Wealth

We investigate the impact on social welfare of the United Kingdom (UK) policy introduced in 1980 by which public housing tenants (council housing in UK parlance) had the right to purchase their houses at heavily discounted prices.

This briefing note provides an up-to-date and comprehensive picture of the incomes and wealth of different cohorts as they have moved through their lives.

This paper uses the large and heterogeneous house price shocks in Denmark from 2006-2009 to provide new evidence on the contested determinants of the correlation between house prices and saving. Crucially, to compare the savings behaviour of home-owners who experienced different house price shocks but similar shocks to income expectations, we exploit the structure of the wage setting process in the Danish public sector. We find strong evidence of a causal link between changes in house prices and saving for young and old home-owners, both through a direct wealth effect and through housing equity serving as collateral or precautionary wealth.

The focus of this report is the distribution of household income in the UK. We assess the changes to average incomes, income inequality and poverty that occurred in the latest year of data (2014–15), and put these in historical context using comparable data spanning the last 50 years.

This report, funded by the Joseph Rowntree Foundation, is the fifteenth in an annual series published by the Institute for Fiscal Studies (IFS). It analyses the HBAI statistics and digs deeper to explore the driving forces behind key trends in living standards, inequality and poverty.

BACKGROUND: Despite the importance of socioeconomic position for survival, total wealth, which is a measure of accumulation of assets over the life course, has been underinvestigated as a predictor of mortality. We investigated the association between total wealth and mortality at older ages. METHODS: We estimated Cox proportional hazards models using a sample of 10 305 community-dwelling individuals aged ≥50 years from the English Longitudinal Study of Ageing. RESULTS: 2401 deaths were observed over a mean follow-up of 9.4 years. Among participants aged 50-64 years, the fully adjusted HRs for mortality were 1.21 (95% CI 0.92 to 1.59) and 1.77 (1.35 to 2.33) for those in the intermediate and lowest wealth tertiles, respectively, compared with those in the highest wealth tertile. The respective HRs were 2.54 (1.27 to 5.09) and 3.73 (1.86 to 7.45) for cardiovascular mortality and 1.36 (0.76 to 2.42) and 2.53 (1.45 to 4.41) for other non-cancer mortality. Wealth was not associated with cancer mortality in the fully adjusted model. Similar but less strong associations were observed among participants aged ≥65 years. The use of repeated measurements of wealth and covariates brought about only minor changes, except for the association between wealth and cardiovascular mortality, which became less strong in the younger participants. Wealth explained the associations between paternal occupation at age 14 years, education, occupational class, and income and mortality. CONCLUSIONS: There are persisting wealth inequalities in mortality at older ages, which only partially are explained by established risk factors. Wealth appears to be more strongly associated with mortality than other socioeconomic position measures.

Abstract We examined the association between lifecourse socioeconomic status (SES) and the risk of type 2 diabetes at older ages, ascertaining the extent to which adult lifestyle factors and systemic inflammation explain this relationship. Data were drawn from the English Longitudinal Study of Ageing (ELSA) which, established in 2002, is a representative cohort study of ≥50-year olds individuals living in England. SES indicators were paternal social class, participants' education, participants' wealth, and a lifecourse socioeconomic index. Inflammatory markers (C-reactive protein and fibrinogen) and lifestyle factors were measured repeatedly; diabetes incidence (new cases) was monitored over 7.5 years of follow-up. Of the 6218 individuals free from diabetes at baseline (44% women, mean aged 66 years), 423 developed diabetes during follow-up. Relative to the most advantaged people, those in the lowest lifecourse SES group experienced more than double the risk of diabetes (hazard ratio 2.59; 95% Confidence Interval (CI) = 1.81-3.71). Lifestyle factors explained 52% (95%CI:30-85) and inflammatory markers 22% (95%CI:13-37) of this gradient. Similar results were apparent with the separate SES indicators. In a general population sample, socioeconomic inequalities in the risk of type 2 diabetes extend to older ages and appear to partially originate from socioeconomic variations in modifiable factors which include lifestyle and inflammation.

This special issue of Fiscal Studies brings together a set of papers on the collection and analysis of household-level data on wealth.

