Real vs. perceived income gap

By Kevin Theissen

Wealth disparity in the United States is a widely discussed topic but what is actually true? The gap between rich and poor is somewhat different than most Americans perceive it to be. 

According to Statista: “Despite wealth disparity in the United States being a much-discussed topic over the past decades, the true size of the income gaps between the top 1% and the rest of the population is consistently perceived as smaller than it is.”   

According to a YouGov survey from January 2022, Americans believe that 10% of households in the country have an annual income of more than $1 million but this is way off. The reality is that less than 0.5% earn that much per year when taking into consideration data from the U.S. Census Bureau. The difference between perception and facts is even more pronounced when looking at households with an annual income of more than $500,000. The median weighted responses from survey participants suggest that  1⁄ 5  of U.S. households belong to that bracket, which is the often cited top 1%. On the other hand, U.S. Americans are overestimating the share of people having to scrape by with less than $25,000 per year. Instead of the perceived 35% who earn less than $25,000, the share stood at 18% in 2020.

When it comes to wealth instead of income, the survey participant’s perceptions hit closer to home. For example, roughly 22 million people in the U.S. had a net worth of more than $1 million in 2020, which amounts to about 7% of the population of the United States. Out of the 130 million households in the U.S., 13.6 million were considered to have accumulated wealth of more than $1 million, excluding their primary residence, according to data from Spectrem Group. As of the third quarter of 2021, the top 1% held about 32% of all wealth in the United States, up 9% from three decades prior.

Kevin Theissen is the president of HWC Financial in Ludlow.