Wednesday, October 22, 2014

Another death knell for the middle class

ByAimee Picchi MoneyWatch October 22, 2014,

While many American families enjoyed rising prosperity in the decades following World War II, those wealth gains have eroded, leaving the middle-class poorer than anytime since the 1940s, according to new research from economists Emmanuel Saez of University of California, Berkeley and Gabriel Zucman of the London School of Economics.

At the same time, the richest Americans have become richer, putting their share of wealth at the dizzying heights only seen during the era of "The Great Gatsby" and the Gilded Age of the robber barons, the researchers note.


Following the Great Depression, the country saw a "substantial democratization of wealth," they note. The decades following World War II are often viewed as a golden time for the American middle-class, when families were buoyed by a growing economy and workforce opportunities.

Starting in the 1980s, that trend inverted, leaving the middle class progressively poorer and the richest even richer, the study found. By 2012, the top 0.1 percent of American households owned 22 percent of the country's wealth, compared with only 7 percent in the late 1970s. The top 0.1 percent of American households consist of 160,000 families whose total net assets amounted to more than $20 million in 2012.

Interestingly, it's only the richest of the rich who have benefited from the trend. For those households in the next 0.9 percent of the top 1 percent of the richest U.S. families, total share of wealth actually decreased slightly during the past 40 years, the study found.

"In other words, family fortunes of $20 million or more grew much faster than those of only a few millions," the economists note.

But what about that backbone of the American economy, the middle-class household? That's been a story of wealth erosion since the mid-1980s, when the bottom 90 percent of U.S. families saw their share of wealth peak at 36 percent. Since then, that share of wealth has declined to 23 percent, or on equal footing to the asset share held by the American middle-class in 1940.


Their findings mirror the research into the growing income inequality between the richest Americans and the rest of the country. The top 1 percent of Americans now take home 20 percent of all pre-tax income in the country, or double their share in 1980, according to a study earlier this year from the Paris-based Organisation for Economic Co-operation and Development.


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