How economic inequality has and hasn’t changed since the pandemic
How economic inequality has and hasn’t changed since the pandemic
Most Americans are a lot richer now than they were before COVID.
From 2019 to 2022, the last year good data is available, total U.S. household wealth grew 25%. And that rising tide really did lift all boats, including the poorest 20% of households.
“So, they had in that three-year period, 83% growth, so almost doubling their wealth,” said Ana Hernandez Kent, senior researcher for the Institute of Economic Equity at the Federal Reserve Bank of St. Louis. “It’s something that we haven’t seen as far back as the data goes.”
While different economists measure wealth in different ways, wealth is typically defined as some combination of assets like a home, stocks and bonds and savings, minus debt like mortgages, student loans and credit cards.
But it wasn’t the fevered post-pandemic housing market or Wall Street that helped poorer households, the vast majority of which don’t own stocks or homes.
“Government aid programs like the stimulus checks and the enhanced unemployment benefits, these things disproportionately benefited lower income families,” said Hernandez Kent.
Wealth also grew significantly among Black and Hispanic households, and never-married women.
But since some households had so little to begin with — $7,000 or so in net worth for those in the bottom 20% in 2019 — those big gains didn’t narrow the divide between rich and poor.
“The gap between the wealthy, the top 80% and the not wealthy, the poor, the bottom 20% has grown by about $200,000 between 2019 and 2022,” said Hernandez Kent.
Wage inequality generally declined the first few years after the pandemic. A red-hot, low-skilled labor market meant low-skilled wages grew faster than inflation.
Economist Michael Strain with the American Enterprise Institute said low-wage workers have become increasingly sensitive to the booms and busts of the business cycle. And since the labor market has cooled this year, he expects the gap between higher and lower incomes to stagnate.
“We probably will look back in 2024 and say ‘OK, the reductions in wage inequality probably petered out,'” Strain said.
There’s lots of evidence that Americans are disenchanted with this economy, despite all that growth in wages and wealth and many other metrics.
Part of that is frustration with inflation. But economist Bruce Meyer at the University of Chicago Harris School of Public Policy said inequality may also be throwing off the vibes.
“A lot of people look to others for how they judge whether or not they’re well off,” said Meyer. “Even when things are getting better in terms of the level of expenditures people can afford at the bottom.”
Last year, those at the bottom 10th percentile of American household incomes made $19,000 per year. Those at the top 90th percentile made $235,000.
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