Inequality, exhibit A: Walmart and the wealth of American families

Two weeks ago saw  the 50th anniversary of the opening of the first Walmart. And just a week before that, the Federal Reserve released the underlying data on family wealth from the Survey of Consumer Finances (SCF). The SCF is the survey that reported the median wealth of American families (that is, the wealth of that American family that is exactly wealthier than half of all families and less wealthy than half) fell by 38.8 percent between 2007 and 2010.

We have argued previously that Walmart is a useful archetype for trends in the larger American economy over the past three decades. Its enormous size and bargaining power has led to fabulous wealth for its owners (most notably the Walton family), while the compensation it pays its employees is generally low, even by retail standards; and the ubiquity of Walmart stores means that it is effectively the marginal employer in many U.S. counties. And its role as this marginal employer often serves to drive down workers’ wages county-wide.

The three years of wealth data from 2007 to 2010 just provides an extreme example of how the economic fortunes of Walmart’s owners have diverged from those of typical American households. Concretely, between 2007 and 2010, while median family wealth fell by 38.8 percent, the wealth of the Walton family members rose from $73.3 billion to $89.5 billion (note that the 2007 wealth number is slightly larger than was reported at the time—to provide an inflation-adjusted comparison, I converted the 2007 wealth value of $69.7 billion to 2010 dollars using the consumer price index (the CPI-U-RS, to be specific)).

In 2007, it was reported that the Walton family wealth was as large as the bottom 35 million families in the wealth distribution combined, or 30.5 percent of all American families.

And in 2010, as the Walton’s wealth has risen and most other Americans’ wealth declined, it is now the case that the Walton family wealth is as large as the bottom 48.8 million families in the wealth distribution (constituting 41.5 percent of all American families) combined.

It’s hardly a surprise that the economic circumstances of the Walton family and that of most Americans are moving in opposite directions, but some have attempted to quibble with the use of this particular statistic by noting that nearly 13 million American families have negative net worth—meaning that they have outstanding debts greater than the value of their assets. This is a bit of a strange objection—of course, many American families have negative net worth, but this is an economic reality, not a statistical fluke.

It’s true that some of these negative net worth families are not necessarily families that are economically struggling: take a 27-year-old recent graduate of Harvard Medical School who has enormous student loan debt, but also has 40 or 50 or 60 years of very high earnings potential in front of them. However, it’s probably a safe guess that negative net-worth families that are actually very well-placed economically are a rare exception, and not the rule. And increasingly, many of these negative net-worth families are people who find themselves underwater in the wake of the housing bubble’s burst—as can be inferred in the large increase in the share of families reporting negative net worth between 2007 and 2010 (negative net-worth families rose from roughly 7.7 percent of the total in 2011 to 11 percent in 2011).

But still, these critics charge, the Walton wealth comparison is unfair because the negative net-worth families distort the whole calculation. Anyone with positive net worth, even $1, they point out, has more wealth than millions of American families.

Let’s take these critics’ suggestion and remove all the negative values at the bottom of the distribution, extinguishing the value of their debts that exceed their assets and assigning them a zero net worth instead. What does the comparison look like then? Not that different: After making this adjustment, about 15.4 million families (13.1 percent of the population) have zero net worth, no small number to be sure. But the Walmart heirs’ $89.5 billion is still equal to the combined net worth of the bottom 33.2 million families (about 28.2 percent of the total), even after extinguishing all negative net worth values in the SCF.

Again, it should be noted that this modification of the SCF is just not an economically sound thing to do; the negative net-worth observations in the SCF data represent economic information (let alone the realities of millions of families) that cannot just be discarded because people think that the number of families that need to have their wealth added together to sum to the Walton family’s total is arbitrarily “too high” in some way.

To address these points in one last way, take the wealth of the Walton family ($89.5 billion) compared to the wealth of the median American family—that family that is wealthier than half of all others and less wealthy than half. In 2010, median wealth was $77,300 (down from $126,400 in 2007). How many of these “typical” American households (i.e., those with median wealth—wealthier than fully half of the overall population) would you need to lump together to reach the Walton family’s wealth? About 1.16 million, up from 580,000 in 2007.

In short, it would still take a city’s worth of families with the overall median wealth to match the Walton family’s net worth. The figure below shows just how many families with median wealth would need to be combined to equal the Walton family’s wealth, and how this has changed over time.

