Call them the new millionaires. Once upon a time — certainly within living memory — becoming a millionaire was a big deal. It was a badge of economic distinction, enjoyed by a tiny elite.
By 2016, slightly more than 9 million U.S. households had a net worth of $1 million or more, according to new calculations by economist Edward N. Wolff of New York University. Of these, an estimated 1.85 million households had a net worth exceeding $5 million.
Now, go back a few decades and correct for inflation. In 1983, only 2.4 million households had a net worth of greater than $1 million. This was less than 3 percent of all households. By contrast, the 9 million in 2016 represented more than 7 percent of households. Probably most of these new millionaires consider themselves comfortably upper-middle class, not super-rich.
Indeed, it's conceivable that 10 percent of households are now millionaires. The reason: Wolff's study doesn't cover 2017, when stocks soared roughly 25 percent. Most gains would have been captured by the rich and upper-middle class, pushing many over the $1 million threshold, because stock ownership is concentrated at the top. The richest 10 percent of Americans own about 90 percent of the stocks.
(Note: Net worth reflects the difference between household assets — mostly homes and stocks — and debts, dominated by home mortgages and credit card balances.)
Wolff's analysis — based on data from the Survey of Consumer Finances, conducted every three years by the Federal Reserve — has some other good news: a steep decline in the indebtedness of U.S. households.
Among the middle class (which Wolff defines as the middle 60 percent of the population by wealth or income), average debt dropped from $98,100 in 2007 to $69,900 in 2016. Lower debt suggests that many Americans are less vulnerable to an economic slump than in the 2007-20 09 Great Recession.
But Wolff's conclusions mostly confirm the conventional view of a society that is increasingly economically stratified. The Great Recession hurt almost everyone. But the upper classes have recovered faster than the middle class. It's not entirely clear why, though the surging stock market helped upper-income households, and a fall in homeownership rates — reflecting foreclosures — harmed the middle class disproportionately.
In any case, median household net worth was only $78,100 in 2016, a decline of a third from its peak of $118,600 in 2007. Wolff calls this the study's most disappointing finding. There were also wealth losses from previous peaks for African Americans, Hispanics and millennials (households headed by someone younger than 35).
It's a sobering report. The problem is not that some Americans are better off than others. This is true now, it was true in the past and it almost certainly will be true in the future. There have always been economic inequalities, but for many years, life got better for many people at the bottom as well as people at the top.
Now, the top seems to be pulling away from the bottom, as evidenced by the expanding millionaire class. Aside from the rising stock market, its growth seems to reflect many factors: high pay for skilled workers; many well-paid doctors and lawyers; two-earner couples among professionals and managers; family businesses (among the wealthiest 1 percent, two-thirds have income from private business).
These numbers are not reassuring, but they define the difficult political and economic task: not to bring the top down but to raise the bottom up.
(Wolff's study is "Household Wealth Trends in the United States, 1962-2016: Has Middle-Class Wealth Recovered?"; Working Paper 24085 of the National Bureau of Economic Research.)
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