As it has done every year, the British NGO Oxfam has published its World Inequality Report on the occasion of the World Economic Forum in Davos. In Europe, the top 10 % hold 37 % of the total European wealth. The Austrian National Bank recently published a similar study for Austria with alarming result: the accumulated wealth of the top 10 % of the population is larger than the wealth of the remaining 90 %.
In its current study, Oxfam finds that compared to last year the wealth of the world’s richest people has grown by EUR 2.2 billion. In comparison, the private wealth of the poorest had shrunk by EUR 500 million. At the same time, it has been alleged that since 2013 the global wealth gap has widened slower than before. Whilst private wealth is successively rising at a global level, public assets (adjusted by public debt) have been nosediving since the den 1980ies. Oxfam works on the assumption that - if one sticks to “business as usual” - inequality will continue to grow. This could result in the global wealth share of the richest 0.1 % being in 2050 as high as the wealth share of the global middle class, hence the middle 40 %. Such a development could for example be halted by an effective tax progression. However, such taxes were drastically reduced in the 1970ies and were only slowly re-established as a result of the financial crisis in 2008. These tax practices and taxation rules are also a serious problem for the European Union, as they encourage aggressive tax planning. In spite of Oxfam’s controversial method, the study refers to a major development since the 1980ies. This development is also the subject of a study for Austria, which comes to a similar result.
Wealth concentration in Austria
On 15th January 2019, the Austrian National Bank published its third “Household Finance and Consumption Survey” (HFCS). Since 2010, the result has been largely the same: the richest 1 % continues to hold almost a quarter of the total private wealth in Austria. Together, the top 10 % own more than the remaining 90 % of the Austrian population. However, it is highly unlike that this study manages to fully depict reality, as super rich household frequently defy the HFCS samples and show a high tendency to refuse to take part respectively. According to estimates this might mean that the top 1 % actually own 40 % of the total wealth.
The place of each of us in the distribution of wealth is determined above all by our heritage. If one is lucky enough to inherit something, be it a small savings account, a small house or company shares, land and property, it will influence our place on the wealth ladder from generation to generation. The rule of thumb applies: the richer a household, the greater its chances to receive an inheritance and the larger the inheritance will be. Even though, compared to other countries of the Eurozone, the wage income in Austria has little influence on wealth creation. It is, compared to wealth, heavily taxed, whilst inheritance is not taxed at all. Hence, it is no surprise that Austria together with Germany is one of the most unequal countries in the Eurozone. The impact on society is devastating: unequal educational opportunities, social segregation, diverging power structures and even different life expectancy.
However, the welfare state can balance wealth inequality. For people with neither an inheritance, nor a high income or wealth, the welfare state is quasi a socio-economically administered asset. Among other, this asset is a combination of public schools and hospitals, affordable public transport, pensions, but also free cultural offers. Hence, it seems the more cynical when the economy claims that it was exactly this welfare state, which was responsible for the fact that there are people who do not accumulate wealth and would not provide for it privately.
OeNB Working Paper 223: Household Finance and Consumption Survey: The functions of wealth: renters, owners and capitalists across Europe and the United States
Wealth distribution in Austria: New Data, consistent inequality