  • Ben Leet

    What if I earned $860,000 an hour and I worked for 50 years? What would I be worth? I would earn $1.7 billion a year for 50 years. What is starting wage at Walmart? 

    • Danny McDermed

      Yeah but those Waltons worked their butts off. They started off with just that little house on a prairie and a bunch of kids and see where they got!

  • Jay

    More dishonesty from the left. The Survey of Consumer Finance does not take into account accrued S.S. and Medicare benefits. Then again I’d be shocked if anyone at EPI could accurately define asset.

    • Aaron D Clark

      lol, if you aren’t a millionaire, then you’re an idiot fighting against your own self interest.

    • Dan

      Interesting comment. For me though, that there is no substantive counter to the article, other than to say “more dishonesty from the left” along with referencing “accrued SS and Medicare benefits–does little to support any credibility for your claims. On the other hand I believe there is enough “dishonesty and spin that comes from both the left and the right, therefore my primary interest is to seek solid information that supports claims.  The comment you posted does not pass the test of being well thought out, well presented, well supported, or well said.  It merely comes across as just another hothead that is unwilling, or unable, to debate an issue without personalizing it. When people just “go off” it calls to question their motive.  I’d be interested in reading why you say what you have; how did you arrive at the conclusions that you seem to put forward in your comment.

  • Nope

    Um. Jay. The Waltons will also be eligable for Social Security and Medicare.

  • It’s not that the comparison is unfair, it’s just meaningless.

    • JoeleneWelsh

      And would you please define in a reasonably academic fashion… HOW you came to this conclusion. Apparently even if it isn’t truly correct it certainly supports the position with more facts than a single sentence.

  • Addi

    Where does the home and mortgage fit in? Does that count as wealth or debt? If it counts as wealth, then it could explain a lot of the loss from 2007 to 2010.

    • Very simply, home = wealth, mortgage = debt.  You OWN your home, but you OWE a mortgage.  If you have a $100k house, and you have a $100k mortgage, (assuming no other assets or debt) you are a zero net worth family.  But lets say you bought a house at the end of the housing bubble… You bought a house for $150k, the bubble burst, the economy crashed, your house is now worth $110k, you are now $40k in debt

  • Curt

    How is that Trickle-Down working for us now?  We were told that if we let the wealthiest keep more of “their” money they would build businesses and hire us and we would all benefit.
    In the real world they used their economic power to pay the rest of us less.  Instead of building more businesses in the U.S. they created jobs in China and pocketed the wealth of the middle class when they bought the stuff they were no longer being paid to make.  Then, instead of investing their profits in the U.S. they stashed them in Switzerland, the Bahamas or the Cayman’s. 
    Romney is a perfect example and therefore the perfect candidate to represent their interests.

    • Jonathan

       The “trickle down” was piss, we’ve been had.

  • Horn

    The report starts out by saying that:
    ‘Most noticeably, median incomes moved higher for retirees and other
    nonworking families. … The decline in mean income was even more
    widespread than the decline

    in median income, with virtually all demographic groups experiencing a decline between

    2007 and 2010; the decline in the mean was most pronounced in the top 10 percent of the income distribution and for higher education or wealth groups.’

    Cherry-picking the Waltons to disseminate misinformation is tendentious at best and outright lying at worst.

  • John_Steinsvold

    An Alternative to Capitalism (since we cannot legislate morality)

    Several decades ago, Margaret Thatcher claimed: “There is no
    alternative”. She was referring to capitalism. Today, this negative attitude still persists.

    I would like to offer an alternative to capitalism for the American people to consider. Please click on the following link. It will take you to an essay titled: “Home of the Brave?” which was published by the Athenaeum
    Library of Philosophy: John Steinsvold

    Insanity is doing the same thing over and over and expecting a different
    Albert Einstein

  • Missourian

    Perhaps as the price of buying politicians rises, some of this wealth will be redistributed

  • They are in 2009 140 million tax payers.
    AGI  of 7800 B odf national total of 12.000B individual income
    Paid 866B at 11.06% Tax Rate
     In 2011 corp paid 12.1% Tax Rate

    Burn Tax Book–start anew–Hard to get exemption–close K street
    This automatically balances 2013 budget and helps pay down debt

    Progressive Flat Tax by group.will help all especially middle class.

