Economist Edward Wolff’s latest paper on household wealth during the Great Recession has some really startling data on who gained and lost ground between 1983 and 2013.
The average American household was poorer in 2013 than it was in 1983
Alisha Ramos turned it into this striking chart:
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.
The data reflects the fact that economic inequality has grown, by a variety of measures, in recent decades. But the patterns here are also influenced by housing policy. The US government’s main approach to helping middle-class families build wealth is to induce them to borrow large sums of money in order to buy houses. Because these investments are financed with so much borrowed money, they can be very lucrative but they’re also very risky. As long as house prices go up, up, up, and up then it’s all good. But a decline in house prices — like we saw from 2006-2012 — ends up absolutely devastating middle class balance sheets. And there’s absolutely no sign anyone in power is even slightly considering revising this approach.
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