Wealth in the United States is commonly measured in terms of net worth, which is the sum of all assets, including home equity, minus all liabilities.^[1]

For example, a household in possession of an $800,000 house, $5,000 in mutual funds, $30,000 in cars, $20,000 worth of stock in their own company, and a $45,000 IRA would have assets totaling $900,000. Assuming that this household would have a $250,000 mortgage, $40,000 in car loans, and $10,000 in credit card debt, its debts would total $300,000. Subtracting the debts from the worth of this household's assets (900,000 - $300,000 = $600,000), this household would have a net worth of $600,000. Net worth can vary with fluctuations in value of the underlying assets.

The wealth--more specifically, the median net worth--of households in the United States is varied with relation to race, education, geographic location and gender. As one would expect, households with greater income feature the highest net worths, though high income cannot be taken as an always accurate indicator of net worth. Overall the number of wealthier households is on the rise, with baby boomers hitting the highs of their careers.^[1] In addition, wealth is unevenly distributed, with the wealthiest 25% of US households owning 87%^[2] of the wealth in the United States, which was $54.2 trillion in 2009.^[3][4]

Contents 1 Income vs. Wealth 2 Changes in wealth, 1989–2001 3 Changes in wealth after 2007 4 Mechanisms to gain wealth 5 Wealth Inequality and Class 6 Wealth Inequality and Race 7 Wealth and Housing 8 Distribution of wealth 9 See also 10 References 11 Further reading 12 External links

[edit] Income vs. Wealth

While income is often seen as a type of wealth in colloquial language use, wealth and income are two substantially different measures of economic prosperity. While there may be a high correlation between income and wealth, the relationship cannot be described as causal.

[edit] Changes in wealth, 1989–2001

When observing the changes in the wealth among American households, one can note an increase in wealthier individuals and a decrease in the number of poor households, while net worth increased most substantially in semi-wealthy and wealthy households. Overall the percentage of households with a negative net worth (more debt than assets) declined from 9.5% in 1989 to 4.1% in 2001.^[1]

The percentage of net worths ranging from $500,000 to one million doubled while the percentage of millionaires tripled.^[1] From 1995 to 2004, there was tremendous growth among household wealth, as it nearly doubled from $21.9 trillion to $43.6 trillion, but the wealthiest quartile of the economic distribution made up 89% of this growth.^[3] During this time frame, wealth became increasingly unequal, and the wealthiest 25% became even wealthier.

According to US Census Bureau statistics this "Upward shift" is most likely the result of a booming housing market which caused homeowners to experience tremendous increases in home equity. Life-cycles have also attributed to the rising wealth among Americans. With more and more baby-boomers reaching the climax of their careers and the middle aged population making up a larger segment of the population now than ever before, more and more households have achieved comfortable levels of wealth.^[1] Zhu Xiao Di (2004) notes that household wealth usually peaks around families headed by people in their 50s, and as a result, the baby boomer generation reached this age range at the time of the analysis.^[3]

[edit] Changes in wealth after 2007

Household net worth fell from 2007 to 2009 by a total of $17.5 trillion or 25.5%. This was the equivalent loss of one year of GDP.^[5] By the fourth quarter of 2010, the household net worth had recovered by a growth of 1.3 percent to a total of $56.8 trillion. An additional growth of 15.7 percent is needed just to bring the value to where it was before the recession hit in December 2007.^[2]

[edit] Mechanisms to gain wealth

Assets are known as the raw materials of wealth, and they consist primarily of stocks and other financial and non-financial property, particularly homeownership.^[6] While these assets are unequally distributed, financial assets are much more unequal. In 2004, the top 1% controlled 50.3% of the financial assets while the bottom 90% only held 14.4% of the total US financial assets.^[6]

These discrepancies exist despite the availability of many wealth building tools established by the Federal Government. These include 401k plans, 403b plans, and IRAs. Traditional IRAs, 401k and 403b plans are tax shelters created for working individuals. These plans allow for tax sheltered (or pre-tax) contributions of earned income directly to tax sheltered savings accounts. Annual contributions are capped to ensure that high earners cannot enjoy the tax benefit proportionally. The Roth IRA is another tool that can help create wealth in the working and middle classes. Assets in Roth IRAs grow tax free; interests, dividends, and capital gains are all exempt from income taxes. Contributions to Roth IRAs are limited to those with annual incomes less than the threshold established yearly by the IRS. The benefits of these plans, however, are only available to workers and families whose incomes and expenses allow them excess funds to commit for a long period, typically until the investor reaches age 59½.

