Posts Tagged ‘chart’

wealth ratio

Credit Suisse [pdf] appears to celebrate the growth of wealth, in the United States and around the world, during the last few years.

But the investment giant also sounds an alarm concerning the growth in the ratio of wealth to income:

For more than a century, the wealth income ratio has typically fallen in a narrow interval between 4 and 5. However, the ratio briefly rose above 6 in 1999 during the dot.com bubble and broke that barrier again during 2005–2007. It dropped sharply into the “normal band” following the financial crisis, but the decline has since been reversed, and the ratio is now at a recent record high level of 6.5, matched previously only during the great Depression. This is a worrying signal given that abnormally high wealth income ratios have always signaled recession in the past.

Graphical-top

This chart contains some of the data on economic inequality from the report of a recent conference organized by the Washington Center for Equitable Growth.

From Emmanuel Saez:

In the United States today, the share of total pre-tax income accruing to the top 1 percent has more than doubled over the past five decades. The wealthy among us (families with incomes above $400,000) pulled in 22 percent of pre-tax income in 2012, the last year for which complete data are available, compared to less than 10 percent in the 1970s. What’s more, by 2012 the top 1 percent income earners had regained almost all the ground lost during the Great Recession of 2007-2009. In contrast, the remaining 99 percent experienced stagnated real income growth—after factoring in inflation—after the Great Recession.

Another less documented but equally alarming trend has been the surge in wealth inequality in the United States since the 1970s. In a new working paper published by the National Bureau of Economic Research, Gabriel Zucman at the London School of Economics and I examined information on capital income from individual tax return data to construct measures of U.S. wealth concentration since 1913. We find that the share of total household wealth accrued by the top 1 percent of families— those with wealth of more than $4 million in 2012—increased to almost 42 percent in 2012 from less than 25 percent in the late 1970s. Almost all of this increase is due to gains among the top 0 .1 percent of families with wealth of more than $20 million in 2012. The wealth of these families surged to 22 percent of total household wealth in the United States in 2012 from around 7.5 percent in the late 1970s.

The flip side of such rising wealth concentration is the stagnation in middle-class wealth. Although average wealth per family grew by about 60 percent between 1986 and 2012, the average wealth of families in the bottom 90 percent essentially stagnated. In particu­lar, the Great Recession reduced their average family wealth to $85,000 in 2009 from $130,000 in 2006. By 2012, average family wealth for the bottom 90 percent was still only $83,000. In contrast, wealth among the top 1 percent increased substantially over the same period, regaining most of the wealth lost during the Great Recession.

For both wealth and income, then, there is a very uneven recovery from the losses of the Great Recession, with almost no gains for the bottom 90 percent, and all the gains concentrated among the top 10 percent, and especially the top 1 percent.

PPI

source (November 2009=100)

According to the Bureau of Labor Statistics, prices received by U.S. producers fell in September for the first time in over a year, a potentially worrisome sign for the economy in that—a sign that economic activity is picking up—appears to be failing to gain traction. Producer prices rose 1.6 percent for the year through September, the lowest annual reading in six months.*

So much for the idea that we’re well into an economic recovery!

 

*The Producer Price Index, which measures the average change over time in the selling prices received by domestic producers for their output, is generally associated with changes in consumer prices down the road.

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There are two periods to focus on in this recently updated chart of the real median income of working-age American families:

  1. From 1979 to 2007, the real median income of working-age families in the United States rose 17.4 percent, even though the hourly wage increased by only 13.9 percent—which means that Americans were forced to work longer hours and send more members of the household out to work in order to enjoy higher annual incomes. During the same period, labor productivity increased dramatically, by 58.9—which means that most of the income gains went to a tiny minority at the top and not to working-class families.
  2. During the past six years, the real median income of working-age families in the United States has actually declined by 8 percent—thus erasing all of the gains workers had made from 1996 onward.

The result? American workers and their families have suffered a prolonged period of immiseration—relatively, over the course of the past three-plus decades, and now absolutely, to add injury to insult, during the Second Great Depression.

Chart of the day

Posted: 8 October 2014 in Uncategorized
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weekly earnings

David Leonhardt appropriately identifies what he refers to as “the great wage slowdown of the 21st century.”

The typical American family makes less than the typical family did 15 years ago, a statement that hadn’t previously been true since the Great Depression. Even as the unemployment rate has fallen in the last few years, wage growth has remained mediocre. Last week’s jobs report offered the latest evidence: The jobless rate fell below 6 percent, yet hourly pay has risen just 2 percent over the last year, not much faster than inflation. The combination has puzzled economists and frustrated workers.

hourly wages

source

However, what Leonhardt should have noted is that the problem of wage stagnation has actually been going on for decades now. If we start with the 1970s, we can see that the real median hourly wage (i.e., the real wages of the 50th percentile) only increased by 4 percent between 1973 and 2011, while the real wages at the 90th percentile increased by more than 30 percent during that same period.

What this means is, for the majority of American workers, “the great wage slowdown of the 21st century” is just a continuation of a problem that started decades ago, and has continued virtually uninterrupted (aside from a short interlude in the late-1990s) down to the present.

BN-EV720_urmid1_G_20141003114813 BN-EV772_wagega_G_20141003134803

On one hand, as the Wall Street Journal observes,

For President Obama, the steep ascent of the unemployment rate heading into the 2010 midterms made it tough for Democrats to call for patience while the economy healed. But the economy in the past three years has been on a much rosier trajectory.

On the other hand,

Wages are the weakest part of the current economic recovery, as is evident by this chart. Virtually every midterm election since 1994 has seen better wage gains than what many Americans are currently experiencing. Weak wage growth can weigh on voters–and on a president’s approval ratings.

And the bottom line? Nate Silver continues to have the Republicans as slight favorites (59.4 chance) to win the Senate.

Chart of the day

Posted: 2 October 2014 in Uncategorized
Tags: , , , ,

median net worth

The median net worth in the United States is, in real terms, lower today than it was in 1989.

As Matt O’Brien explains,

This is a story about stocks and houses. The middle class doesn’t have much of the former, which has rebounded sharply, but has lots of the latter, which hasn’t. Indeed, only 9.2 percent of the middle 20 percent of households owns stocks, versus almost half of the top 20 percent. So the middle class has not only missed out on getting a raise, but also on the big bull market the past five years.

The only thing they haven’t missed out on was the housing bust: 63 percent of that middle quintile own their homes, which are more likely to be a financial albatross than asset. And it doesn’t help that, with student loans hitting $1.2 trillion, people have to take out more and more debt just to try to stay in, or join, the middle class.