    How long can we keep borrowing that aides the richest. It lets them off the hook of paying Fair share of “Total” Income. Yes! They most individual income tax, Get off hookon Payroll tap due to cap. Remove cap let all pay 6.2%
    Multi millioniares pay 1% or less.

    We can pay down that Debt. Let us start now 

    • pjmeli

      “We can pay down that Debt. Let us start now”

      Hmm. If we pay down the Debt there will be no net money left in the domestic economy, only private debt.

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  • If we could just get Walmart to mismanage itself and have a stock crash, just think of all the social justice we would get.

    And talk about inequality. The average American is worth more than the 241 million poorest Indians.

    And for real selfishness, let’s talk about the average beggar in San Francisco. He makes 153 times more than the average beggar in Tibilisi.

    • Kathryn Stone

      God you sound like my mother “you need to get an attitude of gratitude”

  • Serr8d

    Looks to me like the number of families needed to equal the Walton family fortune DECREASED under President Bush, and SKYROCKETED under Barack Obama.

    Which works out well for him, given he is a professional at community organizing the mindless by using class warfare and class envy to promote both his political ideology and his CHANGE agenda (to move America’s Capitalism-based economic system to one resembling the failing Euro-Socialist model). Add a few envious economists with far-Left bents, creating pseudo-intellectual posts with suitably faux gravitas that inflame the mindless who haven’t the spines of our American forebears, and we have a Republic that’s primed for economic failure and perhaps brutal civil unrest.

    There is a reset button, gentlemen. You won’t like it when it’s pushed.

  • The wealth of the Waltons increases with the rising share price of WMT. There are two reasons for the rising share price: 1 WalMart delivers a service to consumers that they want and value highly; thus it is very profitable and this increases its share price as investors want to own a piece of its success (by the way most middle class Americans profit from this fact as well, as it is a good bet that their 401K’s contain WMT shares)

    2. the second reason is more pernicious: it is the massive monetary inflation engineered by the Fed, which favors the rich and disadvantages the poor and the middle class. It is a kind of reverse wealth distribution, but funny enough, the political left is often shouting the loudest for more easy money – which I would put down to economic ignorance. Easy money can create an illusion of prosperity, just as it did during the housing bubble, but the simple fact of the matter is that ever since credit expansion began in earnest with the abandonment of the dollar’s tie to gold in 1971, the real incomes of the middle class and the lower socioeconomic strata have stagnated.

    3. as a general comment to the above: I’m not holding it against people that many of them are unaware of these things. The intellectual vanguard of the economics profession has been peddling the equivalent of snake oil for so long that even many people who think of themselves as well-versed in economic matters are really victims of decades of propaganda. What often looks reasonable on the surface, is really nonsense. Economics is more about the things that are not immediately visible on the surface than those that are.

    4. whenever the growing gap between rich and poor is discussed, the chance is good that the true causes are glossed over. The sometimes openly voiced demand, and sometimes unsaid but implied demand for more government oppression by way of raising taxes misses the mark in more than one respect. Not a single person that is disadvantaged by the Fed’s inflationary policy will gain a dime if taxes are raised on the better off. In fact, most likely such a policy would simply render everyone poorer over time (unless one believes that government bureaucrats are better at allocating resources than the private sector, which is a forlorn hope to put it mildly).

    The goal should not be to forcibly take things from anyone, but to create the conditions that will allow everyone’s income and wealth to grow.

  • william02138

    Yes, some families are very rich, no question about that. I don’t doubt that the Waltons have a net worth equal to the combined net worth of the bottom 48.8 million households.

    However, you and I and everyone reading this each has a net worth greater than the combined net worth of the bottom 43 million households! (approximately).

    Doesn’t make the Waltons seem so bad anymore, does it?

    Here’s where the article went wrong:

    1) It only mentioned households with net worth below zero. However with millions of households below zero, you need millions more above zero to bring the combined total up to zero. I found numbers for 2010 that show the bottom 25% had a mean net worth of -$12,800. Thus 29 million households were a total of $370 billion in the hole. By looking at the median, and the mean and median for the next group up, I guesstimated 14 million more households required to reach zero. I may be off by a couple million either way.

    2) It’s not just people with a positive net worth (no matter how small) who are more “wealthy” than the bottom 43 million combined. It’s everyone, even people deeply in debt. If the bottom 43 million households sum to exactly zero, then only look at the bottom 42.99 million households. They sum to negative $200 million. Not even the most flamed-out former rock star is $200 million in the hole. Virtually everyone is “wealthier” than this. And again, these are rough figures so might as well round off and call it 43 million again.