[edit] Wealth Inequality and Class

In 2004, the wealthiest 25% of US households owned 87% ($43.6 trillion) of the country’s wealth, while the bottom quartile held no net wealth at all.^[3] The middle 50% of the country held 13% or $6.5 trillion of the total household net wealth.^[3] The previous data are taken from analysis of the Survey of Consumer Finances (SCF) which over samples wealthy households. This over sampling more accurately represents the true wealth distribution [since most of the wealth is concentrated at the top]. This data shows that the top 25% of American society holds on average a net wealth of $1,556,801 which is 33 times more than those of the lower middle class, or the 25th-50th percentile.^[3]

In addition to unequal wealth distribution, it can be difficult for individuals in the lower income distributions to gain economic mobility which inhibits their ability to accumulate wealth.^[6] In 2006, children in the lowest 20% of the income distribution only had a 17% chance of making it to the upper 40% of the income distribution.^[6] In 2004, children in the lowest 20% of the wealth distribution had only a 7% chance to make it to the top wealth distribution.^[6]

In other words, wealthy parents tend to produce wealthy children, and poor parents tend to produce poor children. The Panel Study of Income Dynamics shows how stratification is becoming worse and worse since 1984. The lowest percentile has become worse, and the highest percentile has become wealthier. The fifth percentile has dropped further into negative net worth, while the 90th percentile has gained over four hundred points within the last twenty one years.^[7]

However, compared to most countries, upward wealth mobility in the U.S. remains quite high. For instance, the U.S. Income Mobility Study conducted by the Treasury Department found the following -

The Treasury study examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.

Of those in the second lowest income quintile, nearly 50% moved into the middle quintile or higher, and only 17% moved down. This is a stunning show of upward mobility, meaning that more than half of all lower-income Americans in 1996 had moved up the income scale in only 10 years.

The income of those in the top 1% fell by 25.8%, on average, and the top 10% by 2.8%.^[8]

[edit] Wealth Inequality and Race

While African-Americans' average income has risen from $23,514 (in 2002, dollars) to $30,134 in 2004, their wealth is a different story.^[9] Thomas Shapiro, in his book The Hidden Cost of Being African American, states that the median white family has an average of $81,000 in net worth while the median black family only has $8,000.^[10] This means that black families possess, generally, only 10 cents for every white dollar in wealth. Other sources state that for every $1 in wealth the median white family has, black families have less than 17 cents. In 2001, only 10 percent of African Americans possessed any holdings in the stock market. In 2001, only 69% of African Americans held retirement plan, and the average value of a retirement plan for an African American family was just $12,247 (compare to Whites' median retirement plan of $65,411).^[9]

Shapiro states that transformative assets may help explain this wealth gap. He argues that white individuals benefit from these assets which exist above and beyond income.^[10] This can include inheritance, payment of college, down payments on homes, child care, etc. For example, the Federal Reserve Bank noted that the average inheritance plus financial gifts for the average white family in 2001 was $20,685; the average African American legacy was around $2,000.^[9]

Among the 85 Black families in Shapiro’s study, only three black families had received a head-start inheritance of $14,000 in the form of down payments and inheritance. In this study, white families were seven times as likely to be given a substantial inheritance.^[10] Data from the Panel Study of Income Dynamics (PSID) indicate that in the 1990s, nearly 1 in every 4 white families received an inheritance after the death of a parent, while only about 1 in every 20 African American families inherited in this manner.^[10] The amount for whites averaged nearly $144,652 while the black families averaged, $41,985.

