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Minneapolis Fed looks at wealth gap
The Minneapolis Federal Reserve Bank has a new take on the growing gap between the United States' wealthiest 10 percent and the bottom 50 percent.
A June working paper from the Fed's Opportunity & Inclusive Growth Institute addressed that imbalance to look at wealth, such as stock ownership and homes, as well as income over the past 70 years. It's at www.minneapolisfed.org/publications/the-region/race-and-the-race-between-stocks-and-homes.
The study's authors analyzed data on earnings, savings, home values, equity holdings and other assets, along with related demographics, according to an article in the Fed's most recent "The Region."
The background: wages of working-to-middle class have eroded, after inflation, for 40 years, failing to keep pace with the cost of housing, higher education and health care. It's tough to build wealth without owning stocks (equity), a business or a value-appreciated house.
"Because the primary source of middle-class American wealth is homeownership, and the main asset holding of the top 10 percent is equity, the relative prices of the two assets have set the path for wealth distribution and driven a wedge between the evolution of income and wealth," wrote Region author Doug Clement. "In brief, as home prices climbed from 1950 until the mid-2000s, middle-class wealth held its own relative to upper-class wealth even as middle-class incomes stagnated. But after the financial crisis [of 2007-09], the stock market's quick recovery and slow turnaround of housing prices meant soaring wealth inequality that even exceeded the last decade's climb in income inequality."
Fed researchers found that from 1970 to the late 1980s the share of total income earned by the bottom 50 percent dropped from 21.6 to 16.2 percent, while the top 10 percent share climbed from 30.7 to 39.9 percent. By 2016, the "income inequality" had widened to 14.5 percent for the bottom half and as much as 47.6 percent for the top 10th.
"The racial gap in wealth is even wider, and similarly stagnant," according to the Minneapolis Fed. "The median black household has less than 11 percent the wealth of the median white household (about $15,000 vs. $140,000 in 2016 prices).
"The overall summary is bleak," according to the Fed. "Over seven decades, next to no progress has been made in closing the black-white income gap. The racial wealth gap is equally persistent. … The typical black household remains poorer than 80 percent of white households."