    I think it’s sad that the bottom 43 million households’ net worths sum to zero. I assume it’s because a lot of people got underwater on their mortgages recently. However the Waltons didn’t make this happen. The Waltons did not create the housing bubble. They did not push sub-prime mortgages on unqualified buyers. Fifty years of Walmart making housewares and groceries more affordable is a good thing, an overall benefit to society even though their competitors may not like it. If that made them wealthier than the bottom 48.8 million instead of only wealthier than the bottom 43 million like you are, so be it.

    Another thing to remember — there’s a big difference between “poor” people (those who are struggling to get by) and a middle class people who happen to be underwater on a mortgage they can afford. For a family planning on staying in their house a long time, a drop in the resale value of their house shouldn’t affect their daily lives, even though it may have put them in the ‘negative net worth’ category. Negative net worth is not the same as poor.

    • John Hernlund

      Not true, I have a strongly negative net worth, and I’m reading this…I’m probably in the bottom 1% fo wealth, owing to college debt.

      • william02138

        John Hernlund, it seems you missed the point. EVERYONE has a net worth greater than the combined net worth of the bottom tens of millions of households (not necessarily 43 million any more as things change). Even the most indebted person in the country does. That’s why it’s a deceptive way of describing how wealthy the Waltons are.

        In case you don’t see it, let me give you a simplified hypothetical example:

        -$20 billion: total net worth of bottom 20%.
        +$19 billion: total net worth of next 20%.
        ==== [sums to]
        -$1 billion: grand total net worth of bottom 40%

        So unless you owe a billion dollars on your student loans, you have — technically speaking — a greater net worth than the bottom 40% of the country combined.

        That was a hypothetical example. In the US the actual numbers are different, but it’s the same idea.

        • John Hernlund

          No, you obviously don’t understand the difference between adding and sorting/ordering. If one guy has -1, another has 0, and another has 1, then the welathiest has more than the bottom 66%.

          • william02138

            I suggest you read the article again. I’m doing the math the same way they’re doing it. I’m just exposing that it’s a bad measure of how wealthy someone is. In your example the middle guy also has more than the bottom 66% combined — and “combined” is what the article is talking about.

    • Curt Welch

      Let me guess. You didn’t even read the article did you? Because if you had, you would see it addressed your concerns. When they adjusted for your negativity, by pretending those people have a net worth of zero, the Walton’s still have more wealth than the bottom 28.1% of the country combined. When 6 people have more combined wealth, than 80 million, that’s a wealth ratio of a million to one. There’s no excuse for that. The problem isn’t in how much the Walton’s have, it’s how little so many others have.

      None of this is the Walton’s fault. It’s created by technology giving some members of society more power to make money, than others. And as technology grows, wealth inequality grows. We have to fix this, and not by stopping technology. We have to fix it, by better sharing the wealth that technology is creating. It requires taking money away from the Walton’s and giving it to everyone else in the country. It’s called a Basic Income Guarantee.

      • william02138

        He acknowledged that this ‘Waltons have greater net worth than bottom X million combined’ metric is misleading since someone with $1 does too, for a similarly shocking value of X.

        He never addressed the two additional points I made, which make the metric even more useless:

        1) You can’t just count the under-water households; you need to add millions of above-water households to balance them out before getting up to that $1 sum.

        2) It’s takes almost the same number of households to sum to negative $1,000,000 for example. No matter how deeply in debt one household is, their net worth is higher (less negative) than the sum of several million households at the bottom.

        His fix of zeroing out the negatives addresses his point. It happens to cover up my two points. That’s not quite the same as addressing them.

        I agree the problem isn’t how much the Waltons have, it’s how little others have — both in terms of why these net worth comparisons look so shocking, and in terms of what matters in life.

        I also agree that wealth inequality increases with technology. Well, opportunities to become rich increase with technology. It’s not at all clear that the poor are worse off due to technology. Some jobs go away but others emerge, and technology drives consumer prices down (at constant battle with government debt spending, which drives prices up). I’d love to discuss this more, but I have to get back to studying for my next technology-forced career change.

