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Even as Americans got richer, inequality persisted

American families’ savings soared between 2016 and 2019, according to the Federal Reserve released Monday, but wealth inequality remained persistently high – and that was before the coronavirus pandemic hit.

Median net worth rose 18 percent over those three years, the Fed’s consumer finance survey found, as median family income rose 5 percent. The survey, which began in 1989, is published every three years and is the gold standard for data on household financial health. It provides the most up-to-date and comprehensive snapshot of everything from savings to stock ownership in various populations.

The numbers tell of the improvement in personal finances, driven by increased income and rising house prices. This is the legacy of the longest economic development that brought the unemployment rate to half a century low and raised wages for those who earn the least. Still, there were yawning gaps – the share of wealth belonging to the top 1 percent of households was still near a three-decade high.

Almost all of the data in the 2019 survey was collected prior to the coronavirus outbreak. Economists fear that advances for disadvantaged workers have likely reversed in recent months, as pandemic stalemates have left millions of people unemployed. The crisis has particularly cost minorities and less educated workers who are more likely to work in interactive jobs in restaurants, hotels and entertainment venues. Inequality appears to be widening as low-income earners do worst.

“Without a doubt it will get worse,” said Julia Coronado, founder of MacroPolicy Perspectives and former Fed economist. “We know that unemployment leads to low-income, economically more vulnerable people.”

The newly released data suggests that families with lower pre-tax income caught up with their richer counterparts between 2016 and 2019. High wealth families, college educated, and those who identified as white and non-Spanish – all with higher incomes – enjoyed comparatively lower earnings growth over the period.

Even so, inequality in income and wealth remained high.

Since the survey began, families in the top 1 percent of income have gradually taken home a greater proportion of nations’ income, while the proportion of the bottom 90 percent of the workforce has gradually declined. The income share of the bottom 90 percent rose slightly in 2019 – a 10-year decline – but Fed analysis found the rebound was from record lows, with the group only roughly matching its share from 2010 to 2013.

Wealthy families have also had a growing share of the country’s wealth over the past few decades – savings that have accumulated over time, rather than the money a family makes in any given year. They kept this benefit until 2019. In 1989, the top 1 percent of the wealthy owned approximately 30 percent of the nation’s net worth. That rose to almost 40 percent in 2016 and has hardly changed in the last survey.

Families in the lower half of the wealth distribution held just 2 percent of national wealth in 2019, according to Fed data and a related report.

Survey total assets do not include defined benefit pension plans and social security benefits, which are difficult to assess. An expanded measure to include retirement plans shows that wealth at the top has still increased, but by less, according to the Fed report.

Financial assets have long been concentrated in the hands of the rich, and this trend continued until 2019. The middle family among the richest 10 percent owned, directly or indirectly, shares valued at approximately $ 780,000 last year. The middle family in the bottom quarter held about $ 2,000, the data showed.

The percentage of less wealthy households that owned some stocks rose but remained much lower than that of the rich. About 95 percent of the richest families own stocks, compared to one in five households in the bottom 25 percent.

This means that families with lower wealth may have been less affected by stock market declines in the spring, but they also didn’t benefit nearly as much when prices rose this summer.

President Trump often cites stock market performance as a sign of success, but does not speak of how many Americans are financially successful.

The Fed’s newly released figures also underscore that racial income and wealth disparities remain dramatic. The median net worth of black families is less than 15 percent of the net worth of white families – it was just $ 24,100 in 2019 and $ 188,200 for white households. Hispanic families held $ 36,100.

The concern now is that inequalities could deepen if workers at the bottom lose jobs and incomes.

According to the Ministry of Labor, the unemployment rate was 8.4 percent in August and 13 percent among blacks. Likewise, the unemployment rate for people with less than a high school diploma was more than double that for adults with a bachelor’s degree or more.

“The economic downturn has not fallen equally in all Americans, and those least able to bear the burden are hardest hit,” Fed chairman Jerome H. Powell said at a news conference earlier this month . “In particular, high unemployment was particularly serious for low-wage workers in the service sector, for women, and for African-Americans and Hispanics.”

The report also showed how wealth concentration has continued across generations. In 2019, the richest 1 percent of families were expecting an inheritance of $ 1.6 million. Those in the bottom half of the payout were expecting just $ 39,000.

“Inherited wealth can play a direct role in wealth creation – up to half of total wealth is accounted for in intergenerational transfers,” the Fed said in a report. “Growing up in a wealthy household can also bring other indirect benefits – such as social connections or family loans – that play a role in wealth transfer.”

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