Three recent studies using different data sets and methodology show the horrendous losses inflicted on what used to be the middle class by the Great Crash. In March, Emmanuel Saez and Gabriel Zucman presented a preliminary report on net worth showing a loss among the bottom 90% from about 36% of total house wealth to about 25% between the peak in 1984 and 2013. The Russell Sage Foundation estimates that the median net worth was worth about 20% less in 2013 than in 1984. A report From the Census Bureau says that the median household net worth fell nearly 7% between 2000 and 2011. These findings confirm the work of Edward Wolff in a 2012 study.
Median wealth hardly tells the whole story. It would be helpful if these researchers would provide data by decile, but most data is by quintile. So, take a look at the bottom two quintiles, the bottom 40%, as reported by the Census Bureau. The lowest quintile has a negative median net worth: the median person’s debt is $6,029 more than the value of that person’s assets. In 2000, the median was also negative, at -905 dollars. The second quintile saw its median drop in half, from $14,319 to $7,263. The median of the third quintile also dropped, from $73,911 to $68,839, a 7% drop. Only the fourth and fifth quintiles saw a rise in the median. (P. 12)
The report of the Russell Sage Foundation confirms the drop in the bottom half. It also shows that net worth declined at the 75th percentile. In 2003, the net worth was $302,221. It rose to $367, 959 in 2007, and fell back to $310,412 in 2009 and then continued dropping to $260,405 in 2013. Even at the 90th percentile, there was only a $26,246 increase between 2003 and 2013, from $736,853 to $763,099. (Table 1).
The Saez-Zucman results are even more extreme. The chart above (click to make it bigger) reflects the changes in middle class wealth. They call it the bottom 90%, but they say that the bottom 50% has a total net worth effectively equal to zero, as the other studies more or less confirm. Thus, this chart reflects essentially the net worth of the 50th to the 90th percentiles. This is the group Thomas Piketty calls the Middle Class, as I discuss in more detail here. As you can see in the chart, the share of net worth of this group has fallen dramatically since its peak in the mid-80s, when Reagan was in office. Business assets have fallen dramatically as this group is no longer a significant part of the business life in this country. The percentage ownership of equities and bonds has fallen below net non-mortgage debt, and disappears. Pensions are down, and housing is down. Debt has risen.
Saez and Zucman report that the people in the bottom .9% of the top 1% have seen no significant increase in wealth. The gains in wealth have only gone to the top .1%, and most of those gains have gone to the top .01% of US households. The top .1% have net worths in excess of $20 million. The top .01% share of national wealth has risen 400% in the last 35 years, and now exceeds its peak in 1929.
There were approximately 121 million households in the US in 2012. That means that substantially all of the gains in net worth in the country went to just 121,000 households. Among them, these families control at least 22% of the total wealth of the country according to Saez and Zucman. These households are our new Oligopoly.
The trend lines are clear. The Oligopoly will get richer. The middle class will disappear in a few years.
Politicians don’t care. The Republicans are ecstatic: it shows that markets are working and heavily rewarding the most moral and superior among us. The Democrats don’t care. They’re happy to talk about income inequality, but they can’t bring themselves to mention the growing Oligarchy, the vanishing middle class, or the sickening poverty of the bottom 24 million households.
The country we grew up in is dying.