by Nicki Lisa Cole
A new report from Pew Research Center has found that the wealth gap between upper-income households and all others is the largest it has ever been. Just as theGreat Recession of 2007 to 2009 had a vastly more damaging impact on the wealth of black and Hispanic households relative to white households, so too has it negatively impacted those in middle- and lower-income brackets. Meanwhile, those in the upper-income bracket have seen their wealth increase during the period of economic recovery from 2010 to 2013.
In 2013, Federal Reserve data showed that the median wealth of upper-income households–$639,400–was 6.6 times greater than the $96,500 median wealth of middle-income households, and 70 times greater than the median wealth of lower-income households. This is the widest these wealth gaps have been in 30 years.
The gap between the upper- and middle-income groups was smallest in 1983, when the rich were 3.4 times as wealthy. It fluctuated between there and 4.4 times through 2001, jumped to 5.0 in 2004, but fell to 4.5 in 2007, the year the recession began. However, during the first year of the recovery, 2010, the gap climbed significantly to a factor of 6.2.
Important to note here is that the measure Pew Research Center uses for income groups accounts for size of household. For a household to be considered upper-income, it must earn a minimum of $66,000 annually for one person; $93,300 for two; $114,300 for three; $132,000 for four; and $147,600 for five. A household is considered middle-income when it earns a minimum of $22,000 for one; $31,100 for two; $38,100 for three; $44,000 for four; and $49,200 for five. By this measure, forty-six percent of U.S. households are middle-income, one-third are lower-income, and twenty-one percent are upper-income.
Keep in mind though, that these are minimum income levels for inclusion in these groups, and that the median wealth for the upper-income group is more than four times greater than the minimum income for an upper-income household of five.
So why has the wealth gap grown? There are two key reasons. One is that upper-income households experienced an increase in their wealth during the period of economic recovery. In 2010, the median wealth for their income group was $595,300, but by 2013 had grown to $639,400 (all in 2013 dollars). However the median wealth for middle-income groups remained the same during this period: $96,500. This means that the recovery was better for the upper-income group than others.
Pew found that the data from the Federal Reserve also show that the impact of the Great Recession on wealth broke along income group lines too, and this is the second reason. Between 2007 and 2010 the median-wealth of the upper-income group fell by 17 percent, whereas the middle-income group’s median wealth fell by 39 percent, and the lower-income group’s, by 41 percent. So, middle- and lower-income groups were hurt far worse by the Great Recession than the upper-income group was.
Further, the data clearly show that the recovery has only truly been a recovery for those who were already wealthy before the recession hit. For the rest of us, and especially for black and Hispanic people, the recovery has actually been a period of continued decline in wealth. In fact, per the Pew report, the wealth of today’s middle- and lower-income households is comparable to what it was in the early 1990s.
Finally, it’s important, from a sociological standpoint, to view all of this through anintersectional lens. Given that the unequal negative impacts of the recession and “recovery” break across both race and class lines, within income groups, the black and Hispanic households will have been harder hit than white households.