Behind the hoopla of the booming nineties, most Americans have actually lost wealth. Most households have lower net worth (assets minus debt) than they did in 1983, when the stock market began its record-breaking climb. From 1983 to 1998, the stock market grew a cumulative 1,336 percent.1 The wealthiest households reaped most of the gains.
The top I percent of households have soared while most Americans have been working harder to stay in place, if they have not fallen further behind. Since the 1970s, the top I percent of households have doubled their share of the national wealth at the expense of everyone else. Using data from the Federal Reserve Survey of Consumer Finances, economist Edward Wolff of New York University says that the top I percent had 40 percent of the nation's household wealth as of 1997. The top 1 percent of households have more wealth than the entire bottom 95 percent.
Financial wealth is even more concentrated. The top I percent of households have nearly half of all financial wealth (net worth minus net equity in owner-occupied housing) .2 Wealth is further concentrated at the top of the top 1 percent. The richest 1/2 percent of households have 42 percent of the financial wealth.3
Between 1983 and 1995, the inflation- adjusted net worth of the top I percent swelled by 17 percent. The bottom 40 percent of households lost an astounding 80 percent. Their net worths shrunk from $4,400 to an even more meager $900. The middle fifth of Americans lost over I I percent. Only the top 5 percent gained any net worth in this period. The top 5 percent now have more than 60 percent of all household wealth.4
Adjusting for inflation, the net worth of the household in the middle (the median household) fell from $54,600 in 1989 to $45,600 in 1995, before rising again to a projected $49,900 in 1997. That's still $4,700 lower than the median net worth a decade ago. Median financial wealth has fallen from $13,000 in 1989 to a projected $11,700 in 1997.5
The percentage of households with zero or negative net worth (greater debts than assets) increased from 15.5 percent in 1983 to 18.5 percent in 1995-nearly one out of five households.6 That's nearly double the rate in 1962, when the comparable figure was 9.8 percent-one out of ten households.7
Nine years into the longest peacetime expansion in U.S. history, average workers are still earning less, adjusting for inflation, than they did when Richard Nixon was president. No wonder many people have been working longer hours and going deeper into debt in an effort to keep up living standards and pay for college.
Many Americans can't make ends meet. Food banks and homeless shelters have been seeing more people with jobs at wages too low to support themselves and their families. As we'll see later, we can reduce the wealth gap and strengthen national prosperity, if we have the will.
Notes
1.Bloomberg L.P., Standard & Poor's. Return using capitalization weighted S&P 500 index, with dividends reinvested.
2.Edward N. Wolff, "Recent Trends in Wealth Ownership," a paper for the Conference on Benefits and Mechanisms for Spreading Asset Ownership in the United States, New York University, December 10-12, 1998, Table 2, "The Size Distribution of Wealth and Income, 1983-1997." Wolff s computations are based on the Federal Reserve Surveys of Consumer Finances, 1983, 1989, 1992, 1995. The 1998 Survey will be available in late 1999. Wolff s 1997 figures are "projected on the basis of Board of Governors of the Federal Reserve System (1998), Flow of Funds accounts. Projections are based on the average change in total asset and liability values between the last quarter of 1995 and the last quarter of 1997, standardized for the change in the CPI and the change in the number of households in the U.S. Projections of the median are based on the wealth composition of the middle wealth quintile in 1995."
Wolff's net worth figures represent the current value of all marketable or fungible assets less the current value of debts. Fungible assets include assets that can be readily converted to cash (e.g., owner-occupied housing and other real estate; cash, savings and certificates of deposit; stocks, mutual funds, bonds and other financial securities; the cash surrender value of life insurance plans, IRAs, 401 (k) plans; etc.). Consumer durables such as automobiles, furniture and so on are excluded "since these items are not easily marketed or their resale value typically far understates the value of their consumption services to the household."
For historical data and trends see Edward N. Wolff, Top Heavy: The Increasing Inequality of Wealth in America and What Can Be Done about It (New York: New Press, 1996). Back to text.
3.Edward Wolff cited in "A Scholar Who Concentrates... on Concentrations of Wealth," Too Much, Winter 1999, p. 8.
4.Wolff, "Recent Trends in Wealth Ownership," Table 2, "The Size Distribution of Wealth and Income, 1983-1997."
5.Ibid., Table 1, "Mean and Median Wealth and Income, 1983-1997." As Wolff notes, "Financial wealth is a more 'liquid' concept than marketable wealth, since one's home is difficult to convert into cash in the short term"; pp. 6-7.
6.Ibid., Table 1, "Mean and Median Wealth and Income, 1983-1997."
7.Ferdinand Lundberg, The Rich and the Super-Rich (New York: Lyle Stuart, 1968), citing Federal Reserve "Survey of Financial Characteristics of Consumers," 1962.
