A Country of Mini-Millionaires?

The Wall Street Journal’s rosy take on the latest Federal Reserve wealth report.

BY JOHN MILLER | January/February 2024

This article is from Dollars & Sense: Real World Economics, available at http://www.dollarsandsense.org

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The Federal Reserve revealed that last year the average net worth of American families topped $1 million for the first time. Yet it would be a mistake to therefore conclude that wealth gains are purely a phenomenon of the top 1%.

Real average wealth was up 23%, while the level of median wealth rose by 37%, adjusted for inflation. That means wealth inequality actually narrowed. About 16 million American families—just over 12%—have wealth exceeding $1 million. The biggest wealth gains between 2019 and 2022 were among the approximately 13 million families in the 80th to 90th percentile of the income distribution.

Many families have little or no wealth, and limited prospect of accumulating any.

—Jodh Zumburn, “Never Mind the 1%. Mini-Millionaires Are Where Wealth Is Growing Fastest,” Wall Street Journal, Oct. 27, 2023.

Average family wealth was over $1 million in 2022 and growing faster than that of the top 1%. But before you get as excited as Wall Street Journal reporter Jodh Zumburn is about the Fed’s latest Survey of Consumer Finances, you better read the fine print.

More “mini-millionaires” than ever before adds up to just 12% of families in 2022. And as Zumburn was compelled to point out, “many families have little or no wealth.”

Let’s take a closer look at what the Fed’s 2022 Survey of Consumer Finances actually had to say about the distribution of wealth in the U.S. economy.

Mini-Millionaires and the Debt-Ridden

Being a millionaire is not what is used to be. Just to be clear, Zumburn is not talking about making $1 million in a year. By “millionaire,” Zumburn means families with a net worth (the value of all their assets—a house, cars, stock, savings, and other financial assets—minus the debt they owe) that exceeds $1 million. Nor are all Zumburn’s millionaires rich, at least what we used to think of as rich. One of my favorite TV shows when I was a child was “The Millionaire.” Each week, the lead, the personal secretary of an extremely wealthy benefactor, would deliver a $1-million check to a different family. In its last season, 1960, those checks were worth $9.9 million in 2022 dollars. When the TV show “Who Wants to be a Millionaire?” premiered in 1999, a million dollars was still the equivalent of $1.8 million in 2022. And according to the respondents of Charles Schwab’s 2033 Modern Wealth Survey, you need at least $2.2 million of net worth to be rich today.

Nonetheless, not just anyone can be a mini-millionaire. Mini-millionaires, whom Zumburn describes as “upper middle class” rather than rich, typically make between $150,000 and $250,000 per year. That’s more income than that of fourth fifths (78.9% to be exact) of U.S. households in 2022. And nearly nine out of ten of Zumburn’s mini-millionaires own their home, and well over 90% of them own stock, either directly or through a retirement account.

For those at the bottom of the wealth distribution, things were quite different. By 2019, even after a decade-long economic recovery following the Great Recession, 10.4% of U.S. families had more debt than they did assets. The Aspen Institute, the educational and policy center, developed a profile of these nearly 13 million families. Compared to other families, their income was far lower, and they were nearly twice as likely to spend at least 40% of their income repaying debts. These highly indebted families were more often Black and young, and twice as likely to be headed by women. The Aspen Institute found that student debt had replaced mortgage debt as the key driver of their negative net worth. And in its latest Survey of Consumer Finances, even after the gains Zumburn emphasizes, 9.5 million households, 7.5% of all households, still had more debt than assets in 2021.

Large Gains and Starkly Unequal Net Worth

In 2019, median net worth had still not returned to its 2007 level, after falling 39% as housing values plummeted during the Great Recession. Only in 2022, fifteen years later, did real net worth reach a new high. And the 37% gain in net worth after inflation from 2019 to 2022 was the largest on record since the Fed began its triennial survey in 1989.

The wealth gains from 2019 to 2022 were widespread. Net worth increased across the distribution of wealth. The gains were especially large for the 80% to 90% decile, emphasized by Zumburn, as well for the middle quintile (40% to 60%) and for the bottom quintile (0% to 20%).

Nonetheless, the dollar differences in net worth remained stunning. In 2022, the median net worth of the bottom 20% was $16,900. The net worth of the top 10% was 157 times that, $2.7 million.

Other differences were even more intractable. The median net worth (corrected for inflation) of families at all levels of education increased from 2019 to 2022. But the real median net worth of families with earners without a high school degree, with only a high school degree, or even with even some college, was still less than what it had been in 2007. For families with earners without a high school degree, their real net worth was even less than what it had been in 1989. And in 2022, the median worth of families with earners with a college degree was more than four times as much of that of families with earners with only a high school degree.

