America’s 10 wealthiest billionaire families saw their median wealth grow by 25%, per a new report from the left-leaning Institute for Policy Studies. Their net worth collectively increased by $136 billion since the pandemic began in March 2020.
Titled “Silver Spoon Oligarchs,” the report examines the growing concentration of wealth in the US by looking at the top 50 dynastically wealthy families from Forbes’ inaugural ranking of America’s wealthiest clans, published in December 2020, and data from the Federal Reserve‘s Survey of Consumer Finance.
Each family’s wealth comes from companies started by an earlier generation, whether a parent or distant ancestor, according to the report, and each represents a wealth dynasty passing generation to generation.
The ranks of these dynastic fortunes have remained largely unchanged for decades, per the report, and their wealth has grown exponentially during the pandemic.
The Lauder family, the cosmetics magnate behind the Estée Lauder empire, gained the most during the pandemic, nearly doubling its wealth with 83% growth. Even the family with the smallest wealth gains, SC Johnson, saw 9% growth – an increase of just over $1 billion.
“At a time when unemployment rates have skyrocketed and many American families have been struggling to get by, the very wealthiest families in the country have watched their assets multiply,” the report reads.
The pandemic exacerbated America’s wealth disparities
It’s the latest in the story of America’s K-shaped recovery. The pandemic widened wealth inequality in America, exposing preexisting disparities in wealth, in the sense that when the recovery began, upper middle class and wealthy Americans formed an upward leg of a K shape, while the rest saw their fortunes worsen.
But some billionaires have been thinking twice about how they’re tackling generational wealth. Bill Gates and Warren Buffett plan to give most of their money away through the Giving Pledge, instead of keeping it in the family.
I knew New York City was back when I found myself dancing on top of a booth in an East Village bar last weekend.
The night began with dinner out and ended with another bargoer’s drink on my shoe, eating pizza on the street, and an invitation from a six-pack-wielding stranger for my friends and I to drink beer and play “Mario Kart” at his apartment.
That is all to say: It was a normal Saturday night in NYC, one event in a weekend that felt very much like the Before Times. I also worked in the Insider office for the first time that Friday and hit the gym on Sunday.
Pfizer made all these adventures possible, and it seems that the vaccines are having the same effect on New Yorkers across the city.
For the past month, I’ve noticed the magical – and exhausting – things that make New York New York coming to life again: a stalled 1 train, a crowded 6 train, getting turned down by a full cab, tourists getting in my way of shopping on Fifth Avenue, trying four newly opened restaurants, the throngs of sunbathers and picnickers in Central Park, and the familiar murmurs of gossip and chatter over wine glasses on a rooftop. It’s not just a feeling: New York City’s economy is genuinely healing.
It’s also a far cry from a year ago, when New York became the center of the coronavirus in the US and everything that once lit up New York – the distant squares of office windows, taxi-cab lights, and Times Square – dimmed.
Even today, traces of pandemic NYC remain. My Saturday bar closed at midnight, and it took about four attempts to grab a late-night bite to eat at a restaurant not closing by 11 p.m. on Friday night, an insult in the city that never sleeps.
But the return of New Yorkers, lockdown lifting, and a financial boost have revived the city’s energy. NYC as we once knew it is gone, but the big city is back.
The data agrees with Bella’s diagnosis. The supposed mass exodus out of the city wasn’t so massive, according to recent data from USPS. According to Bloomberg, more Manhattanites moved to Brooklyn than anywhere else between March 2020 and February – 20,000 of them, compared with 19,000 Manhattanites who moved to Florida, 10,000 of whom plan to stay permanently. They’ll probably be back.
NYC also remains home to 7,743 ultra-high-net-worth individuals – more than any other city in the world, according to a Knight Frank and Douglas Elliman report from March. Mansion Global said the number of outward migrants from the NYC metro area ticked upward from 2019 to 2020 – a loss of 6.6 per 1,000 residents grew to 10.9 – but those who left for the suburbs were already returning.
“Whoever wrote off New York was wrong,” Kenneth Horn, the founder of Alchemy Properties, told Mansion Global. “This, of course, has been horrible. We’ve lived through a lot different, right. But people want to live in New York. People love the vibrancy.”
