5 Must-Know Facts About the Shocking Divide Between Rich and Poor in America

The distribution of wealth in the United States hasn’t been as lopsided as it is now since the years leading up to the Great Depression, when the richest 10 percent of Americans owned 84 percent of the country’s wealth. This fact—along with other surprising trends in wealth and poverty—was unearthed in a new report from researchers Emmanuel Saez of the University of California, Berkeley, and Gabriel Zucman of the London School of Economics. In an analysis of the wealth of American families over the past 100 years, the researchers considered an array of complicated data sets and factors including family pensions, life insurance, and income tax.

What they found is that the gap between the rich and the poor has gotten larger over the past few decades, due in large part to the explosive growth of wealth for the richest of the rich. The study also shows that the 1980s were the closest the country has been to a golden age for economic equality—not exactly what Ronald Reagan is known for these days.

(Graph: Courtesy Gabriel-zucman.eu)

Here are five other things you should know about the state of America’s rich:

1. Gatsby Is Alive and Well

While you may have heard of “the one percent,” it is actually the top .01 percent whose wealth is growing exponentially. This exceedingly rich and tiny demographic includes approximately 16,000 families across the U.S. who each have an average net worth of about $371 million. In 1978, this elite sliver of American society was 220 times richer than the average family. Now they are 1,120 times wealthier than the average family.

The share of wealth held by this sector is now almost as high as it was in the Roaring ’20s, a time of Gatsby-like opulence and large family fortunes—much of which was upended with the Great Depression, so there’s that to fret about.

2. Most Americans Are Not Wealthier Than They Were in 1986

Maybe you worked your first job in the 1980s, and this statement doesn’t apply; that was the age of mall pizzeria jobs for you, and you’ve come a long way, baby. But it refers to how the share of America’s wealth owned by the middle class increased from the 1930s to the 1980s, peaked in the mid-’80s, and has been in decline ever since. Nowadays, as the upper crust pads their wallets, the middle class struggles to save money, and their piece of the pie is shrinking, due in large part to growing student debt, mortgage payments, and consumer credit debt.

“Contrary to a widespread view, we find that despite the rise in pensions and home ownership rates, the middle class does not own a significantly greater share of total wealth today than 70 years ago,” the report states.

Although the “late 1990s tech-boom and the mid-2000s housing bubble” brought the average wealth of a middle-class family up to $130,000, the Great Recession of 2007–2009 caused that number to tumble, this time by more than $40,000. The middle and lower classes have yet to recover, and the average wealth of the bottom 90 percent of Americans was no higher in 2012 than it was in 1986.

3. Things Aren’t Looking Up for the Elderly Either

Older people are relatively poorer today than they were half a century ago. In the 1960s, the uber rich were typically elderly individuals who were part of the 65 and over set. Now, some of the richest Americans (and many of the top .01 percent) are young, working individuals who are making a lot of money.

“In the 1960s, the rich were not very likely to be working, often because they were retired, or widowed from a rich husband,” the report says.

It’s difficult to tell whether this new, flush demographic is rich off of “self-made” or “dynastic” money (think Mark Zuckerberg and Paris Hilton, respectively), but the researchers hope their study will spur further investigation into that.

4. Very Few People Can Save Anymore

Not only is the middle class making less, but they are having a harder time holding onto their money. While the top 1 percent is able to save about 35 percent of their income, the bottom 99 percent save about zero.

From the late 1930s through the 1970s, there was a “substantial democratization” of wealth in America. The finances of America’s middle class grew as families made more money, began to buy houses, and received expanded tax breaks for retirement funds. By the early 1980s, the middle class peaked, holding 36 percent of the country’s wealth, about four times the amount of wealth held by the .1 percent. It has been downhill for the majority of Americans ever since.

5. Is There a Way to Better Share the Wealth?

Maybe, but it would require new policies that would allow middle class families to make more money and keep that money—for example, instituting a more progressive income tax policy, which would require the rich to pay a larger percentage of their income and allow the poor and middle class to pay less, the researchers say.

Other economic and social changes, such as affordable health care and access to quality education, may also help even the playing field and boost middle class wealth. And by encouraging long-run savings and savvy investments, the gap between the rich and the middle class may begin to narrow. But if these things don’t change, wealth disparity in the U.S. will only continue to increase.

“Ten or twenty years from now, all the gains in wealth democratization achieved during the New Deal and the post-war decades could be lost,” the researchers write. “While the rich would be extremely rich, ordinary families would own next to nothing, with debts almost as high as their assets.”