There are many ways to compare finances, but perhaps a more holistic measure of financial health looks at household wealth, a comparison of what a family’s assets (home, cars, investments and bank accounts) are worth, versus what they owe. And when it comes to wealth, or net worth, the gap between the richest Americans and everyone else is at an historic high.
For the most part, it’s not necessarily that the rich are getting richer and the poor, poorer. Instead, the data shows that while the rich are seeing their assets grow and increase in value, the middle and lower-classes are seeing financial stagnation, creating a growing economic gulf.
According to a recent study from the Pew Research Center, which analyzed data from the Federal Reserve, the median net worth of upper-class families was almost seven-times as large as middle-class families: $639,400 compared to $96,500. That’s the largest the gap has been in the 30 years the Federal Reserve has been collecting such data. In 2007, right before the Great Recession, upper-class households had wealth that was about 4.6 times that of the middle class. In 1995, the gap was even smaller—with median, upper-class net worth equaling about 3.6 times as much as their median, middle-class counterparts.
The wealth discrepancy between upper-class and lower-class is also at its widest point in three decades, with lower-class families having a median net worth that is 70 times lower than the median net worth of upper-class families.
Median Household Net Worth by Income
Stagnation is a big problem for middle and low-income Americans. Between 2010 and 2013, upper-income families saw their wealth increase by 7 percent, while net worth for other families has remained the same, the report showed. Middle and lower-income families also have more ground to make up when it comes to post-recession recovery. Upper-income households lost 17 percent of their net worth between 2007 and 2010. For middle and low-income families the loss was much greater. Middle-class families lost 39 percent of their net worth, and low-income families saw the recession wipe out 41 percent of their household wealth, according to the study.
And the gap between American’s net worth is even bigger when looking at the wealth of different racial groups. A second report from Pew shows that in 2013, white households had about thirteen-times as much wealth as black households, the largest difference since 1989. When compared with Hispanic households, white households had about 10 times as much wealth, the most since 2001. Interestingly, while the net worth of white households increased after the recession, wealth for black and Hispanic families has actually declined since the start of the economic recovery, the report showed.
Median Net Worth of Households by Race
Discrepancies in income and assets may help explain the growing difference in racial wealth. Between 2010 and 2013, the median income of minority households declined by 9 percent, while median income for white households dropped by only 1 percent. Additionally, stocks—an asset more likely to be held by white households—have seen major gains since the recovery started, helping to bolster the financial health of some households, but not others. And when it comes to houses, minorities have seen a larger decline in the rate of homeownership than their white counterparts. It's part of a larger trend that involves minorities shedding more assets during the recovery than majority households.
Though the recession hurt earnings and wealth across the board, Americans on the lower-end of the income and wealth spectrum are still struggling to recoup their losses, while their more financially-secure counterparts have made more significant gains. "Without any palpable increase in their wealth since 2010, middle- and lower-income families’ wealth levels in 2013 are comparable to where they were in the early 1990s," the report found. The increasing gap in financial health between the most well-off Americans and everyone else signals that for many Americans, while things aren't getting worse, they aren't getting much better either.