Late-night bars and subways
NYC hasn’t even reached its peak return of residents, but it already feels alive. A recent Bank of America Research note, from a team led by Head of US Economics Michelle Meyer, said this month would spark a dominolike return to the city, ultimately proving the mass exodus narrative was more myth than reality.
By the end of May, restrictions lifted include: most industry capacity limits, the limit on residential outdoor gatherings, the mask mandate for vaccinated people, and the midnight outdoor- and indoor-dining-area curfew for bars and restaurants.
As Gov. Andrew Cuomo of New York wrote in a Tweet announcing some of these reopenings earlier this month, “NY is coming back!”
Now, while the state of New York officially reopened in May, Mayor Bill de Blasio has announced that he’s eyeing a full reopening for the city on July 1 and plans to eliminate remote learning come fall. But the Legislature unwinding many of the lifts has made it feel like city is already back in action.
“I haven’t had hope for any return to actual normalcy until now, seeing people both indoor and outdoors without masks, and it’s really starting to hit me that this wasn’t actually going to be forever,” Kelsey Peter, a 27-year-old nonprofit worker who stayed in NYC when the pandemic hit, told Insider.
Cash is flowing
The boomerang migration, uptick in real estate, and economic reopening are all helping cash flow again in a city made of money.
Card spending was up by 38% in the NYC metro area compared with the previous year and 17% compared with two years ago for the week ending May 22, according to BofA Research.
Spending on brick-and-mortar retail in NYC by local households hovered around 70% by the end of 2020, as compared to a 74% pre-pandemic trend, indicating a minimal drop from outmigration, BofA also found, while in-person spending on restaurants has improved. As of mid-April, it was still down 30% compared with two years ago but a major improvement from the 70% drop at the end of January.
NYC’s finances are also in better shape than expected. While the state’s tax revenue collected over the past fiscal year was $513.3 million lower than the previous year, the state was fearing a $3 billion bigger drop, New York Comptroller Thomas DiNapoli told Bloomberg, and a large chunk of that came from the city.
And President Joe Biden’s stimulus package included $5.6 billion for NYC, which Insider’s Juliana Kaplan reported likely saved catastrophic cuts to the city budget. This sentiment was largely confirmed at a City Council hearing in March, when Department of Finance Commissioner Sherif Soliman said this federal aid had given the city a “shot in the arm” financially and his office was optimistic for a “full recovery.”
At the end of April, de Blasio announced a $98.6 billion budget, $10 billion higher than previously planned, to help jump-start the city’s recovery. “These investments are about bringing the city back, and they just can’t wait,” he said in a press briefing, according to the New York Daily News. “Sometimes you have to spend money to make money.”
But NYC is also set to get another injection of money beginning next year, now that Cuomo has finalized a budget that would have millionaire New Yorkers pay 13.5% to 14.8% in local and state taxes – the highest taxes in the country.
NYC’s next chapter
To say NYC 2021 resembles NYC 2019 would be inaccurate. Several aspects of the city still aren’t quite “normal.”
The contagious coronavirus variant spreading throughout India and other parts of Asia may also bring with it a risk of some form of lockdown returning later this year. On Thursday, UK Prime Minister Boris Johnson said that the country’s full reopening could be delayed because of the variant, despite a successful vaccination campaign similar to America’s.
And while NYC is never going to return to its 2019 economy, just as America itself won’t, that doesn’t mean that the city has lost its luster. Much like it did after the Great Depression and 9/11, NYC is entering the next chapter of its life – and that’s starting now, in line with the race for a new mayor come November.
BofA noted potential for some recovery in the near term, as NYC remains a “premier city for young renters given status as economic, financial, and cultural centers.” The pullback in rents, it said, has also helped make NYC living more affordable and enticing for young professionals.
As the city was once America’s coronavirus center, NYC’s reopening serves as a metaphor for the country’s pandemic progress. It’s also revived the city’s intangible energy.
For some, this part of NYC never died. Even when the city felt empty, Peter said, there were so many people looking out for each other.
“You would get used to seeing the same vendor’s face at the wine store or at the coffee shop when you’re getting to-go,” she added. “That was all during the worst of it, and things only got better from there. It was always a community.”
