Panel @equitablegrowth Grantee Conference on “What is wealth and why does it matter?” With my coauthor @bl_hardy @Claudia_Sahm and Jonathan Fisher 
Share of wealth held my the top 1% has grown over time. Wealth gaps by race are even more pronounced.
Higher incomes can solidify into stocks of wealth, and wealth concentration can calcify over time. The unequal distribution of wealth has a number of consequences.
. @Claudia_Sahm the Great Recession gave us an opportunity to study these issues in detail. There was a large structural shock. Consumer spending did not pick up even when recovery was seen in income, employment, and stocks
“This has been a wealthless recovery for many households...many have not gotten back to where it was before the shock” @Claudia_Sahm “This hints at how much distribution matters for growth”
Jonathan Fisher: looking at inequality in income, consumption, and wealth. Wealth is the most unequal. Income not as much (top 5% has 45%), consumption is less (top 5% has 20%)
Are the people in the top 5% of one measure in other top 5%? 60% in top 5% of wealth are also in top 5% of income. Similar for consumption. Why is this worrisome? Wealth inequality leads to other inequalities. Wealth is the ultimate insurance policy.
Wealth related to education, health, and other dimensions. High wealth households can smooth consumption. Low wealth households cannot. Wealth insured across generations with transfers in life. High income households transfers $27k to children and grandchildren.
. @bl_hardy Our policies tend to think about education and other aspects. But the racial wealth gap is large. And education does not solve this problem. Among all households it’s 10 cents on the dollar, for the college educated, 17 cents on the dollar.
The number of households who can survive a shock is small. And low wealth and income households are more likely to have highly variable income. The buffer does not exist for many households. There’s a relationship with income volatility.
What are the liquidity households for low income households? They are stark, and they do not have wealth to help smooth consumption (reminds me of @MarthaOlney QJE about consumption effects, which would relate to growth)
High wealth households do not respond in consumption to an income shock (either positive or negative). Low wealth households respond dramatically. This says something about MPC and tax policy.
Is the shorthand that low income households have high MPC? The correlation is not perfect, but targeting low income households would be those with higher MPC on average.
There are structural issues that are stored up in wealth. @Claudia_Sahm so why is this? There are different kinds of wealth— liquid wealth is the buffer. Half of households do not have a liquid buffer for an unforeseen $400 expense.
There is a sizable minority of households who do not have that buffer. This is a big question because for some households who are persistent. Some are able to establish one, but many do not have it.
One advantage of SCF is that it targets top 5%, so when marching to tax it tells us the same story. This helps show us that we are getting a consistent story that is not driven by one data source. We do not have wealth data— a lot of work to do these estimates @Claudia_Sahm
If more interested in the bottom 90% there are more datasets out there. The story across datasets is consistent. But harder to get the top 1% or top 0.1%. In volatility we are not always sure about where the volatility comes from. So overlaying that data with wealth is important
The recession hit lower wealth houses strongly. More low wealth households hold most of their wealth in housing. The shock there was much more negative. We also need to know how much debt is behind that wealth.
There may be a role for marginal improvements via financial literacy. But what helps you purchase a home, afford post secondary education, afford a highly rated school district. @FenabaAddo finds education debt is a driver of this debt, so doing “as we’re told” could help
Now a shout out to my new work with @drlisadcook on black businesses and business districts disappearing. So wealth begets more wealth but this process may not be recreated with all groups. (work also with David Rose and Maggie Jones)
For @Claudia_Sahm this gets back into how high wealth households protect their wealth. If we don’t build as much housing we let the (house) wealthy further protect and grow their wealth. And these families can better help create wealth for their children.
These high wealth families give their children the tools to build more wealth. @bl_hardy thinks about internships as one factor. Parents can benefit from connections and social networks and the ability to take risks early on in their careers. It builds over time.
And @Claudia_Sahm talks about local networks as an insurance for low wealth households. This may be why geographic mobility has declined. @bl_hardy says shocks to housing have disproportionate impacts on black wealth.
. @snaidunl asks if monetary policy contributes as it helps grow non housing wealth. Answer: can have an effect in short and medium run.
And @HBoushey says “thank you for a very rich talk about wealth” (pun intended)
