By GREGORY N. HEIRES
The evidence keeps coming in that the economic recovery has benefited the affluent while leaving behind the rest of us.
Maybe it’s time to acknowledge that we live in a plutocracy.
The country’s wealth gap between upper-income families and middle-income families is the widest on record, according to a Dec. 17 analysis by the Pew Research Center.
Wealth inequality has also deepened along racial and ethnic lines since the end of the Great Recession.
“The wealth gap between America’s high income group and everyone else has reached record high levels since the economic recovery from the Great Recession of 2007-09, with a clear trajectory of increasing wealth for the upper-income families and no wealth growth for the middle- and lower-income families,” the analysis says. The report is based on data from the Federal Reserve Bank’s Survey of Consumer Finances.
Widest Wealth Gap
The PEW analysis shows that the wealth gap is the widest since the Fed started collecting the consumer data three decades ago.
The median wealth of upper-income families was nearly seven times that of middle-income families in 2013. Upper-income families are 70 times wealthier than lower-income families.
PEW classified 46 percent of Americans as middle income in 2013. One-third were lower income, and 21 percent were upper income.
The wealth gap between middle-income families and upper-income households has increased during the recovery from the Great Recession, which lasted from December 2007 to June 2009.
Between 2010 and 2013, the median wealth of upper-income households increased from $595,300 to $639,400 in 2013 dollars. The median-income of middle-income households stagnated at $96,500 during those years.
The wealth of all three groups declined from 2007 to 2010. But middle-income and lower-income families were hit harder than upper-income families.
From 2007 to 2010, the median wealth of upper-income families declined 17 percent, while lower-income families suffered a 41 percent decline and middle-income families lost 39 percent.
“The Great Recession destroyed a significant amount of middle-income and lower-income families’ wealth, and the economic ‘recovery’ has yet to be felt for them,” the analysis says. “Without any palpable increase in their wealth since 2010, middle-and lower-income families’ wealth levels in 2013 are comparable to where they were in the early 1990s.”
Growing Racial and Ethnic Disparity
An earlier Pew study examined the racial and ethnic wealth gap.
That analysis, released Dec. 12, found that the median wealth of white households was 13 times the median wealth of black households in 2013, compared to eight times higher in 2010. During the same period, the median wealth of white families households grew from 8.7 to 10.3 times that of Latino households.
Between 2010 and 2013, the median net worth of white households fell from $192,500 to $141,000. The median net worth of black households dropped from $19,200 to $11,000 and that of Latinos went down from $23,600 to $13,700.
5% of Households Own 63% of the Wealth
Fed Chair Janet L. Yellen discussed inequality during a conference at the Boston Federal Reserve Bank on Oct. 17.
“The distribution of wealth is even more unequal than that of income,” Yellen said. She added that the Survey of Consumer Finances shows that “wealth inequality has increased more than income inequality since 1989.”
The disparities in wealth in the United States are staggering.
In 1989, the wealthiest 5 percent of households owned 54 percent of the wealth. Their share increased to 61 percent in 2010 and 63 percent in 2013.
The other households in the top half of wealth distribution—families with a net worth between $81,000 to $1.9 million in 2013—saw their holdings drop from 43 percent in 1989 to 36 percent in 2013.
The holdings of the bottom half of families—made up of 62 million households—fell from 3 percent of the country’s total wealth in 1989 to just 1 percent in 2013.
The average net worth of the bottom half of those households was $11,000 in 2013—50 percent lower than in 1989, adjusted for inflation. About one-fourth of these families reported having zero net worth or being in debt.
