Surprise The Rich Get Richer

New data on wealth concentration

Since the early 1990s, as the soaring stock market added trillions of dollars to U.S. household wealth, the share of households with equity holdings--either directly or via mutual funds and retirement accounts--has risen from a third to close to half. So you might think that wealth in the U.S. would be growing less concentrated.

A recent study by Federal Reserve economist Arthur B. Kennickell, however, suggests that such a conclusion would be premature. Based on the Fed's consumer finance surveys, he estimates that the share of total household net worth held by the top 1% of households rose from 30.1% in 1992 to 34% in 1998. And the top half of that segment accounted for nearly 26% of all household wealth or an average $14.9 million per household--up from $11.3 million in 1995.

As Kennickell notes, though, the Fed's surveys don't count the super-rich--such as the 400 wealthiest Americans listed by Forbes magazine each year, whose net assets totaled $740 billion in 1998 (or nearly $2 billion per household). Adding the Forbes numbers to total household net worth in 1998 would increase the share owned by the top half of 1% of households to 27.7% (and the top 1% to 35.6%), and the average net worth of these half-million or so households to about $16.4 million.

Meanwhile, the share held by the bottom 90% of households has fallen from 33% in 1992 to 31.3% in 1998 (30.5% if one includes the Forbes numbers). Still, their average real net worth rose about 23% between 1995 and 1998 to $98,000, or $59,000 excluding home equity. Over the same period, the median net worth of all households in real terms rose just 17.6%, to $71,600, while the average real net worth of the top 1% increased by 28%.

The stock market did boost the net worth of the lower 90% of households in recent years, as the value of their shares surged by 126% between 1995 and 1998. But stock holdings of this group were still a relatively small part of the equity pie, and rose only modestly from 16.1% to 17.8% of the total. By contrast, the top 1% of households accounted for 42.8% of Americans' equity stakes, up from 41.9% in 1995.

As it happens, some 40% of the net worth of the bottom 90% of households is tied up in their homes. Not including principal residences, the Fed's latest numbers indicate that over 75% of total net worth was held by the top 10% of households in 1998, with the top 1% accounting for more than 40%.

While most American families enjoyed rising wealth in recent years, a significant number did not. Kennickell reports that people in the lowest 25% of the distribution either suffered declines in their nominal net worth or saw negligible change.

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