This week in the great wealth meltdown: Pew reports that the wealth gap between America’s middle-income and upper-income families has never been greater in recorded history. In 2013, the median wealth of what Pew defines as a middle-income family was $96,500. The median wealth, or “nest egg,” as Pew terms it, of an upper-income family was nearly seven times that: $639,400.
The Federal Reserve began collecting the Survey of Consumer Finances data that Pew uses in its report in 1983, when the wealth gap between the median upper- and middle-income family was a factor of 3.4. Wealth, for a bit of context, is defined as the difference between a family’s assets and debts. Those assets in this case include things like a house, a retirement account, stocks, bonds, and—unlike in other calculations—a car. (For a full discussion of why some researchers choose not to count cars, it’s worth reading Jordan Weissmann’s Slate post on the wealth gap between blacks and whites, but the basic point is that cars are depreciating assets.)
Thinking about the kinds of assets included in wealth is key to understanding why the gap between middle- and upper-income families might have grown so substantially over the past several years. After hitting a low point in March 2009, the stock market had rallied well over 100 percent by when the Fed began collecting its 2013 data. For America’s upper-income families, which tend to have more of their wealth invested in the stock market, that translated into gains. But for middle-income families, which disproportionately keep their assets in their homes, the market’s momentum hasn’t made much of an impact.
According to Pew’s methodology, 46 percent of families in the U.S. were classified as middle income in 2013, and 21 percent counted as upper income. “The upper fifth of households by income, their typical wealth levels have indeed started to mend from the devastation of the Great Recession,” says Richard Fry, a researcher at Pew and author on the report. “But for the bottom four-fifths of households, particularly the middle income households, they’ve made no gains.”
Beyond stock market gains, the other factor to consider in the growing wealth gap is household income since the recession. “When we look at the incomes of the upper-income households and the incomes of the middle class, what we see in this Fed data is that the typical incomes of upper-income households have at least held steady from 2010 to 2013,” Fry explains, “as opposed to the typical incomes of middle-income households and lower-income households, which have actually have fallen.”
The one caveat to this data is that the 2013 numbers were collected between March and December of 2013. In the time after that survey began, as the Fed points out in a footnote on its findings, housing prices rose and the stock market continued to surge. That means both middle- and upper-class families have likely seen their wealth increase over the last year or so. But whether gains in the housing market have been enough to start narrowing the wealth gap? That’s an open question.