Here are a few takeaways from the newly released Survey of Consumer Finances. The SCF is a tri-ennial report on the finances of American families. The the most recent results are derived from the survey conducted by the University of Chicago in 2013.
The big story is that earnings by the most well-off increased, the middle held its ground, and things got worse for the poor. Families in the area between the 40th and the 90th tier actually saw little or no change in their real income. The top decile gained ground, but notably, their incomes are still below 2007 levels. But some other details paint more of a picture of what is happening in our country these days.
- Incomes dropped. Overall, median income fell from $49,000 to $46,700.
- While it may not be a surprise that white families continue to out-earn minorities, it is worth noting that while incomes barely changed (-1 percent change in median) for the former, they dropped 9 percent for the latter.
- "Some college" isn't very helpful, and the marginal value of "some college" would appear to be weakening. In 2010, median earnings for high school graduates was $39,200 and for those with some college, it was $46,000. In 2013, incomes actually increased about $800 for the former but fell more than $5,000 for the latter.
- The median net worth of American families was $82,000. That level nearly matches that of 2010. That steadiness contrasts with the recent boom ('04 to '07) and bust ('07 and '10). Median net worth declined more than 5 percent, but mean net worth increased almost the same number.
- The gaps in income across different demographic variables (race, age, gender, et al) are still of a lower magnitude than are the gaps in wealth.
- There are lots of millionaires in America. The upper quartile of net worth in American begins at $505,000. For those in the top decile, the median net worth is $1.87 million. At what percentile does net worth cross $1 million? The numbers do not say but the total count of such families must be higher than ten million. But a fair share of those dollars are in non-financial assets such as houses, cars, or horses.
- Fewer American families own stocks, bonds, mutual funds, or retirement accounts. The downward trend in ownership of retirement accounts picks up on change that began in 2007. That is a shame, because those that did stay invested ended up with substantial gains for the period from 2010 to 2013. Almost every family in the upper decile has a retirement account, but only two in five of those in lowest decile do.
- It turns out that homes are not recovering their values. The median value of a home was $170,000 in 2013, down significantly from $182,200 just three years ago. In 2007, median value was $217,000.
- More than half of all student loan debt is held by families with incomes of more than $60,000. This is good in one respect, as it confirms that going to school does correlate with earning a middle-class wage in the future. But one quarter of debt held by younger families is due from those making less than $30,000. I suspect this is factored heavily by the steep increase in enrollment at for-profit schools. Those institutions draw a disproportionate amount of their student populations from people at the lower end of the economic spectrum.
Personally, I wonder how much of what is happening can be attributed to decision-making in Washington. People seem to expect that Congress and the President can use levers to over-ride the forces of globalization, but the truth is that this is really not very easy. The ongoing division in returns to different skill sets is increasing and it is hard to see how that reverses itself. Pew's recent survey on the future impact of robotics hinted that the working class, as well as some mid-level professionals, will see the sum of jobs decline. Driving trucks is one of the best-paid jobs available to men with a college degree. Those self-driving cars and drone delivery vehicles imperil those opportunities. That is only one example. Moreover, it isn't just a factor of how technological change is altering the demand for skills. It is also that the borderless economy has been shaving work for some time. Bookkeeping and accounting work is being shifted to back-of-the-house operations in India. It isn't just that Maytag moved from Galesburg to Reynosa. Our political leadership can do little to combat Google and internet bandwidth. Some would say that trade pacts could be put in place to damper the impact, but then again, would not that only serve to limit comparative advantage? Wouldn't we all pay for that?
Note: the Fed used family instead of household as its unit of analysis. But it defined family in a way that most people would conceive of the term. By the Fed's working assumption, family is actual a proxy for the "primary economic unit." Thus, if a family is led by a adult breadwinner, then the income and wealth of lower-earning member of that domestic group is not counted in their analysis. This kind of approach adds authenticity to their findings. But one confounding factor could be the dwindling size of economic units themselves. As more and more households become headed by a single parent, mean and median incomes and assets will naturally decline.