The Pew Research Center puts into words what many Americans in their gut already knew: the “the gap between America’s upper-income and middle-income families has reached its highest level on record.”
The median wealth in 2013 of $639,400 for upper-income families was nearly seven times the $96,500 in median wealth of middle-income families. It’s the widest gap seen in the 30 years when the Federal Reserve began collecting such data.
“In addition, America’s upper-income families have a median net worth that is nearly 70 times that of the country’s lower-income families, also the widest wealth gap between these families in 30 years,” the Pew center notes.
Wealth is measured in the value of a person’s assets such as a home, vehicles and savings minus that person’s debt. Wealth determines whether a family can remain afloat financially in the event of a layoff, hospitalization or some other calamity. Wealth also determines whether a family can afford to send children to college, enjoy travel and other opportunities without taking on enormous debt.
“The data have also shown a growing gap in wealth along racial and ethnic lines since the recession ended,” the Pew report notes. Again, blame the Great Recession for the widening gap.
Another Pew study found: “The wealth of white households was 13 times the median wealth of black households in 2013, compared with eight times the wealth in 2010. Likewise, the wealth of white households is now more than 10 times the wealth of Hispanic households, compared with nine times the wealth in 2010. The current gap between blacks and whites has reached its highest point since 1989, when whites had 17 times the wealth of black households. The current white-to-Hispanic wealth ratio has reached a level not seen since 2001.”
From 2010 to 2013, the median wealth of white households increased from $138,600 to $141,900, or by 2.4 percent. But the median wealth of African American households fell 33.7 percent, going from $16,600 in 2010 to $11,000 in 2013.
One factor cited for the disparity is white households more than minorities are more likely to own stocks, which have rebounded since the Great Recession.
“Among Hispanics, median wealth decreased by 14.3 percent, from $16,000 to $13,700. For all families — white, black and Hispanic — median wealth is still less than its pre-recession level,” the Pew reports.
Pew notes that 46 percent of American families in 2013 were classified as middle class, a third were lower income and 21 percent were upper income. “For a family of three in 2013, a household income of $38,100 qualifies as middle income and $114,300 or greater qualifies as upper income,” the Pew study on family income said.
Upper income families’ fortunes have rebounded since the Great Recession.
“The median wealth among upper-income families increased from $595,300 in 2010 to $639,400 in 2013 (all dollar amounts in 2013 dollars),” the report said. “The typical wealth of middle-income families was basically unchanged in 2013 — it remained at about $96,500 over the same period,” the report said.
That caused the increase in the wealth gap. “In 2010, the median wealth of upper-income families was 6.2 times the median wealth of middle-income families. By 2013, that wealth ratio grew to 6.6,” the report 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,” the report said. “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.”
What’s hard to stomach is that families typically have seen their wealth increase each decade over the last 30 years. The Great Recession robbed many people of equity in their homes, took from their retirement savings, took away jobs, reduced wages, killed pay increases and interest earnings.
A true recovery looks a long way off for middle- and lower-income families. For people at the top, happy days are here again.