Missing trillions: European Central Bank says top one per cent actually richer than previously thought
August 09, 2014
Scrooge McDuck was never shy about his wealth.
Scrooge McDuck was never shy about his wealth. Source: Supplied
THE world’s richest one per cent is actually richer than previously thought, according to a new study by the European Central Bank.
Apparently, rich people don’t like to reveal just how rich they are.
The study by ECB senior economist Philip Vermeulen argues inaccurate survey data provided by the super-rich has led to serious under-counting.
In the US, it has been estimated that the top one per cent own a third of total wealth, while the top five per cent own 59 per cent.
According to Mr Vermulen’s revised figures, which take into account data such as Forbes Rich Lists, the top one per cent of Americans may actually hold up to 37 per cent of the nation’s wealth.
With US household net worth estimated at $A80.88 trillion, a three per cent error could amount to $2.43 trillion in missing money — and billions of lost tax revenue.
Richer than we ever thought. Bill Gates’s fortune is estimated at $US80 billion. AFP PHOT
Richer than we ever thought. Bill Gates’s fortune is estimated at $US80 billion. AFP PHOTO / ZACHARIAS ABUBEKER Source: AFP
“The difficulty rests in the fact that much of our knowledge of the wealth distribution is derived from household surveys,” Mr Vermulen writes.
Those are the Survey of Consumer Finances in the US, and the more recent Household Finance and Consumption Survey in Europe.
“Measuring wealth at the top is always difficult with household surveys, as these are widely believed to suffer from various degrees of non-response and differential non-response.”
In other words, while most surveys suffer from non-response, rich people are far more likely not to respond, skewing the figures.
He argues these “missing rich” make it more difficult for economists and policymakers to do their jobs. “Not only do policymakers care about wealth for fiscal policy purposes, the share of wealth held at the very top has become an important parameter used to calibrate macro-economic models,” he writes.
However, Professor Sinclair Davidson of the School of Economics, Finance and Marketing at RMIT describes it as a “silly argument”, and that it’s “not the job of the wealthy to make life simpler for bureaucrats and modellers”.
“The fact that rich people have money makes it more difficult for modellers to model? That’s the tail wagging the dog,” Professor Davidson says.
“To be quite honest it’s one of those things that isn’t really that surprising, that the wealthiest people in society are wealthier than we imagine. Part of it is a privacy thing — we don’t really know who’s got what income in society generally. People to a certain extent want to keep their wealth secret.”