Wealth Gap Between Middle-income & Upper-income Families Reaches Record High: Use Pew's Income Calculator to Find Out If You're In the Middle Class
Editor's Note: The following is excerpted from the Pew's Research, The Middle Class Is Losing Ground; No longer the majority and falling behind financially
The gaps in the wealth (assets minus debts) of lower-, middle- and upper-income families are much wider than the gaps in income.46 There is one other stark difference: only upper-income families realized notable gains in wealth from 1983 to 2013, the period for which data on wealth are available, while gains in income over that period were felt across all income groups, albeit at different rates. The wealth holdings of lower-income and middle-income families are virtually unchanged, and these families fell further behind upper-income families in the past three decades.
The widening gaps in wealth, measured as the ratios of median wealth, across income tiers are the consequence of the crash in the housing market and the Great Recession of 2007-09. These two closely intertwined events wiped out all of the gains in wealth experienced by lower- and middle-income families from 1983 to 2007.
Wealth and income together provide a more complete financial portrait of US adults. The former is a stock of financial resources accumulated over time, while the latter is an annual inflow of financial means. Some adults, such as retirees, may have low income but high levels of wealth. Meanwhile, younger workers may have a high inflow of income but low levels of wealth.
Unlike income, wealth data are not adjusted for family size because it is difficult to associate a current family size with a stock of wealth. In part, that is because wealth is accumulated and potentially spent over an extended period of time during which family structure may change significantly. It is also typical for at least part of a family’s wealth to be passed on to future generations.
Changes in wealth are measured from 1983 to 2013 using the Survey of Consumer Finances. Because of the way the data are collected and reported, the unit of analysis for wealth is the family, not the household. Families in the Survey of Consumer Finances are divided into three income tiers based on their income level after it has been adjusted for differences in family size.
Because the Survey of Consumer Finances is conducted triennially, the estimates presented in this section are for different time periods than in the analysis of income. The years 1983, 1992, 2001 and 2010 immediately follow recessions or represent the tail ends of recessions. The year 2007 was a business cycle peak, prior to the onset of the Great Recession. Changes in wealth since 2007 reveal the impact of this downturn.
The fortunes of US families overall swung like a yo-yo from 1983 to 2013. The ride up lasted through 2007 as median wealth overall increased to $137,955 from $77,890 in 1983, a gain of 77%. Most of these gains were registered during the record-long economic expansions in the 1990s and the housing market boom that followed.
The wealth of US families plunged as home prices began a rapid descent in 2006. By 2013, overall median wealth had decreased to $82,756, a loss of 40% in the space of just six years. Almost all of this erasure took place from 2007 to 2010, but there was no sign of a recovery from 2010 to 2013. Over the entire span from 1983 to 2013, the median wealth of US families was up only 6%.
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