In the wake of the 2007 financial crisis, it seems that the yearly income disparity between the richest Americans and the rest has grown consistently and has reached record levels. Middle and lower-class Americans have seen their incomes stagnate, while their higher income counterparts is growing markedly.
Median wealth for the richest families had climbed to $639,000/year last year – a seven percent increase from three years prior, and seven times greater than middle-class incomes at $96,500/year, according to Pew Research.
The Pew study defines wealth as: “the difference between the value of a household’s total assets and its total debts.” Middle-class median wealth has not increased since 2010.
The wealth gap between the rich and the rest of us is now the widest since the Fed had began tracking earnings, some thirty years ago. As inequality has now surpassed the last measured point, there is no longer a benchmark for determining just how much worse off middle-class America has gotten in terms of wealth disparity. Could we be approaching the greatest inequality in a hundred years? Who knows? The financial crisis seems to have only made the gap worse.
America’s upper-income families have median net worth nearly 70 times that of the country’s lower-income families http://t.co/LweKQup3HU
— Pew Research Center (@pewresearch) 19. Dezember 2014
“The latest data reinforces the larger story of America’s middle-class household wealth stagnation over the past three decades,” Pew said. “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.” Pew defines middle-income households as: “people who earn between two-thirds of, and double the median income, after adjusting for the number of family members living in the same home.”
— Wall Street Journal (@WSJ) 18. Dezember 2014
A person living on his own was deemed middle-income if his earnings were located between $22,000 and $66,000/year. A family of four would have to earn between $44,000 and $132,000/year. Thus, around forty six percent of all American households fell into the middle-income category last year, while thirty three percent fell into the lower-income and twenty one percent in the high-income category.
The most disturbing part about all this is just how poorly the middle and lower-class had performed. For middle-income families, Pew reported, “practically no change in wealth over the 30-year period.” The median wealth for the middle class was $94,300/yr in 1983. That peaked at $158,400/yr in 2007, and has since fallen back to $96,500/yr.
At the same time, the wealth of lower-income families jumped to a high of $19,100 in 2001, but has since plummeted to $9,300 last year. Median wealth for this group stood at just $11,400 in 1983.
Unsurprisingly, the wealthiest US families had suffered the smallest percentage of drop in wealth from the outbreak of the 2007 crisis to 2010. This was due to their “disproportionately large stock holdings”. The upper-class had recovered a “substantial part” of losses sustained during the crisis because of government bailout packages that injected trillions of dollars into the market to shore up the financial system – all funded by the taxes paid by the middle and lower-income earners.
While middle America stagnates, the average wealth of upper-income families recorded last year was about double what it was in 1983 when it stood at $318,100, to $639,400 in 2013, it reported.
Pew explains that the wide wealth disparity between the classes, “could help explain why…the majority of Americans are not feeling the impact of the economic recovery, despite an improvement in the unemployment rate, stock market and housing prices.”
In October, only twenty percent of Americans had rated the country’s economic conditions as ‘excellent’ or ‘good’, the polling agency said. This was an increase from the 8 percent who had voted four years ago in the depths of the crisis, but far from an optimistic outlook. Interesting point: twenty one percent of Americans fall into the high-income category, the beneficiaries of the so-called “recovery”.