Wealth gap in America widens to record level, report says
The wealth gap between middle- and upper-income households has widened to the highest level on record, says a new report.
Using the latest Federal Reserve data, the Pew Research Center said Wednesday that the median wealth for high-income families was $639,400 last year — up 7% from three years earlier on an inflation-adjusted basis.
For middle-income families, the median wealth — that is, assets minus debts — stood at $96,500 last year, unchanged from 2010.
The result is that the typical wealth of the nation’s upper-income households last year was nearly seven times that of middle-class ones. By Pew’s calculations, that is the biggest gap in the 30 years that the Fed has been collecting statistics from its Survey of Consumer Finances.
“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.”
In Pew’s definition, middle-income households are those earning between two-thirds and twice the median income, after adjusting for household size. The median marks the halfway point.
For example, a one-person household was categorized as middle income if its earnings last year were at least $22,000 but less than $66,000. For a four-person family to qualify as middle income, earnings had to be at least $44,000 but less than $132,000.
Based on these thresholds, 46% of American households were classified as middle income last year. One-third were considered lower income, and 21% upper income.
Incomes represent wages and other earnings such as interest and profits, whereas wealth is the value of stocks and other assets such as homes and cars, minus debts.
The Pew data shows that lower-, middle- and upper-income households all have yet to recover the wealth lost in the Great Recession. But higher-earning families had the smallest percentage loss of wealth from 2007 to 2010. And these same households, thanks in good part to their disproportionately large stock holdings, recovered a substantial part of the lost wealth since then, while lower-income families made no pickup at all.
Seen over a longer period, the typical wealth of upper-income households in 2013 was about double what it was in 1983, after adjusting for inflation.
For middle-income households, there was practically no change in wealth over the 30-year period. The median wealth for the middle class was $94,300 in 1983. That peaked at $158,400 in 2007 and has since retreated to $96,500.
For lower-income households, wealth rose to a high of $19,100 in 2001, but has since fallen to $9,300 last year. Their median wealth was $11,400 in 1983.
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