The Typical Household, Now Worth a Third Less

The Typical Household, Now Worth a Third Less

By ANNA BERNASEK JULY 26, 2014

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.

The Russell Sage study also examined net worth at the 95th percentile.

(For households at that level, 95 percent of the population had less wealth.) It
found that for this well-do-do slice of the population, household net worth
increased 14 percent over the same 10 years. Other research, by economists like
Edward Wolff at New York University, has shown even greater gains in wealth
for the richest 1 percent of households.

For households at the median level of net worth, much of the damage has
occurred since the start of the last recession in 2007. Until then, net worth had
been rising for the typical household, although at a slower pace than for
households in higher wealth brackets. But much of the gain for many typical
households came from the rising value of their homes. Exclude that housing
wealth and the picture is worse: Median net worth began to decline even
earlier.

“The housing bubble basically hid a trend of declining financial wealth at
the median that began in 2001,” said Fabian T. Pfeffer, the University of


Michigan professor who is lead author of the Russell Sage Foundation study.

The reasons for these declines are complex and controversial, but one
point seems clear: When only a few people are winning and more than half the
population is losing, surely something is amiss.

Correction: July 27, 2014

An earlier version of this article described incorrectly the households
discussed in part of a study conducted by the Russell Sage Foundation. The
households had greater wealth than 95 percent of the population, not 94
percent.

A version of this article appears in print on July 27, 2014, on page BU6 of the New York edition
with the headline: The Typical Household, Now Worth a Third Less.