As someone who also rode out the pandemic out in Manhattan, I agree with Peter. My local bodega owner, the friendly parking-garage attendant on my street, and a fellow parkgoer and his five poodles became the faces I’d typically see during my pandemic routine. With endless options to experience the city again, I’m back to encountering strangers and forgotten faces on the regular, from my waiter at Lil’ Frankie’s to my hairstylist and colorist, so much so that it’s getting somewhat exhausting.
Wealth no longer means what it used to for high-net-worth millennials.
The pandemic has caused the wealthy to alter their lifestyles and reassess their priorities, changing how they perceive wealth in the process, a new report by Boston Private found. The report, titled the Why of Wealth, surveyed high net-worth individuals with at least $1 million of assets.
Millennials, who turn ages 25 to 40 this year, changed their perceptions of wealth the most. More than three-quarters (89%) said the pandemic altered the way they define wealth. The generation was also most likely to say the pandemic shifted their wealth priorities and their emotions about wealth, with 85% of respondents feeling this way about each change.
Both Gen X and Gen Z felt fairly similarly, with at least three-quarters of each cohort identifying in the same way for nearly all these sentiments. However, it’s a sharp contrast from baby boomers and the silent generation. Less than a quarter (24%) of both generations combined said the pandemic changed their perception of wealth. The report attributes this to their age, as they’ve already experienced significant cultural milestones and being more settled into a certain mindset.
More millennials (as well as Gen X) associate wealth with success and happiness, whereas boomers and the silent generation are more likely to view wealth as peace of mind and independence. “For these younger generations, wealth is a key contributor to creating a comfortable, happy life, and is directly related to achieving important goals, having a good family life and being a positive contributor to community and society,” the report reads.
Older generations feel less able to use their wealth on enjoying life as much as they’d like to right now, according to the report, whereas younger generations are possibly using their wealth to enjoy life more than they feel they should.
What’s more is that this shift in perception of wealth has also affected millennials’ wealth goals – 78% said the pandemic changed how they planned to use their wealth in the future, compared to 26% of baby boomers and the silent generation.
One out of every 10 millionaires has a net worth between $5 to $30 million, which Wealth-X defines as “very high net worth” (VHNW) individuals in its annual report. But the wealth among this wealthy class is lopsided.
Two-thirds of the VHNW class (about 1.7 million people) comprise the cohort’s lowest wealth tier of $5 million to $10 million, per the report. But those in the upper two tiers – the $15 million to $20 million range and the $20 million to $30 million range – represent just 421,170 people, less than 16% of the VHNW population. And they hold twice as much wealth, or 32% of the total.
The VHNW class is collectively worth $26.8 trillion, accounting for a quarter of millionaires’ total global wealth of $105 trillion. Those worth $1 million to $5 million account for 40% of this total wealth, while those worth over $30 million account for 34%.
This means that across both the larger millionaire population and the VHNW cohort, vast amounts of wealth are held by an exclusive group.
The bottom of the K dragged downward, with lower-income individuals continuing to struggle with the economic fallout. The poor were financially vulnerable, with many on unemployment benefits or risking their health as an essential service worker. From June to November, about 7.8 million Americans fell below the poverty line.
Meanwhile, higher-income Americans were six times more likely to be able to work from home than lower-wage workers, according to research from the Economic Policy Institute. They were spending less and saving more, and the very richest have been growing their billions.
The wealth gap among VHNW millionaires, and millionaires overall, says a lot about the wealth gap among the rich and the poor. It shows just how concentrated wealth is at the very top.
Bank accounts are freshly padded with $1,400 stimulus checks, any adult should be able to get a vaccine around May, and everyone is readying for a “hot vax summer.” Shut-in Americans are gearing up to spend and socialize after a year in which the experience economy was replaced by one defined by solitary leisure.
In a year marked by social distancing, activities enjoyed alone such as golfing and boating replaced the group activities typical of social leisure, like amusement parks and tourist attractions. At the end of last August, Google Mobility data showed that restaurants, theme parks, museums, and the like were down 77% from pre-pandemic levels, and visits to parks, beaches, and marinas were up 51%.
Spending on experiences in 2020 declined by 29% compared to 2019, per a February Bank of America Research note. Spending on leisure fell by 17% and spending on “stuff” was down by 6%. Spending on solitary leisure categories such as golf and bikes remained strong in mid-March, per a subsequent BofA note.
