Will Household Wealth (Ever) Recover?

This research project focuses mainly on whether the wealth of the United States middle class recovered and whether wealth inequality continued to rise or moderated over the years 2010 to 2013 following the financial crisis of 2008.

Several stunning developments in household wealth are notable over the Great Recession from 2007 to 2010 on the basis of data from the Federal Reserve Board’s Survey of Consumer Finances (SCF). First, median wealth in real terms dropped by an astonishing 47%, with its level in 2010 returning back to where it was in 1969. Second, wealth inequality as measured by the Gini coefficient climbed precipitously. Third, the ratio of mean wealth between black and white households tumbled, while that between Hispanics and whites fell even more dramatically. Fourth, the ratio of mean wealth between households under age 45 and the overall mean plummeted. This project analyzes wealth trends and trends in wealth inequality from 1983 to 2013 on the basis of both regression analysis and decomposition analysis to better understand past trends and predict future trends. Policy implications are addressed, in particular, public measures that may help to speed the recovery of household wealth.