The idea that poor and middle-class Americans are suffering is nothing new: Anyone with access to the news (or, for that matter, to an ordinary suburban neighbourhood) is likely to notice that it has gotten harder for average families to make ends meet.Beyond that, a veritable army of economists, politicians and pundits has spent the past few years pointing out the growing gap between the rich and everyone else.
Now, a recent study by New York University economics professor Edward N. Wolff has put the decline of the American middle class in a whole new perspective: According to Wolff’s calculations, the median net worth of American households has now reached a 43-year low of $57,000 (in 2010 dollars).
On the surface, the fact that American households are poorer and less stable than they were in 1969 is shocking.
And the deeper one digs, the more it becomes clear that the situation is even worse than those headline numbers suggest.
The median, after all, is the midpoint, which means that there are an equal number of households above and below that line. And we don’t have to go far below that line to find troubling data.
According to Wolff, between 1983 and 2010, the percentage of households with less than $10,000 in assets rose from 29.7 per cent to 37.1 per cent. (And yes, that “less than $10,000” figure includes the many households with no assets at all, or “negative assets” — what we in the non-academic world just call debt.)
Where did all the money go? Over the same period, the richest 1 per cent of households increased their average wealth by 71 per cent.
Here’s another way to gauge the shift in wealth: From 1983 to 2010 the share of total wealth held by the richest 10% of American households increased from 68.2 per cent to 76.7 per cent. All the rest of Americans lost ground.
Most studies of wealth inequality focus on salaries — a rich arena for discussion when one considers that the average CEO takes home 380 times as much money as his or her average worker. By contrast, Wolff’s focus on total wealth not only measures how much money a household brings in, but also the amount it accumulates.
This latter number is highly significant — economically secure households are generally more comfortable spending their disposable income, and are less likely to become a drag on the social safety net. With that in mind, Wolff’s calculations don’t just paint a worrisome picture of the present; they also suggest a dimmer economic future.
This story was originally published by DailyFinance.
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