Presentation by: Sir John Hills (London School of Economics) OECD Conference on wealth inequalities: Measurement and policies Paris, 26 April 2018.

1. Why does household wealth
inequality matter?
John Hills
London School of Economics
OECD Conference on wealth
inequalities: Measurement and policies
Paris
26 April 2018

2. Two questions
• Why is it important to study the distribution of
household wealth?
• Why do social and economic policy-makers
need to take it into account?

3. 1. Scale
UK example
• The UK Office for National Statistics has now carried out five
waves of the Wealth and Assets Survey (WAS)
• This looks at household wealth including:
- personal possessions (clothes, furniture, cars, number plates, etc)
- net financial assets
- housing net of mortgages
- private pension rights
• The 2014-16 wave put a value of £7.5 trillion on physical, financial
and property wealth in Great Britain, or £12.8 trillion including
pension rights – an average of £490,000 per household
• That’s £12,800,000,000,000

4. Scale
UK example
• 7 times UK GDP
• Mean household wealth (including pensions) is 14 times
mean disposable income per household
• And median household wealth (£260,000) is 9 times
median household disposable income
• Crucially – as highlighted by Thomas Piketty – those
kinds of ratio have grown over time – and not just in the
UK

5. Average market-value national wealth per adult in
France, Germany, the UK and the USA since 1970
Expressed in EUR ppp constant
Source: OECD (2018) The Role and Design of Net Wealth Taxes in the OECD , Fig. 1.6.

6. Private and public capital as shares of national income
in six rich countries, 1970-2016
Source: World Inequality Report 2018. figure E6.

7. 2. Wealth is functional
• We depend on accumulated capital from past
generations as basis for production and productivity
• It can provide security
• Income and consumption smoothing
• Self-insurance
• We value being able to pass it on to children,
grandchildren and others

8. 3. But wealth is very unequally distributed: OECD 18
household disposable income and net wealth shares
Note: OECD18 includes Australia, Austria, Belgium, Canada, Finland, France, Germany, Greece, Italy, Korea,
Luxembourg, the Netherlands, Norway, Portugal, the Slovak Republic, Spain, the UK and the USA.
Source: OECD (2018) The Role and Design of Net Wealth Taxes in the OECD, Fig 2.4

9. And historic falls in wealth inequalities have gone into
reverse: Top 1% net personal wealth share in France, UK
and USA
Source: OECD The Role and Design of Net Wealth Taxes in the OECD (2018), Fig 2.5

10. Some wealth inequality is driven by the life cycle…
Net wealth across the age distribution, EUR, 2013-14
Source: OECD (2018) The Role and Design of Net Wealth Taxes in the OECD, Fig 2.11

11. But a lot of it is not... Percentiles of real family total net wealth
per adult (CPIH-adjusted to 2017 prices) by cohort, GB 2006-2016
Notes: Excludes physical wealth. ‘p25’ refers to incomes at the 25th percentile within each cohort; ‘p50’ refers to incomes at the 50th
percentile (the median) within each cohort; ‘p75’ refers to incomes at the 75th percentile within each cohort.
Source: Resolution Foundation analysis of ONS, Wealth and Assets Survey

12. 4. Inheritance

13. Source: OECD (2018) The Role and Design of Net Wealth Taxes in the OECD, Fig 1.8
5. Policy – Resources: Evolution of property tax revenues
as share of total taxation since 1965, OECD average

14. 6. Social policies
• Pensions
• Social assistance
• Social and health care
• Asset endowments

15. Two answers
• Why is it important to study the distribution of household
wealth?
- It’s big; it has significant benefits for its holders; it is very
unequal; and its effects carry over to the next generation
• Why do social and economic policy-makers need to take it
into account?
- It’s big; it has significant benefits for its holders; it is very
unequal; and its effects carry over to the next generation