But the anticipated economic boom of 2021 that should follow a mass vaccine rollout signals that the US will soon say goodbye to solitary leisure. A full economic recovery depends on something else, though: how the wealthy will spend their money.
The wealthy need to spend
The drop in spending left a huge hole in the economy that spending on solitary leisure alone couldn’t fill.
That’s because the experience-based economy, which thrives on activities like sporting events and travel, only continues to grow as long as people have discretionary money, Daniel Yoder, the department chair of the Recreation, Park, and Tourism Administration at Western Illinois University, previously told Insider. But discretionary spending all but disappeared.
Now, Americans are sitting on $1.6 trillion in savings. BofA Research estimates that to hit $2 trillion by the time the economy reopens. The economic fate of the US, it said, depends on whether Americans view their excess savings as wealth or deferred income.
Much of that is in the hands of higher-income households, who have more of a propensity to spend. Consumer spending accounts for 70% of the American economy, and half of that is from the top 10% of American households, per estimates from Goldman Sachs and Deutsche Bank, respectively. That means about one-third of US GDP comes from spending by the top 10%.
That all means it’s up to the wealthy to fill the gap from the solitary leisure era. “Higher income households are key to driving the recovery in consumption,” reads a recent UBS note led by strategist Keith Parker, which noted that more than half (52%) of Americans expect to increase their spending once life returns to “normal.” Those earning more than $80,000 annually anticipate increasing their spending the most – a more than 8% increase, compared to 5.2% for middle-income earners and 3.4% for those earning less than $30,000.
During the pandemic, spending among high earners was consistently 10% below pre-pandemic levels, compared to 5% below for middle-income earners. But spending less doesn’t mean they stopped spending entirely.
Instead of splurging on pricey gym memberships and educational trips as forms of discreet wealth, they began shelling out on nostalgia-tinged purchases from childhood collectibles to vintage fashion to rare books and art, from street art to cryptoart. Critics charged that the pandemic economy created various strange asset bubbles, but the common theme of people with money buying stuff online while bored at home was consistent throughout the year.
But that all might soon look a lot different.
A return to social leisure
As the economy continues to reopen amid the vaccine rollout, it increasingly looks like America will see the return of social leisure.
There are also signs that travel is on the verge of a booming comeback as Americans itch with wanderlust. Airports saw their busiest time the weekend of March 12 since the pandemic began, and airline, hotel, and restaurant spending are all up this month compared to a year ago, although still not close to pre-pandemic times.
And, after a year of loneliness, Americans are ready for intimacy. Dating apps saw record-breaking use during the pandemic, and it looks like that won’t be abating any time soon. Several people told Insider’s Julia Naftulin that they’re looking forward to relentless dating and relieving pent-up horniness in a vaccinated world.
More in-person dates are certainly set to fuel the rebirth of the experience economy, inciting a shift from Facetime and socially distanced walks to nights at movie theaters and cocktail bars.
The caveat is that President Biden has been eyeing a tax increase on Americans making over $400,000. They could see their top income-tax rate increase to 39%, which could curb their desire to spend. So too, could the unpredictability of inflation as goods begin to get more expensive along with reopening.
The light at the end of the tunnel for a new “new” normal is within sight, but the wallets of the wealthy will determine just how bright it gets.
Some residents have criticized Florida Gov. Ron DeSantis for setting up special vaccine access in these wealthier areas. He recently set up a pop-up vaccine site in Lakewood Ranch, one of Florida’s richest neighborhoods with a median household income 75% to 85% higher than the county average, per WFLA, citing Census data.
DeSantis said in a press conference Wednesday that he chose Lakewood Ranch because of its elderly population. “We wanted to find communities that have high levels of seniors living in there, and this obviously has a high concentration,” he said. “You look at all these different communities, and there is a lot of senior citizens. If there were few senior citizens, then you wouldn’t have set up a pod here.”
It’s a similar case over in Los Angeles County. Dr. Paul Simon, chief science officer for the Los Angeles County Department of Public Health, told the Los Angeles Times that the county’s mass point-of-distribution sites have been successful in their goal to quickly distribute vaccines, but often don’t work well for poorer communities.
More residents in largely white and wealthy cities are vaccinated than the Black and Latino communities in lower-income areas, the LA Times reported. At least 25% of residents have received at least one vaccine dose in more affluent neighborhoods like Bel-Air and Beverly Hills, per LA County Department of Public Health data. It’s a sharp contrast from South LA and southeast LA county, home to working class cities such as Compton and Paramount, where at most 9% of the population is vaccinated.