Native Americans suffer from disproportionately high levels of poverty. Despite the expanse of land which includes many natural resources, Native Americans have the highest poverty rates in America at 25.7%. They also suffer from low education levels and high levels of chronic diseases. In 1999, among Native Americans, the average median home value was $81,000 which is only 2/3 that of white. Some point to unfair federal policies that unjustly extract newly acquired resources from tribal land which could augment wealth.^[9]

In 2001, the average Latino family was only worth $11,458. In 2003, 57.35% of all Latino families in the US fell into the zero to $40,000 income distribution. In 2003, only 13.6% of Latino families made earnings of $80,000 or more in comparison to 34% of white families.^[9]

While some argue that Asians represent the most successful minority, wealth remains unequally distributed across this demographic.^[9] Asians and Pacific Islanders represent a challenging demographic because they are the only racial category in the United states that has high concentrations in both the top economic quintiles and the lowest economic quintiles. Because of these factors, the data for Asians is often skewed and not representative. The term Asian American encompasses many different groups of Asians including Cambodians, Vietnamese, Korean, Indian, and others. Looking across groups, Cambodians have the lowest rates of homeownership, business ownership, and income. Nonetheless, Asians overall have higher income levels than all other racial groups, including whites, and the trend appears to be increasing in relation to those groups.^[9]

[edit] Wealth and Housing

Home ownership is one of the main sources of wealth among families in the United States.^[10][11] However, there are racial differences in the acquisition of housing, and this inequality reproduces stratification in housing wealth across the races.^[10] For white families, homeownership is worth, on average, $60,000 more than it is worth for black families. The idea of buying a house to let it appreciate in value over time in order to increase wealth is not possible for some people of color.^[9] For black families, higher interest rates often cause roadblocks to home ownership.^[10]

Because Blacks pay on average, interest rates about 1/3 higher than whites, they are unable to afford the housing, because this subtle change can add up over time. One explanation for why there are higher interest rates is because whites typically come to the table with more assets in the form of down payments which sets them up to pay lower interest rates. Black families do not typically have these assets or down payments to place down on a home in order to lower the interest rates. White Flight also decreases the value of African American homes as they are not able to resale their house at reasonable value.^[10][12] It also cannot be ignored that Black Americans have been hit hardest by the historical practice of redlining, which continues today. That and the sub-prime mortgage fiasco, also focused at Black families, contributed to both strip equity out of black neighborhoods and wealth from Black families.

Recent statistics (2003) have shown that the homeownership rates for blacks are close to 25 percentage points less than white families (Whites = 75.4% homeownership rates, Blacks = 48.1%).^[10] Homeownership among Latino Americans is lower than other groups in the United States with a rate of 47%. For Asian/Pacific Islander, the homeownership rate is 56.3%. For Native American, it is 54.3%.

[edit] Distribution of wealth

• Family net worth
• 

  U.S. mean family net worth by percentile of net worth (1989–2007)

• 

  U.S. median family net worth by percentile of net worth (1989–2007)

• Percent change in net worth
• 

  Percent change in mean net worth (1989–2007)

• 

  Percent change in median net worth (1989–2007)

The total value of all U.S. household wealth in 2000 was approximately $44 trillion. Prior to the Late-2000s recession which began in December 2007 its value was at $65.9 trillion. After, it plunged to $48.5 trillion during the first quarter of 2009. The total household net worth rose 1.3% by the fourth quarter of 2009 to $54.2 trillion, indicating the American economy is recovering.

