Middle-Class Economic Security Declines as Wealth Concentration Increases

Economic Recovery Depends on Fixing Problems Plaguing the Middle Class

America’s middle class became poorer and more economically insecure during the Great Recession, as household wealth concentrated in the hands of the rich, according to new Federal Reserve data about the recession and its aftermath. The latest Survey of Consumer Finance data covering the years 2007 to 2010 are yet another reminder that addressing the economic insecurity of the nation’s middle class must be the top priority for policymakers.

In the following chart we depict the rising financial insecurity of the American household in two ways: the share of nonretiree households 25 years old and older with no or negative wealth, and the share of these households with an emergency fund (commonly defined as nonretirement financial assets, equal to more than three months of their income).

The percentage of families with no or negative wealth rose to 32.5 percent in 2010—up from 19.2 percent in 2007. Likewise, the share of these households without sufficient emergency funds dropped to 32.4 percent in 2010, down from 37.5 percent in 2007. On both measures, household financial insecurity was the highest in 2010—higher than any other period since 1989, the first year for which consistent data exist.[1]

Meanwhile, as the chart also shows, wealth became more concentrated at the highest income brackets from 2007 to 2010. The share of wealth owned by the top 5 percent of households grew to 62.6 percent in 2010, up from an already very high 61.9 percent in 2007—again making 2010 the largest share on record, dating back to 1989.

So what do these data tell us? They tell us that middle-class families experienced rising economic insecurity, not only because of falling incomes during and after the recession but also because of disappearing household wealth.

Earlier this month the Center for American Progress released a compendium of 35 policies that would revitalize America’s middle class, which would in turn boost the country’s economic recovery and security, and would ensure that it is broadly shared among all Americans.

Among these policies are immediate ways for policymakers to help middle-class families build wealth more quickly by offering lower-cost savings options, lower mortgage payments, reduced college costs, and other ideas. The sooner policymakers can enact such policies, the more quickly American families will regain their economic security.

the change in wealth distribution

Christian E. Weller is a Senior Fellow at the Center for American Progress.


[1] The Federal Reserve’s Survey of Consumer Finances is published every three years, and consistent data are available since 1989.