Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze - An Update to 2007

Abstract

I find here that the early and mid-aughts (2001 to 2007) witnessed both exploding debt and a consequent “middle-class squeeze.” Median wealth grew briskly in the late 1990s. It grew even faster in the aughts, while the inequality of net worth was up slightly. Indebtedness, which fell substantially during the late 1990s, skyrocketed in the early and mid-aughts; among the middle class, the debt-to-income ratio reached its highest level in 24 years. The concentration of investment-type assets generally remained as high in 2007 as during the previous two decades. The racial and ethnic disparity in wealth holdings, after stabilizing throughout most of the 1990s, widened in the years between 1998 and 2001, but then narrowed during the early and midaughts. Wealth also shifted in relative terms, away from young households (particularly those under age 45) and toward those in the 55–74 age group. Projections to July 2009, made on the basis of changes in stock and housing prices, indicate that median wealth plunged by 36 percent and there was a fairly steep rise in wealth inequality, with the Gini coefficient advancing from 0.834 to 0.865.