Summary of major findings
The last two decades have witnessed some remarkable events in terms of personal wealth. After rising sharply through 2007, the collapse of the stock market and the sudden collapse in home pricestook an immense toll on many Americans. What happened and why is an amazing story about theGreat Recession and its repercussions.
Median wealth plummeted over the years 2007 to 2010.
Middle class debt exploded from 1983 to 2007, already creating a highly fragile middle class.Their situation worsened during the Great Recession. As a result inequality of net worth,after almost two decades of little movement, rose sharply between 2007 and 2010.
The racial and ethnic disparity in wealth widened considerably in the years between 2007and 2010. Blacks and especially Hispanics lost in net worth and net equity in their homes.
Young households (under age 45) also were pummeled by the Great Recession, as their wealth declined sharply both in absolute terms and in comparison with older households.
Data sources and methods
This study focuses mainly on how the middle class fared in terms of wealth over the years2007 to 2010 during one of the sharpest declines in stock and real estate prices. I also investigatetrends in wealth inequality, changes in the racial wealth gap, wealth differences by age, and trendsin home ownership rates. The period covered spans the years from 1962 to 2010. The choice of years is dictated by the availability of survey data. By 2010, we are able to see what the fall-out wasfrom the financial crisis and associated recession.
The primary data source is the
Survey of Consumer Finances
(SCF) conducted by theFederal Reserve Board. Each survey consists of a core representative sample combined with ahigh-income supplement. The high income supplement was selected from a sample derived fromtax data from the IRS
Statistics of Income
. This second sample was designed to disproportionatelyselect families that were likely to be relatively wealthy. Typically, about two thirds of the casescome from the representative sample and one third from the high-income supplement.
The principal wealth concept used here is marketable wealth (or net worth), which is defined as the current value of all marketable or fungible assets less the current value of debts. Net worth is
Two other data sources are also used: the 1962 Survey of Financial Characteristics of Consumers, alsoconducted by the Federal Reserve Board, and the 1969 MESP file, a synthetic dataset based on the 1970 Census of Population with matched records from the 1969 Internal Revenue Survey Tax Model.