A digital divide
The digital divide is also partly to blame. Vaccine appointments are a virtual task. Those without access to the internet can’t make an appointment, which is reportedly a difficult process to navigate even with access.
In Los Angeles, “websites have been flooded with folks trying to get an appointment,” Simon said. “And so those people who have the luxury of time can spend, literally in some cases, hours, I’m sad to say, working to try to get an appointment.”
Over in New York City, Mayor Bill De Blasio seconded this sentiment to Bloomberg. “Folks who have more privilege are best able to navigate this process,” he said. “Folks who have more confidence in the vaccine are going to go through more effort to get it.”
New York City is also seeing a disproportionate surge in vaccinations among wealthy neighborhoods, Bloomberg reported. De Blasio said there are 33 vaccination sites in “hard-hit” neighborhoods, accounting for 77% of total vaccination sites, but that the city needs to establish more.
He attributed the inequality partially to vaccine hesitancy. “Folks who have been doing very well in this society also have a high level of confidence in the vaccine,” he said.
In today’s modern world, less access to technology is generally equated with less access to education. And, right now, knowledge is power in getting vaccinated.
Showing off wealth is no longer the way to signify having wealth.
Flashing a Louis Vuitton handbag or a multimillion-dollar Bugatti have long been standard status symbols for the elite, but the ultrawealthy have increasingly turned to intangible investments such as security and health to discreetly flaunt their wealth instead. An unlikely reflection of this transformation is the recent history of inflation in the US economy.
The latest iteration, featured below, shows 54.6% overall inflation over the last 21 years, which works out to an annualized compound growth rate of 2.2%, very close to the Federal Reserve’s stated inflation target.
But as you can see, some services and goods have become way more expensive than others.
Hospital services, college tuition, medical services, and housing have seen disproportionate upticks past the average 54.6% inflation. Their costs have outpaced the hike in average hourly wages, which have shot up by 82.5%, or 28% more than the average increase in consumer prices.
Meanwhile, consumer goods such as new cars, clothing, computer software, toys, and TVs have become more affordable.
In a nutshell, it seems that the cost of intangible services (with the notable exception of housing) has increased while the cost of material goods has decreased, mirroring the shift from conspicuous to inconspicuous consumption.
Elizabeth Currid-Halkett coined the term in her 2017 book, “The Sum of Small Things: A Theory of the Aspirational Class,” as the opposite of “conspicuous consumption,” a term conceived by 19th-century economist Thorstein Veblen referring to the concept of using material items to signify social status.
In the US in particular, the top 1% have been spending less on material goods since 2007, Currid-Halkett wrote, citing data from the US Consumer Expenditure Survey. In an era where mass consumption means both the upper class and the middle class can own the same luxury brand, she explains, forgoing material goods for immaterial means is a way for the rich to differentiate themselves.
“This new elite cements its status through prizing knowledge and building cultural capital, not to mention the spending habits that go with it,” Currid-Halkett wrote, adding, “Eschewing an overt materialism, the rich are investing significantly more in education, retirement, and health – all of which are immaterial, yet cost many times more than any handbag a middle-income consumer might buy.”
That inconspicuous consumption often goes unnoticed by the middle class – but getting noticed by a fellow elite is the appeal of the discreet. Investing in things like education, health, and childcare – which have all become more expensive since 2000, per the AEI chart – “reproduces privilege” and “offers social mobility” in a way that flaunting luxury couldn’t, according to Currid-Halkett.
Discreet wealth is just one of many inflation factors
Now, this isn’t to say that discreet wealth is the sole cause of inflation in the US.
Mark Perry, the AEI economist behind the chart, notes in his blog post that economists have attributed several reasons to these trends: Price increases correlate with a greater degree of government involvement in a good or service (like health care) and prices decrease as the degree of international competition for goods increases (like toys).
Mass production has enabled manufactured goods to become more affordable. And college has become more expensive for many reasons, including increasing globalization, increases in financial aid, and ballooning student services.
But the fact that the inflation chart correlates with the rise in discreet wealth indicates the power of demand in driving up prices – and the spending power of the elite as wealth inequality worsens in developed economies.