By GREGORY N. HEIRES
The evidence just keeps coming in: The country’s economic elites are the only ones who have benefited from the so-called economic recovery.
The triennial Survey of Consumer Finances by the Federal Reserve Board, released this month, offers a treasure trove of data that documents the uneven recovery and the persistence of inequality in the United States.
The study of these and similar data tell an all too familiar story—a story of the decline of our standard of living.
But the exercise is always worth it because this storyline will continue until the U.S. voters wake up and support progressive politicians and a political agenda directed at working families that includes such polices as a national jobs program, redistributive taxes, fair trade policies, labor law reform to promote unionization, a higher minimum wage, the strengthening of Social Security and retirement security, and national health care.
Widespread Income Loss
About the only good news for consumers in the Fed report is that Americans are chipping away at their debt. But that also means they are cutting back on spending, which can’t be good for the economy. And while housing and credit card debt are declining, educational debt is increasing substantially.
Except for the top 20 percent, all families experienced a drop in median income from 2010 to 2013, the years covered by the report. Only families at the very top of income distribution saw widespread gains during that period. Families at the bottom of the income distribution “saw substantial declines in average incomes, continuing the trend observed between the 2007 and 2010 surveys,” the report says.
Overall, average income increased by 5 percent during 2010 to 2013, but median income fell. That points to an increasing concentration of income, as the economic elite captured most of the economic gains during that period. That observation is consistent with the findings of French economist Thomas Piketty, who found that a staggering 93 percent of the pre-tax income growth in 2010–the first year of the recovery—went to the top 1 percent.
The retirement security of most Americans continues to decline.
With employers failing to offer and continuing to drop traditional retirement plans, the participation of families in the bottom half of the income distribution has declined substantially from 2007 to 2013.
In 2013, only 40.2 percent of families actually participated in a retirement plans. That’s down from 48.2 percent in 2007.
But even the families that do participate in retirement plans generally aren’t on track to saving enough to be able to maintain their current standard of living during their retirement years.
The typical combined balance of Individual Retirement Account and defined-benefit pension for the lowest-income group with those assets was $39,100 in 2013. The average balance for the upper-middle group was $147,300.
The ownership of retirement savings accounts dipped below 50 percent in 2013. These accounts include IRAs, Keogh accounts, and certain employer-sponsored accounts, such as 401(k)s, 403(b)s and thrift savings accounts.
The report documents how lousy these retirement vehicles are. The average account had $201,300 in 2013. Half of account holders had $59,000 or less. Try living off that.
The low retirement savings show the need to expand Social Security rather than reduce the benefit. The easiest and most equitable way to do that, of course, is by scrapping the $117,000 cap on the income taxed for Social Security, an option that’s gaining support.
The report notes that, “the shares of income and wealth held by affluent families are at modern historical highs.” And among high-income groups considerable inequality exists.
The income share of the top 3 percent amounted to 30.5 percent in 2013, with this group recovering the hit it took during the Great Recession.
But the share of income received by the next highest group (percentiles 90 through 97) has not budged for a quarter of a century, amounting to just less than17 percent in 1989 and 2013.
The “rising income share of the top 3 percent mirrors the declining share of the bottom 90 percent in distribution,” the report says. Translation: Productivity is not shared equally, and inequality reflects a direct transfer of income and wealth to the 1 percent from the rest of us.
The Wealth Divide
The bottom 90 percent of families has seen its share of wealth plummet to 24.7 percent in 2013 from 33.2 percent in 1989.
The inequality in our country becomes particularly striking when you look at net worth—the gross assets and liabilities of families.
The median net worth of all families fell by 2 percent to $81,200 from 2010 to 2013 while the mean (overall average) net worth—propped up by the gains of the affluent–remained at $534,600.
Wide disparities exist among different income and demographic groups:
· The bottom 20 percent of families had a median net worth of less than $50 in 2010 and 2013. Their average net worth was actually negative in 2013, as they carried a debt burden of $13,400.
· Families between the 75th and 90th percent groupings experienced a 20 percent decline in their average net worth, which fell to $505,800.
· The median net worth of the top 10 dropped to $1,871,800 in 2013, but their average net worth rose a little to just over $4 million in 2013, pulled up by the upper tier in this group.
· The average worth of non-white or Latino families fell 2 percent to $183,900.
The report points to the lingering impact of the housing crash.
Overall, the ownership rate of nearly every type of asset declined from 2010 to 2013. The drop in homeownership and home prices explains most of the decline.
The percentage of families who own a primary residence decreased from 69.1 percent in 2004 to 65.2 percent in 2013. The median family’s house was worth $170,000 in 2013. That is down from $182,200 three years earlier.
The survey is discussed in September issue of the Federal Reserve Bulletin, which is available at the Federal Reserve System’s website, where you can also find a video about the survey.