Difference between wealth and income

before talking more about inequality I think it it's worth talking about the difference of what the difference between wealth wealth and income wealth and income because I think they often get confused in conversations about well wealth and income and also about inequality as you can imagine these two things move together you tend to associate someone who has more wealth has a higher income or someone who has a higher income is more likely to have more wealth but these are not the same things wealth wealth is you could view it as the capital or the assets that you own so this is the value value of capital capital and assets that you own capital and assets that are owned while this is how much is made in a certain period of time so amount amount made in a certain certain period and they tend to move together but not always so let's take an example where they don't move together so let's say that there's a retiree a retiree might have a lot of wealth because they've had a whole lifetime of income to save so let's say that your grandparents or let's just say your your grand your grandfather has a wealth so their total assets his total assets let's say he has a million dollars a million dollars in total assets but he's not working anymore he's retired so his total income his total income is the return that he gets on that 1 million dollars and let's say that he has invested in reasonably safe things and some bonds and whatever else and so he's getting a let's say he's getting a 3% return after taxes on his wealth so his income is going to be $30,000 per year now let's say you let's say this is you over here let's say you you're maybe you're you're just out of college maybe you actually have more debt than you have assets so maybe your wealth could even be your wealth if you if you know say you have a $20,000 car but you owe $40,000 for your college loans you might have negative wealth you might have a wealth of negative wealth of negative $20,000 but you that that education was to good use you were able to get a really good job and you are now making let's say you're making $80,000 a year so this is a situation where the younger person they actually have more liabilities than they have assets could even have negative wealth but has a reasonably high income while someone who's older and retired could have a lot of wealth but a lower income now as you can imagine this isn't you know this is kind of I have drawn two extremes here between a younger person making a good amount of money but they have some debt and an older person who is just living on the returns from there from there from there from their accumulated wealth over their lifetime now as you can imagine these do these do think these two things do start to correlate especially for example let's say wealth got really big let's say instead of your grandfather saving 1 million over his lifetime let's say it was 10 million let's say it's 10 million and he's investing it in the exact same way so now that 3 percent of 10 million he has 300 thousand dollars per year to live off of so obviously as wealth grows the income from wealth the income from that capital will grow and at some point that income could be larger than what you might be able to make purely from labor but the whole point of this video is to at least highlight the difference sometimes when people talk about inequality or disparities they'll talk about accumulating wealth in a frag in a segment of the population while other times they will talk about accumulating the national income be going more and more towards the top 1% or top 10% or the top or tile or whatever and they often move together but it's important to realize the difference