Family net worth, by selected characteristics of families, 1989–2004 surveys[13]
Thousands of 2004 dollars
Family characteristic	1989	1992	1995	1998	2001	2004
Median	Mean	Median	Mean	Median	Mean	Median	Mean	Median	Mean	Median	Mean
All Families	68.8	272.6	65.2	245.7	70.8	260.8	83.1	327.5	92.2	422.9	93.1	448.2
Percentiles of income
Less than 20	2.6	36.2	5.2	43.4	7.4	54.7	6.8	55.4	8.4	56.2	7.5	72.6
20-39.9	35.3	96.4	36.6	84.6	41.3	97.4	38.4	111.4	39.9	122.7	33.7	121.5
40-59.9	61.1	148.5	52.1	133.3	57.1	126.0	61.9	146.6	67.8	173.3	72.0	194.6
60-79.9	97.5	199.3	99.3	185.4	93.6	198.5	130.2	238.3	152.6	313.2	160.0	340.8
80-89.9	193.5	326.1	151.8	297.1	157.7	316.8	218.5	377.1	280.3	487.0	313.3	487.4
90-100	569.5	1,438.5	479.3	1,266.0	436.9	1,338.0	524.4	1,793.9	887.9	2,410.9	924.1	2,534.6
Age of head (years)
Less than 35	11.4	68.7	12.0	59.7	14.8	53.2	10.6	74.0	12.5	96.6	14.2	73.5
35-44	82.7	216.4	58.7	175.5	64.2	176.8	73.5	227.6	82.6	276.6	69.4	299.2
45-54	144.8	405.1	103.1	353.3	116.8	364.8	122.5	420.2	141.6	517.6	144.7	542.7
55-64	143.5	451.2	150.2	445.4	141.9	471.0	148.2	617.0	197.4	779.5	248.7	843.8
65-74	112.4	410.2	130.0	377.6	136.6	429.3	169.8	541.1	189.4	722.6	190.1	690.9
75 or more	106.2	354.2	114.5	282.3	114.5	317.9	145.6	360.3	165.4	499.6	163.1	528.1
Education of head
No high school diploma	35.3	121.8	24.6	92.4	27.9	103.7	24.5	91.4	27.2	110.8	20.6	136.5
High school diploma	54.0	163.3	50.7	147.1	63.9	163.7	62.7	182.9	61.8	193.0	68.7	196.8
Some college	67.4	273.3	76.0	226.0	57.6	232.3	85.6	275.5	77.5	305.7	69.3	308.6
College degree	162.8	530.2	129.4	447.5	128.6	473.6	169.7	612.3	227.2	848.0	226.1	851.3
Race or ethnicity of respondent
White non-Hispanic	104.2	333.4	91.9	292.9	94.3	308.7	111.0	391.1	130.2	520.2	140.7	561.8
Nonwhite or Hispanic	9.8	92.1	15.8	102.0	19.5	94.9	19.3	116.5	19.1	125.1	24.8	153.1
Current work status of head
Working for someone else	55.7	166.7	51.6	161.0	60.3	168.4	61.2	194.8	69.3	240.3	67.2	268.5
Self-employed	248.7	955.2	190.2	790.6	191.8	862.7	288.0	1,071.3	375.2	1,342.9	335.6	1,423.2
Retired	96.9	267.9	92.9	250.1	99.9	277.2	131.0	356.5	123.1	483.6	139.8	469.0
Other not working	1.2	57.6	4.3	70.0	4.5	70.1	4.1	85.8	9.5	192.3	11.8	162.3
Region
Northeast	128.1	316.1	84.5	277.2	102.0	308.9	109.3	351.3	99.3	483.2	161.7	569.1
Midwest	77.0	274.8	75.1	228.1	80.8	244.7	93.1	288.5	113.3	363.3	115.0	436.1
South	51.7	192.8	45.5	185.5	54.2	229.5	71.0	309.6	78.6	400.6	63.8	348.0
West	67.2	360.0	94.2	335.4	67.4	286.1	71.1	379.1	93.4	470.4	94.8	523.7
Housing status
Owner	147.1	394.8	130.2	355.7	128.1	373.7	153.2	468.7	183.8	596.9	184.4	624.9
Renter or other	2.9	56.3	4.2	50.9	6.0	53.8	4.9	50.4	5.1	58.6	4.0	54.1
Percentiles of net worth
Less than 25	0.3	-0.9	0.6	-0.8	1.2	-0.2	0.6	-2.1	1.2	†	1.7	-1.4
25-49.9	30.9	33.7	30.9	33.4	34.7	37.6	37.9	41.6	43.5	47.2	43.6	47.1
50-74.9	127.0	130.4	115.4	119.2	117.1	122.6	139.7	149.1	168.2	177.9	170.7	185.4
75-89.9	308.2	331.2	268.5	287.4	272.3	293.6	357.7	372.7	458.8	480.7	506.8	526.7
90-100	1,009.5	1,820.7	876.2	1,645.8	836.7	1,766.7	1,039.1	2,244.2	1,388.5	2,944.3	1,430.1	3,114.2
Note: See note to table 1. † Less than 0.05 ($50).

[edit] See also

Wikimedia Commons has media related to: Wealth

• Household income in the United States
• Poverty in the United States
• Economy of the United States
• Redistribution of wealth#Public_opinion
• Wealth inequality in the United States

[edit] References

[edit] Further reading

• Frank, Robert L. (2007). Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich. Crown Publishing Group. pp. 277. ISBN 0307339262. http://books.google.com/books?id=slDLwk_lJWQC&printsec=frontcover. 

[edit] External links

• Americans Underestimate U.S. Wealth Inequality - audio report by NPR

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