Racial differences in net worth also remained quite pronounced, despite the real net worth of Black families increasing twice as quickly as white families from 2019 to 2022 (61% vs. 31%). The gains for Black families were due mostly to increases in net housing wealth (the market value of family homes minus any outstanding loans secured by the home). Nonetheless, the dollar gap between the wealth of Black and white families increased substantially because Black family net worth was so much lower than that of White families. Fed economists Aditya Aladagnady, Andrew Chang, and Jacob Krimmel report that since 2007, the gains of the typical Black family ranged between $10 and $15 of wealth for every $100 of wealth gain of the typical white family. By 2022, the median net worth of Black families was $44,100, and $284,310 for white families, six and a half times that of Black families.

Did Wealth Inequality Narrow?

Wealth inequality did narrow, but only from 2019 to 2022, and remained far more unequal than three decades ago. The ratio of the median net worth of the top 1% to that of bottom 50% of U.S. families fell from 16.4 in 2019 to 12.6 in 2022. Most of the reduction was due to the price of houses increasing more quickly than inflation. That pushed up the net worth of the bottom half of families. But even at a 12.6 ratio, the average net worth of families in the richest 1% remained 630 times that of families in the bottom 50%.

But compared to what it had been in 2007 and earlier years, U.S. wealth inequality has widened, not narrowed. The 12.6 ratio of the median net worth of the top 1% to the bottom 50% in 2022 was still higher than the 12.5 ratio in 2007, and wealth inequality remained far greater than it had been in 1989. The ratio of the top 1% to the bottom 50% ratio in 1989 was 5.9, less than half the ratio in 2022, some three and half decades later. The share of net worth that went to top 1% was far less than in 2022, and the share of the bottom 50% substantially greater than in 2022. But even then, the average net worth of families in the top 1% was still nearly 300 times that of families in the bottom 50%. And by the first three months of 2022, the richest 1% held nearly a third of the wealth of the country, 31% of the net worth of households. That was more than at any time since 1989.

In addition, the wealth share of wealth of the U.S. top 1% was greater, actually far greater, than in most other rich countries. In 2022, the wealth share of the U.S. top 1% was higher than that in the other G-7 countries (Canada, France, Germany, Italy, Japan, and the United Kingdom). Also in 2021, the U.S. Gini coefficient for wealth inequality, economist’s most comprehensive measure of inequality, was 0.85 (where 0 is the most equal and 1 is the most unequal). That number was higher than all but two of the 37 countries of the Organization for Economic Cooperation (OECD).

Mini-Progress Is Not Enough

The 2022 Survey of Consumer Finances makes clear that even when market forces trim the differences in wealth and increases the ranks of the well-to-do, the alarming differences between the rich and most people remain intact. And when Wall Street Journal reporters feel compelled to recognize that today “many families have little or no wealth and limited prospect of accumulating any,” you know that “The Millionaire” is not going to show up with a check for $9.9 million—and that it’s well past time to act.

Corrective action should begin with taxing wealth and using the revenues from requiring the super-rich to pay their fair share of taxes to remove the obstacles that stand in the way of families with little or no wealth improving their economic position. A 2022 Aspen Institute report proposed “101 Solutions for Inclusive Wealth Building.” Some good places to start would be cancelling student debt, ending housing discrimination, creating universal savings accounts for all children, and enacting policies that would expand union power and enable workers to make a living wage in a full-employment economy.

is a professor of economics at Wheaton College and a member of the Dollars & Sense collective.

Federal Reserve, 2022 Survey of Consumer Finances (federalreserve.gov/econres/scfindex.htm); Federal Reserve, Survey of Consumer Finances, Historical Tables; Survey of Consumer Finances, SCF Interactive Chart, Before Tax Family Income by All Families; Survey of Consumer Finances and Financial Accounts of the United States, Distribution of Household Wealth in the U.S. Since 1989; “Changes in U.S. Family Finances from 2019 to 2022:Evidence from the survey of Consumer Finances, “Research and Analysis, Federal Reserve System, October 2023; Aditya Aladangady, Andrew C. Chang, and Jacob Krimmel with assistance from Eva Ma, “Greater Wealth, Greater Uncertainty: Changes in Racial Inequality in the Survey of Consumer Finances,” FEDS Notes, Oct 18, 2023; Charles Schwab Modern Wealth Survey 2023: Full Report; Shehryar Nabi, “Thirteen million US households have negative net worth. Will they every move from debt to wealth?” The Aspen Institute, May 25, 2022; “101 Solutions For Inclusive Wealth Building: Solutions Summary,” The Aspen Institute Financial Security Program, April 26, 2022; Global Wealth Databook 2022, Credit Suisse Research Institute, Table 3.1 Wealth Pattern within Countries, 2921, Table 4.5 Wealth Shares and minimum wealth of deciles and top percentiles for regions and selected countries, 2021; Anthony Shorrocks and James Davies, Global Wealth Report 2023, UBS, “Global Wealth Distribution 2022,” Table 6, Wealth Inequality trends, 2000–2022, selected markets.

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