Friday, January 30, 2015

Prosperity...What Prosperity?

Still the research arrives describing the inequality of America, this time from National Bureau of Economic Research and a paper by Edward N Woolff

Between 1983 and 2013 US net worth rose considerably over that period, which is what you would expect to see. Technology has improved and productivity increased, so society has a greater capacity for wealth building. America was also quite a bit older on average in 2013 than it was in 1983, so average wealth should have gone up.

But all of these gains went to the top 20 percent of the population. It's worse than that, actually. Over 100 percent of the gains went to the top 20 percent, because the bottom 60 percent of the population got poorer.

Median wealth plummeted by 44 percent over years 2007 to 2010, almost double the drop in housing prices.

For wages the recession began much earlier than the financial crisis. Real wages then rose very slowly from 2001 to 2004, with the BLS mean hourly earnings up by only 1.5 percent, and median household income dropped by 1.6 percent. From 2004 to 2007, real wages remained stagnant, with hourly earnings rising by only 1.0 percent. From 2007 to 2010 median household income in real terms declined sharply over this period, by 6.7 percent. The stagnation of median wealth from 2010 to 2013 can be traced to the depletion of assets. In particular, the middle class was using up its assets to pay down its debt. The evidence suggests that middle class households, experiencing stagnating incomes, expanded their debt (at least until 2007) mainly in order to finance normal consumption expenditures rather than to increase their investment portfolio.

The Great Recession hit African-American households much harder than whites. Hispanic households got hammered by the first half of the Great Recession. Young households got pummeled by the Great Recession.

Between 1983 and 2013, the top one percent received 41 percent of the total growth in net worth, 43 percent of the total growth in non-home wealth, and 49 percent of the total increase in income. The figures for the top 20 percent are 99 percent, 98 percent, and 103 percent, respectively – that is to say, the upper quintile got it all! Stock ownership is also highly skewed by wealth and income class. The top one percent of households classified by wealth owned 38 percent of all stocks in 2013, the top 10 percent 81 percent, and the top quintile 92 percent.

The average American household is poorer today than it was in 1983.