Families were earning income and net income in the three years following the epidemic, but wealth inequality has remained stubbornly higher, according to Federal Reserve data released Monday.
The Fed’s survey Cons Consumer Finance showed that between 2016 and 2019, average household wealth increased by 18 percent, as average income increased by 5 percent. Launched in 1989, the survey is published every three years and is available in the U.S. There is a gold standard in information about the financial circumstances of households. It provides the most advanced and comprehensive snapshots of everything from savings to stock ownership in demographic groups.
The figures tell the story of improving personal finances driven by income gains, the legacy of the longest economic expansion on record that pushed the unemployment rate to a half-century low and the lowest earning wage. Despite progress, large gaps remain – the share of wealth in the top 1 percent of homeowners is still close to a three-decade high.
Almost all data in the 2019 survey were collected before the onset of coronavirus. Economists worry that progress for disadvantaged workers may have put millions out of work in recent months, possibly due to epidemic shutdowns. The crisis has particularly cost minority and less educated workers, who work more in high-interaction jobs in restaurants, hotels and entertainment venues. Many economists expect crisis inequality to worsen because low-wage earners are the worst hit.
“The recession has not fallen on all Americans equally and is at least able to shoulder the burden, which has hit hardest,” said Fed Chairman Jerome H. Powell said at a news conference earlier this month. “In particular, high levels of unemployment are critical for low-wage workers, women and African-Americans and Hispanics in the service sector.”
Newly released 2019 data suggest that low-pretax income households were catching up with their affluent counterparts between 2016 and 2019. Families with higher wealth, college-led education, and those identified as white and non-Hispanic – whose incomes are higher – will grow relatively low incomes over the period, Anand Fed said.
However, inequality in both income and wealth remained high.
Since the survey began, the first 1 percent of income-sharing households have gradually taken a large share of the nation’s income, while the share of less than 90 percent of earners has gradually declined. The bottom 90 percent of revenue rose slightly in 2019 – as opposed to a decade-long decline – but a Fed report on data noted that the revision hit record lows and pushed the group back to its share in the 2010-2013 segment.
Wealthy families have sustained a growing share of the nation’s wealth in recent decades, and they will continue to do so until 2019. Fed economists said there was a 40 per cent change in 2016 and a slight change in a recent survey.
According to Fed data and a related report, households, which account for half of the wealth distribution, accounted for only 2 percent of the country’s wealth in 2019.
Wealth measures do not include defined benefit pension plans and social security benefits, which are difficult to value. According to the Fed report, the additional move to include pension plans shows that wealth at the top is still rising, but in less time.
Now the concern is that inequality – especially in income, which gets heavier than wages – could work again as workers at the bottom lose jobs.
The unemployment rate was 8.4 percent in August, according to the Department of Labor, but for blacks it was 13 percent. Similarly, the unemployment rate for those with less than a high school diploma was more than double that of adults with a bachelor’s degree.
