"The Median Family Is Worth One Third Less Than It Was A Decade Ago"
Median household wealth has fallen by 43 percent from its pre-recession peak in 2007, according to a new study from the Russell Sage Foundation. It has fallen so far that the median household is worth less now than it was in 2003. But the wealthiest 10 percent of families haven’t faced that pain, and are worth far more on average than they were in 2003.
The net worth of the median household — the line where half the country is richer and half the country is poorer, giving an approximation of how the middle class lives — rose from nearly $88,000 in 2003 to just below $99,000 in 2007, before collapsing when the financial crisis and Great Recession gutted the economy. In 2013, the figure stood at $56,335.
In contrast to that roughly $32,000 drop in median net worth, households at the top of the income distribution are many thousands of dollars wealthier than in 2003. The 95th percentile for household net worth hit $1,364,834 in 2013, up 14 percent from 2003 levels.
This divergence means that inequality has intensified over the decade. The gap between a 95th percentile household’s net worth and the median has doubled since 2003, the report says. The report’s statistics do not provide a sense of the demographic realities of American inequality, but there is also a yawning racial wealth gap buried within the overall wealth gap.
The clearest difference between the rebound at the top and the continued collapse at the middle and bottom of the wealth distribution, according to the study, relates to where different economic classes store their wealth. Rich people’s primary source of wealth is investments, and they rebounded along with the markets (and bank profits). Middle-class wealth generally comes from housing equity, and the housing market hasn’t bounced back in anything close to the same way as investment markets. Median household wealth is down a full 43 percent since pre-recession highs, but non-real estate median household wealth fell 29 percent.
Bad news for the middle class is bad news for the entire country, and there’s plenty of it to go around. Middle-class jobs were hit hardest in the recession, and lawmakers around the country have undermined the labor unions that have traditionally bolstered the middle class. The consumer spending that drives economic growth comes primarily from the middle class, and as the ranks of those spenders have thinned the American economic engine has sputtered.