Gloomy outlook on recovery from loss of net worth suffered during Great Recession 

by Grace

Median net worth declined by 36%  and wealth inequality substantially increased over the ten years ending in 2013.  The Great Recession of 2007 and the slow subsequent recovery can be blamed for much of this economic pain.

The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation. Those are the figures for a household at the median point in the wealth distribution — the level at which there are an equal number of households whose worth is higher and lower. But during the same period, the net worth of wealthy households increased substantially.

 

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These numbers come from a study, “Wealth Levels, Wealth Inequality, and the Great Recession”, released by the Russell Sage Foundation.  According to the authors, the outlook for the “coming years” does not look much brighter for prosperity among the overall population.

Through at least 2013, there are very few signs of significant recovery from the losses in wealth experienced by American families during the great recession. Declines in net worth from 2007 to 2009 one large, and the declines continued through 2013. These wealth losses, however, were not distributed equally. While large absolute amounts of wealth were destroyed at the top of the wealth distribution, households at the bottom of the wealth distribution lost the largest share of their total well. As a result, wealth inequality increased significantly from 2003 through 2013; by some metrics inequality roughly doubled.

The American economy has experienced rising income and wealth inequality for several decades, and there is little evidence that these trends are likely to reverse in the near-term. It is possible that the very slow recovery from the great recession will continue to generate increased wealth inequality in the coming years as those hardest hit may still be drawing down the few assets they have left to cover current consumption and the housing market continues to grow at a modest pace.

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Anna Bernasekjuly, “The Typical Household, Now Worth a Third Less”, New York Times, July 26, 2014.

Fabian T. Pfeffer, Sheldon Danziger, and Robert F. Schoeni, “Wealth Levels, Wealth Inequality, and the Great Recession”, Russell Sage Foundation, June 23, 2014.

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