This paper is an outgrowth of the larger project ‘Top Wealth Shares in the UK since 1896’ by the same authors. They thank for helpful comments Daniel Heymann, Thomas Piketty, Gabriel Zucman, the co-editor Thomas Crossley, an anonymous referee and participants at the Household Wealth Data and Public Policy Conference (Bank of England, March 2015), the 16th Trento Summer School (June 2015) and the workshop on measuring inequalities of income and wealth (Berlin, September 2015). The authors are particularly grateful to Alan Newman (Office for National Statistics, ONS), who shared the Wealth and Assets Survey (WAS)-based results submitted to the OECD Wealth Database, and to Sian-Elin Wyatt (ONS), who addressed their inquiries about the WAS response rates. This research received financial support from the Institute for New Economic Thinking (INET), the European Research Council (ERC) and the Economic and Social Research Council / Department for International Development (ESRC-DFID) joint fund (grant ES/I033114/1). The usual disclaimer applies.

For many years, survey data on household wealth have been somewhat limited, but the situation is improving in the UK and internationally. This paper uses the new Wealth and Assets Survey (WAS) to document some key features of the distribution of household wealth in Great Britain.

We investigate the impact of inheritances and gifts received on the distribution of wealth. Whereas previous work has looked only at marketable wealth, we consider broader measures of wealth including state and private pensions.

A substantial share of the wealth of Americans is held in tax-deferred form such as in retirement accounts or as unrealised capital gains. Most data and statistics on assets and wealth are reported on a pre-tax basis, but pre-tax values include an implicit tax liability and may not provide as accurate a measure of the financial position or material well-being of families. In this paper, we describe the distribution of tax-deferred assets in the Survey of Consumer Finances (SCF) from 1989 to 2013, provide new estimates of the income tax liabilities implicit in those assets, and present new statistics on the level and distribution of after-tax net worth. The results of our analysis suggest that, relative to published statistics on pre-tax net worth, the distribution of after-tax wealth is slightly less concentrated in the early years of our sample period, but the effectiveness of the income tax system in reducing wealth inequality has decreased during the last decade. We find the reduction in the long-term capital gains rate is the primary reason for the muted effectiveness of the current income tax system in reducing wealth inequality.

We use comparable data from the US and England to examine similarities and differences in the level and trajectories of assets among households aged 70 and over.

Every year since 2004, the Bank of England has commissioned NMG Consulting to carry out a survey on household finances. This paper describes the NMG Survey, its methodology, and its advantages and disadvantages relative to other surveys. The NMG Survey is useful in providing a timelier guide to developments in the distribution of household balance sheets than other surveys, it appears better at measuring financial distress, and it includes questions on topical policy issues that are often not available in other surveys. A drawback of the NMG Survey is that there may be a greater risk of selection into the survey based on unobservable characteristics than is the case for some other household surveys.

Large swings in aggregate household sector spending, especially for big-ticket items such as cars and housing, have been a dominant feature of the macroeconomic landscape in the past two decades. Income and wealth inequality increased over the same period, leading some to suggest the two phenomena are interconnected. Indeed, there is supporting evidence for the idea that heterogeneity in economic shocks and spending are connected, most notably in studies using local-area geography as the unit of analysis. The Survey of Consumer Finances (SCF) provides a household-level perspective on changes in wealth, income and spending across different types of families. The SCF confirms that inequality is indeed increasing in recent decades, and the data provide support for the proposition that shocks to income and wealth are indeed related to large swings in spending across and within birth cohorts. However, the economic shocks associated with the Great Recession and changes in spending and debt to income ratios are widespread, and inconsistent with a narrow focus on the experiences and changes in behaviour of particular (especially low- and modest-income) households.

Official data on the distribution of household incomes in the UK are available only with a significant lag: the latest statistics are for 2013–14. In this report, we use modelling techniques to provide a more up-to-date picture and to assess how things are likely to evolve in the coming years.

We estimate a dynamic model of employment, human capital accumulation - including education, and savings for women in the UK, exploiting tax and benefit reforms, and use it to analyze the effects of welfare policy.

This is a response by IFS researchers to the Work and Pensions Committee's intergenerational fairness inquiry.