Despite the economic toll of the Great Recession, a recent blog by Dr. Lawrence Yun on the website of the National Association of Realtors pointed out that the net worth of American households hit an all time high in 2014. The Federal Reserve calculated the net worth of America, or our collective assets minus our collective liabilities, at $81.7 trillion. That works out to almost $259,000 for every person or approximately $777,000 for a three-person household.
This is an impressive increase in wealth, given that during the low point of the recent recession America’s net worth was $55 trillion – closer to $175,000 per person.
However, most of America reads that information and shrugs. We have been officially out of recession for five years, yet around half of Americans believe we are still in one. An insufficient amount of this record net worth has reached average Americans.
The point of the blog was that the majority of the average American’s assets are invested in home ownership, and the housing market has yet to recover fully. Even those who were able to weather the housing crash have suffered, since the value of their homes has diminished and not yet recovered.
We think an equal component of that is the jobless rate – not the official U-3 unemployment rate listed in the news, but the larger U-6 number encompassing the marginally employed and the underemployed. Surely, the slack in employment is dragging down people’s impressions of the economy, and probably the net worth of America as well.
Another factor to consider is how much of the wealth creation is concentrated in the stock market. Dr. Yun’s blog asserted that approximately 10% of Americans have any sort of significant investment in the stock market, where the remaining 90% have very little if any at all.
To make matters worse, in 2012, the top 10% of wage earners accounted for more than 50% of the total income in the U.S. Thus, we have a compounding effect with disproportionate increases in both income and assets (wealth) among the highest wage earners.
One can argue that calculating the net worth of the average American is pointless because of the skewing involved. The Forbes 400 list accounts for a little over $2 trillion of the net worth, or around 2.5% of the total. Meanwhile, dividing by the total population of the U.S. includes many people with zero assets – for example, a newborn.
A better way to indicate the true net wealth of Americans might be to use the median value instead of an average. At the median value, the number of Americans with higher net worth and lower net worth than that number would be exactly the same. This is difficult if not impossible to compile, so we go with the statistics that we have and throw in the caveats.
Still, it is hard to feel bad about having the highest net worth in our country’s history. What we must aspire to economically and politically is driving up the median net worth as well as the average – increasing the wealth of the lower 50% without merely taking it from the upper 50%. To do so, policies would need to direct more of this wealth toward investment in job-creating ventures.
Let’s hope this aspiration is fulfilled, and that we can look forward to even higher average net worth values in the future – and that an increasing number of Americans can look at that number as a source of pride instead of a sign of growing inequality.