How to end wealth inequality: Teach the poor to save
A video about America’s income inequality has been making the rounds on YouTube. The video, posted by an anonymous YouTube account known only as Politizane, was produced last November relying on data from several major publications, including Mother Jones. According to the video’s narrator, 40 percent of America’s total wealth is concentrated in the hands of the wealthiest 1 percent.
But many critics dispute the content of the video. The numbers, according to an article by Tim Worstall in Forbes, are “right enough if you consider just financial wealth: but that isn’t wealth at all, or at least most certainly not all wealth.” For Worstall, it makes the video, which seems to advocate support for policies that would reduce income inequality, fall short. “If you’re trying a call to action, one needs to use the real and complete numbers,” he said.
Another issue with the video, according to Noah Smith of the Atlantic, is that it doesn’t account for the fact that a significant portion of income inequality is about age, not class. “Young people tend to have a lot of debt and not much savings, meaning they have negative wealth,” he writes, “so Americans aren't quite as unequal as the video makes out.” However he is quick to add “they are still very, very unequal.”
According to Smith, the anecdote for all this inequality is teaching America's middle-class and poor people to be more cheap and build wealth through savings. He cites research by behavioral economist Richard Thaler, who studies ways to nudge people to save more. In lab experiments, just giving people information on how to save money makes them save a lot more. In addition to reaching people about saving, they need to be taught that once they invest their money they need to let it sit, Smith said.