The savings of American families increased strongly between 2016 and 2019, according to Federal Reserve data released on Monday, but wealth inequality remained stubbornly high — and that was before the coronavirus pandemic took hold.
Median net worth climbed by 18% in those three years, the Fed’s Survey of Consumer Finances showed, as median family income increased by 5%. The survey, which began in 1989, is released every three years and is the gold standard in data about the financial circumstances of households. It offers the most up-to-date and comprehensive snapshot of everything from savings to stock ownership across demographic groups.
The figures tell a story of improving personal finances fueled by income gains and rising home prices, the legacy of the longest economic expansion on record that had pushed the unemployment rate to a half-century low and bolstered wages for those earning the least. Yet yawning gaps persisted — the share of wealth owned by the top 1% of households was still near a three-decade high.
Nearly all of the data in the 2019 survey was collected before the onset of the coronavirus. Economists worry that progress for disadvantaged workers has probably reversed in recent months as the pandemic-related shutdowns threw millions of people out of work. The crisis has especially cost minority and less-educated employees, who are more likely to work in high-interaction jobs at restaurants, hotels and entertainment venues. Inequality appears to be poised to widen as lower earners fare the worst.
“Without a doubt, it will worsen,” said Julia Coronado, founder of MacroPolicy Perspectives and a former Fed economist. “We know that the skew of the unemployment is toward lower-income, more economically vulnerable people.”
The newly released data suggest that families with lower pretax incomes were catching up to their richer counterparts between 2016 and 2019. Families with high wealth, college educations, and those who identified as white and non-Hispanic — demographics groups that have higher incomes — enjoyed comparatively smaller earnings growth over the period.
Even so, inequality in income and wealth remained high.
Since the survey started, families in the top 1% of income have gradually taken home a bigger share of the nation’s income while the share of the lower 90% of earners has gradually fallen. The bottom 90%’s income share increased slightly in 2019 — reversing a decade-long decline — but a Fed analysis noted that the rebound happened from record lows and took the group back to only roughly its share from 2010 to 2013.
Affluent families have also held a growing share of the nation’s wealth — savings amassed over time, rather than the money a family earns in a given year — over recent decades. They retained that advantage through 2019. In 1989, the top 1% of wealth holders held about 30% of the nation’s net worth. That jumped to nearly 40% in 2016 and was little changed in the latest survey.
Families in the bottom half of the wealth distribution held just 2% of the nation’s wealth in 2019, the Fed data and a related report showed.
The survey’s overall wealth measure does not include defined-benefit pension plans and Social Security benefits, which are hard to value. An augmented measure that incorporates pension plans shows that wealth at the top has still risen, but by less, according to the Fed report.
Financial assets have long been particularly concentrated in the hands of the rich, and that trend persisted through 2019. The median family among the wealthiest 10% held about $780,000 in stocks, directly or indirectly, last year. The median family in the bottom quarter held about $2,000, the data showed.
The percentage of lower-wealth households who held some stocks climbed, but remained far lower than for the rich. About 95% of the wealthiest families hold stocks, compared with one of every five households in the bottom 25%.
That means that while lower-wealth families may have been less touched by stock market declines in the spring, they also did not benefit nearly as much when prices surged this summer.
President Donald Trump often highlights the stock market’s performance as a signal of success, but it does not speak to how many Americans are doing financially.
The Fed’s newly released figures also underline that dramatic gaps in income and wealth persist across racial groups. Black families’ median wealth is less than 15% of white families’ net worth — it stood at just $24,100 in 2019 to $188,200 for white households. Hispanic families held $36,100.
The concern now is that inequities could deepen as workers at the bottom lose jobs and incomes.
The unemployment rate was 8.4% in August, according to the Labor Department, but the rate was 13% for Black people. Likewise, the jobless rate for those with less than a high school diploma was more than twice that for adults with a bachelor’s degree or more.
“The economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been hardest hit,” Jerome Powell, the Fed chair, said at a news conference earlier this month. “In particular, the high level of joblessness has been especially severe for lower-wage workers in the services sector, for women and for African Americans and Hispanics.”
The report also showed how wealth concentration is perpetuated across generations. In 2019, the wealthiest 1% of families expected $1.6 million in inheritance. Those in the bottom half of the distribution anticipated just $39,000.
“Inherited wealth can play a direct role in wealth accumulation — with up to one-half of total wealth attributable to intergenerational transfers,” the Fed said in a report. “Growing up in a wealthy household may also impart other indirect advantages — through social connections, for example, or family loans — that play a role in wealth transmission.”