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About Northwest labor press. (Portland , Ore.) 1987-current | View Entire Issue (Sept. 19, 2014)
Federal Reserve survey shows family net worth grew over quarter-century as income stagnated By SAM PIZZIGATI WASHINGTON (PAI) — The “av- erage” U.S. family is doing just fine in net worth, the Federal Reserve says in its latest triennial portrait of household wealth. But typical Americans are struggling something awful. Analysis of the report shows both statements are true. The agency’s Survey of Consumer Finances covers just how well the na- tion’s families are doing economically. The Fed takes this surveying seriously. But the survey involves much more than standard public opinion polling of SEPTEMBER 19, 2014 1,000 or so individuals by random phone calls. Federal Reserve re- searchers conducted over 6,000 inter- views, each running usually for an hour and a half. Most get conducted in person. And interviewers delve into every aspect of modern economic ex- istence, from monthly car payments to mutual funds. The latest consumer finances report, released Sept. 4, covers 1989-2013. The report’s new numbers essentially offer up the most detailed economic portrait yet of American family fi- nances over the last quarter-century. Some economists argue that the pic- ture the new Fed numbers paint does- n’t look all that bad. They cite family net worth, which has increased. In 1989, after adjusting for infla- tion, the average American family had $336,100 more in assets than liabili- ties. Last year, American family net worth averaged $534,600, up 59 per- cent. Conservatives use the data to con- tend the economy must be working. But a closer look at the family net worth numbers paints a different pic- ture. NORTHWEST LABOR PRESS Analysis of the Fed’s report shows the economy is working, but only for the affluent. The growing wealth of these affluent, the new Fed data show, is driving up America’s average family net worth. But straight averages can mislead — and even deceive, other economists note. If nine people each have zero net worth and a tenth person holds a fortune worth $10 million, the average person in that 10-person group will be a millionaire. Medians, by contrast, tell more about how everyday families fare. At the median point, half the people in any distribution have more, half less. In 1989, the new Fed survey says, the median U.S. family held $84,800 in net worth, after adjusting for inflation. In 2013, America’s most typical families held $81,200, 4 percent less than in 1989. That data shows the typical U.S. family is moving economically in re- verse, losing wealth. And in specific in- come brackets, the losses in family net worth become even more pronounced. Families in the statistical middle class — the nation’s middle 20 percent of income earners — held a median net worth of $75,300 in 1989. Their me- dian net worth in 2013: $61,700, down 18 percent. Up at the nation’s income summit, a different story: America’s top 10 per- cent of income earners — families that pulled in over $154,600 in 2013 — saw their median household net worth rise 61 percent, to $1,130,700, in the quarter-century that ended last year. How much did top 1 percent wealth rise during that span? The Fed’s report doesn’t break down a top 1 percent fig- ure. But it supplies some numbers for the top 3 percent. This lofty cohort, the new Fed re- port notes, owned 44.8 percent of the nation’s wealth in 1989, 51.8 percent in 2007, and 54.4 percent in 2013. Actually, the top 3 percent had a higher share of America’s net worth than the Fed numbers indicate. The reason: The Fed’s wealth totals do not reflect any of the wealth of America’s 400 richest individuals. Fed re- searchers, for “confidentiality” rea- sons, purposefully do not take these top 400 fortunes into account. “Persons listed by Forbes magazine as being among the wealthiest 400 people in the United States are ex- cluded from sampling,” the survey ac- knowledges. Forbes will release its list at the end of September. Last Septem- ber, it reported those 400 held a com- bined fortune worth $2.02 trillion. The combined fortune of 400 typi- cal American families last year? A bit over $32 million. The data show we would have to assemble just over 62,000 groups of 400 typical American families to equal the $2.02 trillion of the Forbes 400, or 24.8 million fami- lies (62,000 X 400 each) overall. (Editor’s Note: Sam Pizzigati is ed- itor of Too Much, a project of the Insti- tute for Policy Studies Program on In- equality and the Common Good.) PAGE 5
