Where Wealth Surged In The '90s

Among a thin slice of households

There's little dispute that incomes have grown more unequal in the U.S. in recent decades. But the question of the distribution of wealth is more controversial. While research by economist Edward N. Wolff of New York University found a sharp increase in the share of wealth held by the top 1% of households in the 1980s, Federal Reserve survey data relying on different statistical adjustments show relatively little change in the concentration of wealth.

The 1990s, however, may be different. A new technical working paper by Arthur B. Kennickell of the Federal Reserve and R. Louise Woodburn of Ernst & Young suggests that the top 1% of the population--especially the top half of that 1%--has been getting a lot richer.

From 1992 to 1995, a period in which household net worth grew by more than $2.7 trillion, the study finds that the richest 1% boosted their share of the total from 30.2% to 35.1%. What's more, almost all of that gain accrued to the top half of that segment, a group that saw its average net worth jump from $8 million to $11.3 million. (The average for the whole top 1% was $7.2 million.) Meanwhile, the share held by the bottom 90% of households slipped to just 31.5%, down from 32.9%. Their average net worth: nearly $73,000--but just $39,000 when home equity is excluded.

Interestingly enough, the biggest part of the gain racked up by the wealthiest 1% of the population came at the expense of the next 9%. The average net worth of this group remained around $766,000, but its share of the pie fell by 3.7 percentage points.

What's behind the rising concentration of wealth among the top 1%? A big factor is their growing share of business assets such as private companies, entrepreneurships, and professional corporations, which jumped from 56.5% of the total for all households in 1992 to 71.4% in 1995. And the concentration of stock ownership among the very wealthy means they have reaped huge rewards from the stock market boom, despite the rising number of households investing in mutual funds.

From 1992 to 1995, the value of stocks held by the top 1% surged by a heady 72%. And the group's share of household equity holdings also climbed, from 38.5% to 42.2%, as the share held by the bottom 90% actually fell.