American’s are grasping their purse strings tighter than ever. As if paying bills and pinching pennies wasn’t grueling enough, now we must worry about how Trump’s new tax plan or the proposed health care bill will affect our finances. Both these programs are under tough scrutiny as the country’s wealth inequality spins out of control.
But figuring out how the rich are getting richer while the poor get poorer is a hard nut to crack — an attempted explanation would be a different article entirely. What we do know is that wealth inequality is a real problem. Anyone who says otherwise is either in denial or blissfully unaware of the issues Americans are facing across the entire spectrum. These statistics paint a dark picture, we know. In fact, you yourself may be living a few of these sad truths right now.
1. There’s a record amount of cashed-up richies
- The richest 1% of families controlled almost 40% of the country’s wealth in 2016.
Part of what makes the wealth inequality issue such a tough pill to swallow is just how untouchable America’s elite seem to be. The top 1% now holds over 38% of the nation’s total wealth, an increase of 5% from 2007. In comparison, the bottom 90% holds only 22% of the country’s wealth, down from 28.5% in 2007. That’s almost double what the lower earners have.
These numbers showcase why politicians like Bernie Sanders and President Donald Trump ran successful campaigns denouncing America’s “rigged” systems that favor the rich.
2. One in five U.S households have zero or negative net worth
- Most households can’t even fund a $500 emergency.
While the wealthiest 25 individuals in the United States today own $1 trillion in combined assets, other households are drowning in debt. The Billionaire Bonanza report dubs these homes as “underwater households,” meaning they have zero or negative net worth.
Unfortunately, 19% of all households fall into this category, while over 30% of black households and 27% of Latino households have nothing to fall back on. Its obvious that families with little savings endure enormous stress should they face a job loss, illness, or even unexpected car trouble. More than 60% of Americans claim they don’t have enough reserves to cover a $500 emergency, according to the report.
3. Wealth gaps between upper, lower, and middle-income families are at the highest levels ever recorded
- Upper-income families had 75 times the wealth of lower-income families in 2016, compared with 28 times the wealth in 1983.
To put it simply, only the wealthy have managed to fully recover from the 2007 recession. The recession was far more kind to upper-income families as they managed to gain 10% more wealth in recovery than other, less fortunate people. Pew attaches real numbers to this alarming statistic, noting upper-income families are now worth a median $810,800, up about $70,000 since 2007.
Lower-income families, on the other hand, are down about $7,000 in total assets since the recession, with the median family holding only $10,800 in assets. This lower wealth level is comparable to income levels in 1989, a telling statistic that proves a harsher divide exists between classes than we ever imagined.
4. Wealth differs drastically by race
- A white family owns 35 times more wealth than a median black household and 25 times more than a median Latino family.
The typical — or median — white household holds $151,800 in wealth. But Black and Latino households own just $4,300 and $6,200. When experts crunch numbers to determine combined wealth, they consider the value of your home, your car, and your liabilities such as mortgages and student loans. Put simply, do you own more than you owe?
The Billionaire Bonanza report from Inequality.org suggests the possible reason for a large wealth gap could be tied to homeownership trends. For example, there is a racial disparity in homeownership and home equity, two prime factors that contribute to the racial wealth divide. The report found 71.8% of white Americans owned their own homes. By contrast, only 42.3% of African-Americans, and only 45.5% of Latinos owned their homes. The fact that so many people aren’t privy to substantial homeownership tax breaks such mortgage interest deductions, let alone able to afford a home in today’s pricey market, only reinforces the large wealth gap.
5. The U.S. has a wealth gap that’s worse than Russia and Iran
- In cities, that gap is even worse.
The have and have-not situation here at home is even worse than in turbulent countries like Russia and Iran. This is according to urbanist, author, and professor, Richard Florida. In an interview with Fortune, he notes in the Gini coefficient — a measure of inequality where 0 is totally equal and 1 is totally unequal — the U.S. falls at about a 0.45. This rating is worse than Iran which sits at 0.37.
But the wealth inequality in our U.S. cities is even more alarming. Florida explains the inequality quotient in Los Angeles is equivalent to that in Sri Lanka and Miami may as well be Zimbabwe. New York paints the clearest picture of the wealth gap. The 95th percentile in the Big Apple makes $282,000 while the 20th percentile makes a paltry $23,000.
6. There was a slight decrease in overall poverty rates — which means (only) 40.6 million families were in poverty in 2016.
- Seniors 65 and older were the only demographic to see an increase in poverty rates in 2016
The poverty rate for Americans in 2016 was 12.7%, which hardly differs from the pre-Great Recession level of 12.5% in 2007. Even though the overall poverty rate decreased for most demographics, it still represents a whopping 40.1 million people who are unable to make ends meet. But those age 65 and older were the only demographic to lose more ground to poverty in 2016. This means a vast chunk of our family households make less than $24,593 annually. In comparison, the median income for all other American family households was $75,062 in 2016 according to Pew.
The share of Americans in severe poverty – defined by the Census Bureau as those with incomes below half of their poverty threshold – reached its highest point in 20 years. It was 45.6% of all those in poverty in 2016, up from 39.5% in 1996.
7. About 20.6 million people make less than $10.10 an hour
- This means 30% of hourly workers are listed as “near-minimum wage” employees, according to Pew
The current $7.25 per hour federal minimum has lost about 9.6% of its purchasing power to inflation since 2009. Some states agree that the minimum is not enough to survive on, and thus, pay their employees a higher state rate.
But even a more reasonable $10 minimum wage would do little to secure additional wealth. At that rate, workers would still earn less than $21,000 a year. It also means these low-wage hourly workers are usually without health insurance, sick days, pension plans, and other employer benefits wealthier people enjoy.
Still, companies have little incentive to offer higher wages, since their profits soar when they outsource cheap labor. Manufacturing and factory jobs, which were traditionally higher-paying union jobs, disappeared as a result. Walmart is a prime example of a company who has inadvertently contributed to America’s wealth inequality problem by outsourcing labor and paying employees a meager hourly wage.
8. Millennials are dragging…again
- American millennials have more debt than German millennials
The uphill battle millennials have been fighting is nothing new. But when it comes to wealth inequality, it seems they’re getting hit harder than most other generations. A 2017 Credit Suisse report dubs them “unlucky millennials” claiming the recession, rising student debt, higher housing prices, greater income inequality, and less job mobility has created a “perfect storm” preventing these people from accumulating any semblance of wealth.
Their data found American millennials are saddled with more debt than those in Germany. Thirty-seven percent of Americans aged 20–29 had some student debt in 2013, but only 12% of Germans in the same age group could say the same. Also, most Americans have debt ratios greater than their current income.
For some, acquiring more education in order to overcome the “millennial disadvantage” is a winning strategy. For others, it’s a debt cinderblock that foreshadows a bleak financial future.
Follow Lauren on Twitter @la_hamer.
Check out The Cheat Sheet on Facebook!