        • Curt Welch

          Yes, I often point out with sharing this type of statistic that is says far more about how poor the bottom of society is, than how rich the top is. You have pointed out how insignificant the Walton’s wealth is in the statistic, but your arguments seems to have missed the entire point of the statistic. You seem to be trying to argue that the ratio of rich to poor is “not significant” when in fact, your argument only amplifies the fact of how amazingly bad it is. As you suggest, even a person with a net worth of only $1 is better off than a huge percentage of Americans. That’s an even worse statistic then the one that uses the Walton’s as the reference wealth.

          “It’s not at all clear that the poor are worse off due to technology.”

          It may not be clear to you, but it’s very clear to many of us. Capitalism is a competition for market share. It’s a zero sum game. When one business wins a customer’s sale, another business loses the opportunity to win that customer. When apple sells me an iPhone, Nokia lost the chance to take my money.

          The more technology we add, the more power a few end up having, to win the competition over the many. When Wal-Mart figures out how to operate it’s business in 1000 different cities, 1000 little mom and pop shops get put out of business.

          Technology drives inequality, as it creates a super-star business environment where only the best of the best corporations are able to expand and claim huge market shares around the world and push everyone else out of those markets. Not by cheating the markets, but simply by being the best.

          This is not bad for the economy. But it’s VERY BAD for PEOPLE who are left in the cold in terms of what slice of the huge strong GDP they are allowed to have access to. And that’s exactly what this statistic shows – how much our fixation on GDP has allowed us to cause 100’s of millions of our PEOPLE to suffer. If the point of a large and growing GDP is not to take care of the people, what is it’s point? And if the point is to take care of the people, why have we failed to badly?

    • Daddy Warbucks

      I may have a net worth greater than the bottom 43 million households (approximately) but i don’t own a private jet to fly around the world to play golf everyday, either. Agreed the Walton family didn’t cause all this extreme Income/Wealth/Tax Inequality all by themselves. But what if they gave all their employees the same pay-rate increase they give themselves each year (say, +30%)? If the lowest-paid employee got the same pay increase as the highest-paid employee, wouldn’t that, at least, stop the current Wage/Wealth/Tax Inequality from getting worse, as it has ever-since the mid-70’s?

  • Guest

    They steal. No different than all the rich before them.

    But then not much more can be expected from them and those like them
    as they simply can not function at a higher level.
    If they could have they would have.

  • Urlo

    It’s greed, pure greed. The Wal-Mart families could pay their employees better and still remain billionaires. Their reputations would improve, they would have happier employees and with less turnover.

    • Daddy Warbucks

      They don’t have to. Labor unions are at an all-time low in the U.S. and ALEC has busted Public Employee Unions in Wisconsin, with more to be broken up. Congress could pass a law requiring corporate Boards to have an employee representative Board member as they do in Germany, but do you expect anything like that will happen in the USA??

  • Mauricio

    Just crazy.

  • Pete Thottam

    Hillary was a Walton/Walmart family’s primary corporate attorney while she was a partner at the Rose Law firm (Arkansas), pre Bill’s ’92 election and his Goldman Sachs/Bob Robin backed NAFTA and the transfer of 27 million plus American manufacturing jobs to China, Thailand, et al.

    • gordon smith

      Already running scared for 2016 Pete?

  • Beuna Oates

    Truth about Walmart right here in this article, greed. Why there is no middle class any more and do blame the government so you Walmart can keep your billions!

  • econ1

    It is certainly true that the Walton’s built a pretty valuable company. They did that by providing folks with something they wanted…things they need or want at low prices. No one forces folks to shop there or to buy their stock. So, while I am amazed at what they have done, I don’t begrudge them their success. Witness the founder of Alibaba. Probably if you took someone in the bottom 10% of those with a positive net worth in the US, their net worth would be larger than millions of people in Africa or India….so inequality is pretty significant. Fun with numbers.

    • Daddy Warbucks

      What doe you say about people who need or want medicine at low prices, yet Billy Tauzin, a former congressman (R-LA) now turned Big Pharma lobbyist who wrote a condition in the ACA that Medicare could not use their collective buying power of 20 million patients to pay anything less than what the pharmaceutical companies told them the prices Medicare patients would have to pay?

      Is that an example of monopoly pricing or “free market” competitive pricing or single-payer pricing?

  • travelin_rn

    For those that says Walmart and McDonald’s can’t afford a higher minimum wage. Look no further than Williston, ND. Last year, 2014, before the oil boom went bust, they were offering $17/hr and $14/hr respectively.