In the never-ending “Down With the 1%!!!!” haymaking, the NYTimes has this bit:
Economic inequality in the United States has been receiving a lot of attention. But it’s not merely an issue of the rich getting richer. The typical American household has been getting poorer, too.
The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation. Those are the figures for a household at the median point in the wealth distribution — the level at which there are an equal number of households whose worth is higher and lower. But during the same period, the net worth of wealthy households increased substantially.
So, what might be driving these differences?
Let’s look at “the study” being reported on… oh, a two-page PDF (two pages, really? I have blog posts longer than that.)
Unfortunately, I can’t quote from the PDF in terms of copy/paste, so I will mention that they do say a huge amount of household wealth is tied up in the value of their home. And that between 2003 and 2013, house prices did decrease by about 20%.
Seems to me that explains a lot of the wealth disparity right there (especially since, even when rich people buy expensive houses, it doesn’t represent a huge percentage of their wealth. Financial markets bounced back, real estate market didn’t….DUH) Seems like a whole lot of nothing there.
But I thought there might be something else going on: change in household composition. If you have a lot more adults living single, instead of married, that is going to have an effect on the wealth distribution. Think about it — if you have a couple that together have a net worth of $50K, versus two separate single people with a net worth of $25K both, or $10K and $40K, or whatever — it’s going to pull the median downward.
I had an inkling this might be one of the factors, as I found this old USA Today article:
A half-century slide in the number of people living under one roof has ended and has even reversed in some places, according to 2010 Census data released today.
So I decided to look up household composition from the American Community Survey (which gives estimates every year) from the U.S. Census. The most recently available info is from 2012, so I will compare 2012 against 2000, because I can’t get 2003 data on household composition (yes, I know it’s out there, but I’m doing minimal work).
What I found is in this google spreadsheet
So, what I have found: there are indeed increasing household sizes, but there are more and more single adult householders (with or without children).
In 2000, married couple households were 52% of households, and in 2012, they were 48% of households. If we look at single adult households (with or without children), we see this percentage went from 42% of households in 2000 to 46% of households in 2012.
To be sure, the real estate value aspect is the biggest driver in those net worth changes (as well as the percentage of house value in net worth compared to rich people), but when you’ve got more single adult households (whether or not there are kids in the household), that will also push median net worth downward.
Then there is the aspect of age distribution — we have the Boomers entering retirement in the 2010s, spending down their assets. And that also has an effect.
Anyway, number don’t speak for themselves. Don’t just take whatever explanations people give.
And even if the explanations are correct, it doesn’t mean that the numbers indicate anything for which something must be done.
Yes, people’s wealth were hit because housing values were hit…. so what? You want to re-inflate the housing bubble? Doesn’t seem like a good idea to me.
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