Today, the Federal Reserve released its triennial Survey of Consumer Finances (SCF) which collects information about family incomes, net worth, balance sheet components, credit use, and other financial outcomes. A superficial flip through the first few pages of the 2016 SCF as most will do, reveals “broad-based gains in income and net worth since the previous time the survey was conducted, in 2013” as the Fed puts it. Unfortunately, reading between the lines reveals that while net worth and income did increase in the past three years, it was exclusively for the “top 10%” of Americans. The “bottom 90%” got virtually nothing of this so-called recovery.
First, here is the report’s summary, taken verbatim and meant to demonstrate just what a great job at “wealth creation” the Fed is doing:
- Between 2013 and 2016, median family income grew 10 percent, and mean family income grew 14 percent
- Families throughout the income distribution experienced gains in average real incomes between 2013 and 2016, reversing the trend from 2010 to 2013, when real incomes fell or remained stagnant for all but the top of the income distribution.
- Families without a high school diploma and nonwhite and Hispanic families experienced larger proportional gains in incomes than other families between 2013 and 2016, although more-educated families and white non-Hispanic families continue to have higher incomes than other families.
So far, so good. However, the next bullet is the first troubling admission that not all is well:
- Families at the top of the income distribution saw larger gains in income between 2013 and 2016 than other families, consistent with widening income inequality.
Considering that one of the longest-running themes on this website has been the destruction of the middle class by the Fed, and the unprecedented transfer of wealth from the lower and middle-classes to wealthiest as a result of trillions in global, coordinated QE, we decided to focus on the bolded bullet. Luckily, the Fed did most of the work for us, and as the report’s authors write in a sidebar titled “Recent Trends in the Distribution of Income and Wealth”, the Fed authors admit that “The distribution of income and wealth has grown increasingly unequal in recent years. The Survey of Consumer Finances (SCF) has played a crucial role in our understanding of these trends because the survey collects data on net worth in addition to income, and it pays particular attention to sampling affluent families.”
First, a look at the distribution of income by various wealth buckets, “indicates that the shares of income and wealth held by affluent families have reached historically high levels since the modern SCF began in 1989.”
In case this is unclear, this is the Fed admitting that the rich have never made more money than they do now.
As the following chart shows, the share of income received by the top 1% of families was 20.3% in 2013 and rose to 23.8% in 2016. The top 1% of families now receives nearly as large a share of total income as the next highest 9 percent of families combined (percentiles 91 through 99), who received 26.5 percent of all income. This share has remained fairly stable over the past quarter of a century. Correspondingly, the rising income share of the top 1 percent mirrors the declining income share of the bottom 90 percent of the distribution, which fell to 49.7 percent in 2016, the lowest on record.
But while income may be bad, wealth is worse. Much worse.