Thursday, November 15, 2007

Churnin' and Turnin': High Turnover in Forbes 400

In a study by Federal Reserve economist Arthur Kennickell titled "A Rolling Tide: Changes in the Distribution of Wealth in the U.S., 1989-2001," he looks at the considerable amount of churning that take place in the composition of the annual Forbes 400 list of the richest Americans.

Of the 400 people in the 2001 Forbes list of the wealthiest Americans, 230 were not in the 1989 list and this group achieved enough wealth during the 1990s to replace almost 60% of the 400 richest Americans in 1989. As the study says, "Over this long a period, such movement may be somewhat less surprising, but even between 1998 and 2001 nearly a quarter of the people on the list were replaced by others."

Bottom Line: The way "the rich" are often portrayed by the media and the general public, you would think a group like the Forbes 400 was a private club, closed to new members, and with no turnover. The reality is that there is much more churning and turnover than one might think in the group of the 400 richest Americans. Even in a short 3-year period, there was almost a 25% turnover rate, and over a longer 12-year period there is almost a 60% turnover in the Forbes 400. And the group of the wealthiest 400 Americans is probably fairly representative of other groups of less-wealthy individuas - there is lots of churning and turnover at all levels of the income spectrum as people move up and down the income quintiles over their careers and lifetimes.

Keep in mind that Oprah, Tiger Woods and Bill Gates were probably in the lowest income quintile at one time before moving up to the top end of the richest quintile, and might end up in a lower quintile at some point in retirement by income (although certainly not by wealth).


At 11/15/2007 11:05 PM, Blogger Ryan said...

What kind of turnover exists in the Wealth rankings? Do people that become wealthy tend to keep their money for the rest of their lives, or do some lose it? And, most importantly, how large have the wealth gains by quintile been?

It's my opinion that we are significantly wealthier, and it's obvious when considering the amazing stuff we can buy and use today. The poor of today are immensely wealthier than the poor of the 1970s. But are there any stats or charts that would show the growth in wealth?

At 11/18/2007 10:08 PM, Blogger Doug Campbell said...

60% turnover in 18 years -- given google, microsoft, the rise of china, and the Internet -- doesn't strike me as that high to warrant you thinking it implies it's easy for anyone to become rich...


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