What about the middle class?

October 2, 2012 | Alex Stone

The title of recent article in Bloomberg Businessweek says it all: Top 1% Got 93% of Income Growth as Rich-Poor Gap Widened.

Much of this imbalance in income growth can be explained by looking at where the growth has happened. Big gains in the stock market have buoyed most indexes close to pre-recession levels, but home values remain largely stagnant or continue to drop. Of course, few middle- and lower-class Americans have the resources to invest on Wall Street – much of their wealth is tied up in their home value – so the current system favors wealthier Americans.

share of income growth, u.s. 2010

As the above graphic shows, the bottom 99% of Americans saw an average income growth of just 7% in 2010. Separated further, the bottom 80% of Americans actually saw their share of income decrease – with the poorest 20% of Americans experiencing a decline of 20% since the 1980s.

From Bloomberg:

The earnings gap between rich and poor Americans was the widest in more than four decades in 2011, Census data show, surpassing income inequality previously reported in Uganda and Kazakhstan. The notion that each generation does better than the last — one aspect of the American Dream — has been challenged by evidence that average family incomes fell last decade for the first time since World War II.

In this recovery it’s proved better to own stock than a house. For stockholders like Hemsley, the value of all outstanding shares has soared $6 trillion to $17 trillion since June 2009, the recession’s end. Even after a recent rebound, the value of owner-occupied housing, the chief asset of most middle- income families, has dropped $41 billion in the same period, part of a $5.8 trillion loss in home values since 2006.

Read the full article here.

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Posted in State Economy

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