Bottom 50% of Americans Owned Just 1.1% of All Wealth in 2010

The Congressional Research Service (CRS) has a new report out analyzing the distribution of wealth in the U.S. Think Progress reports on one of the striking findings: the bottom 50% of Americans owned just 1.1% of all wealth in 2010 while the top 1% owned 34.5%. The CRS report illustrates yet again the importance of looking at wealth disparities as a key driver of inequality. While income and wealth do typically increase “in tandem, wealth is more concentrated than income.” Here’s a graph showing the trends in wealth ownership over the last two decades for the bottom half of Americans and the top 1%.

As Reid Cramer pointed out last month, ignoring the role wealth plays in driving inequality is a big mistake. He writes: “wealth and assets are a foundation of economic security.” Adequate wealth helps families weather income drops like unemployment, financial emergencies like a big medical bill, or any other unexpected event. Over the long-term, wealth serves as a launch pad to economic security for future generations: children who inherit wealth, for example, receive tangible benefits from their parents’ wealth holdings. The CRS report explains this dynamic in more depth: “The desire of wealthier households to bequeath assets to their children […] prompts wealthy households to save at a high rate and helps to explain why households in the upper tail of the wealth distribution even in old age do not consume all their assets. […] Wealthy parents can more easily finance their children’s post-secondary education compared with parents who have amassed less savings.” These are among the factors that contribute to generational wealth disparities.

The recent recession has clearly played a role in wiping out families’ wealth. As our Assets Report infographic shows, the recession took a particularly deep toll on wealth in communities of color. While white families lost an average of 16% of their wealth, Hispanic families lost 66% and black families lost 53% of their total net worth. As the CRS report points out, these losses were hugely impacted by the housing crisis. Since households of color were more likely to have wealth in their homes, losses in the housing crisis contributed to widespread declines in wealth. Households in the top 10% of wealth fared better, because while they too experienced housing-related wealth losses during the recession, they own 90.4% of the total value of stocks in the U.S. The report notes that “stock prices have broadly recovered from their lows [but] continuing problems in the residential real estate market continue to suggest that it will be a drag on the wealth of homeowners for some time to come.” Stocks have recovered, but housing prices have not, leaving average Americans floundering.

Unfortunately, while these statistics are jarring, they are not unexpected. In many respects, wealth disparities in the U.S. are the outcome of a range of policy choices made over time, reflecting the priorities of those in power. The differential taxation of wealth versus income, for example, boosts some from rich to richer, but offers no benefit to those who rely solely on earned income for subsistence. The regressive mortgage interest tax deduction is another prime example. Look at this graph, again from the assets report infographic, and see who benefits from this enormous tax expenditure:

Generations of low-income households and communities of color who were excluded from wealth accumulation are still struggling to amass any amount of wealth to help weather the unexpected. The small gains made in closing the racial wealth gap during the 2000s were largely destroyed by the implosion of the housing market. Until our policy priorities align with the goals of equal access to and opportunity for wealth accumulation, we are unlikely to see much improvement of in these figures on wealth inequality.

Note: The CRS report is largely based off the recent Federal Reserve's Survey of Consumer Finances. For more of our in-depth anaylsis of the data from this report, check out this three part series: Part 1: Precautionary Savings; Part 2: Retirement Savings; Part 3: Credit Card Debt.