The bottom 90 percent of American families own just 23 percent of the country’s wealth, about the same share they had in 1940, according to a new paper from Emmanuel Saez and Gabriel Zucman.
This wide swath of Americans held just 15 percent of wealth in the 1920s, which grew to a peak of 36 percent by the mid-1980s. Yet it has fallen dramatically since then.
The economists note that the reason wealth has fallen for virtually all Americans except the very richest is because they are increasingly falling into debt. “Many middle class families own homes and have pensions, but too many of these families also have much higher mortgages to repay and much higher consumer credit and student loans to service than before,” they write in a brief for the Washington Center for Equitable Growth. There was a period when the increase in debt was offset by the increasing value of Americans’ assets: wealth for the bottom 90 percent was boosted by the stock market bubble in the 90s and the housing bubble of the 2000s.
But then assets were hit hard by the Great Recession and haven’t recovered. Today, average wealth for the bottom 90 percent is $80,000, the same as it was in 1986. For the top 1 percent of earners, however, average wealth has more than tripled since then. Wealth inequality is now as high was it was in the roaring 1920s.
Even so, it’s only the richest of the rich who are seeing their share of wealth increase. The top 0.1 percent owns 22 percent of the country’s wealth, up from 7 percent in the late 1970s. But those just below them, the top 0.9 percent of families, didn’t see wealth increase, and the top 10 percent actually saw a slight decrease.
Wealth inequality is a separate phenomenon from income inequality, but one has fueled the other. “[T]he combination of higher income inequality alongside a growing disparity in the ability to save for most Americans is fuelling the explosion in wealth inequality,” the economists write. The bottom 60 percent of Americans have experienced a lost decade of either stagnant or falling wages since 2000 despite increasing their productivity 25 percent over the same period. But wages for the 1 percent grew by about 200 percent since the 1960s. At the same time, the wealthy have been able to put away more of that money into savings hile the rest of America struggled to save. The 1 percent now saves more than a third of its income while the bottom 90 percent doesn’t save anything.
The economists warn that if these trends continue, the country could face dire consequences. “Ten or twenty years from now, all the gains in wealth democratization achieved during the New Deal and the post-war decades could be lost,” they write. That wouldn’t just been painful for American families; it will hurt our economy as well if people don’t have any money to spend. Companies are already warning that income inequality is hurting their bottom lines.