, which includes housing and other non-financial assets. It claims that there are about 2 million such households, and includes all ages. This, by the way, confirms another observation of Piketty, that intergenerational wealth distribution is not very different from overall wealth distribution, giving the lie to another claim of mainstream economists called life-cycle savings. Anyway, this study tells us that these wealthy people are not worried about the future. Well, then, I guess all’s right with the world.

At the very top we find Ultra High Net Worth Individuals.

UHNWIs now get an annual survey to themselves, the World Ultra Wealth report. It says their number swelled by 6% last year to 199,235, and that their combined net worth expanded by around $2trn – which is roughly the same as the GDP of, say, Russia or India – to $27.7trn, which equates to approximately 40% of the world’s GDP.

Piketty’s view of class structure makes a lot more sense than the gauzy vision of the US as a middle-class country. He thinks the solution is a dramatic increase in taxes, including much higher income taxes for the largest incomes, higher estate taxes and much higher taxes on capital gains. This program has been widely derided as impossible in today’s society by all the serious people. Piketty rejects this pessimism, and points to the US as the prime example of a nation that once upon a time loathed inherited wealth and took direct action to defang it.

It seems to me that there is an opportunity for organizers here. How do you explain this issue to people in a non-threatening way, with a view to moving people away from neoliberal gibberish and towards a solution which involves dramatic increases in taxation of the filthy rich? Perhaps one step is to point out the reality that people know in their bones but don’t discuss.