What recovery? US rich get richer, middleclass treading water
“Inequality is as dear to the American heart as liberty
itself,” William Dean Howells once observed. But this quaint
aphorism notwithstanding, the latest report on wealth polarization
in the US may be difficult for many Americans to accept.
The top 7 percent of Americans saw their average net worth explode by 28 percent between 2009 and 2011, while the wealth of the remaining 93 percent of the population steadily declined during the same period, according to a study by the Pew Research Center.
From 2009 to 2011, the average net worth of the country’s 8 million wealthiest households surged from an estimated $2.7 million to $3.2 million, the Pew study said. For the 111 million households that make up the bottom 93 percent, average net worth plunged 4 percent, from $140,000 to an estimated $134,000.
The wealth chasm separating the top 7 percent and the rest of American society increased from 18-to-1 to 24-to-1 between 2009 and 2011. Meanwhile, the most affluent 7 percent of households owned 63 percent of the nation’s household wealth in 2011, up from 56 percent in 2009.
The results of the study throw a spotlight on a decades-long trend of increasing wealth disparity across the country, despite growing social and political awareness of the issue. In September 2011, protesters from the Occupy Wall Street movement descended on Manhattan, the financial heart of the US, and in Washington and elsewhere, to protest against rising social and economic inequality, corporate greed and political malfeasance.
Although the last presidential election between Barack Obama and Republican challenger Mitt Romney attracted attention to issues of inequality, proposed tax legislation aimed at narrowing the wealth gap has failed to pass in Congress.
Meanwhile, too-big-to-fail banks and other corporate entities that failed magnificently during the crisis, only to be rescued by a massive government bailout, continue to grow in size and – critics say – vulnerability to another setback.
Where’s the wealth?
The main difference between the richest Americans and other economic groups, Pew reported, is that the top 7 percent have their wealth diversified in stocks, mutual funds and other financial schemes. For the remainder of the population, household wealth is locked into the value of their homes, the sector that took the greatest hit when the bottom fell out of the US economy in late 2008.
This left the American middle class holding the bag, since this large group lost not only the greatest part of its savings, and there was no government plan to protect Americans from losing their homes in the ensuing chaos. Since 2007, almost 4 million homes have been lost in the foreclosure crisis, according to Forbes. Today, US home prices – except in the most affluent neighborhoods – remain essentially flat.
At the same time, stock prices – due in large part to a massive bailout and buy-in of US banks and corporations, which artificially enhanced the performance of these institutions with the injection of hard cash – have withstood the economic storm. In the two-year period examined in the report, the Standard & Poor’s 500 stock index increased by 34 percent, while the S&P/Case-Shiller home price index dropped by 5 percent.
“It has been a very good recovery for those at the upper end of the wealth distribution,” said Paul Taylor, executive vice president of the Pew Research Center and co-author of the report along with Richard Fry, according to the Washington Post. “But there has been no recovery for the lower 93, which is nearly everybody.”
The grim picture put forward by Pew is consistent with the increasing wealth concentration observed in income statistics, as well as in reports of the paltry growth of middle-income jobs since the end of the Great Recession was declared.
Overall, the amount of wealth held by American households increased 14 percent between 2009 and 2011, going from $298,000 to $339,000 in inflation-adjusted dollars, the report said. Yet the study also revealed that only the 13 percent of households with a net worth of $500,000 or more saw their wealth increase. Every other income group in the US saw their net worth decline.