US continues trend to two-tiered society

I have long felt that the worst challenge facing America is the trend, which started around 1980, for those at top part of economy to get higher and higher income and assets while those in lower half lose income (in real terms). The latest figures from the Federal Reserve confirm that this trend continued unabated through 2004.

The trend toward what economists call the “hourglass economy” is going strong. Here are some selected stats:

In 1995 average family income was $54,900. Median (mid point) was $37,800. By 2004, median had increased by less than $6,000 (to 43,200) but average had jumped by almost $16,000 (to $70,700). Rapidly growing income at top levels accounted for this disparity.

But even average was not in good shape from 2001, to 2004, dropping from $72,400 to $70,700.

From 2001 to 2004, median real wages dropped by 6%.

Real net worth of families (the difference between family assets and liabilities) rose only 1.5% from 2001 to 2004, to $93,100 versus a 10.3% gain from 1998 to 2001.

Liabilities rose faster than assests during this period, due largely to a big rise in mortgage debt. Median debt level jumped 33.9% to $55,300.

Breaking out net worth by income group, real net worth of the wealthiest 10% of families rose 4% in 2004 to $924,100.

Net worth of the group whose income is in the 20% to 40% category dropped 13% to $34,300.

Net worth of bottom 20% dropped 10% to $7,500.

The rich get richer and the poor get poorer. Not exactly the American Dream.

You must be logged in to post a comment.