Washington DC, United States: The wealthy Americans have been positively emerging from the effects of the COVID-19 pandemic. The wealth and income share of such individuals is again on the rise despite the tight job market and hefty wage gains generated by the coronavirus. It was believed that the gap between rich and poor would be narrowed amid the crisis caused during the crisis.
According to the data shared by the Federal Reserve, at the end of June month, the top 1 percent (1%) households by income held roughly 26.5 percent (26.5%) of household net worth – the reports by Reuters mentioned. Reportedly, the recorded data is 1.5 percent (1.5%), up as compared to the year 2019 – the year the COVID-19 crisis caused high inflation, recession and massive government stimulus.
Similarly, the share of income to the top 5 percent has risen from 23 percent to 23.5 percent (23% to 23.5%) from the year 2019 to 2022. These estimates by the US Census Bureau have shown an extended trend since the 1980s, providing the highest earners greater fodder to build even more wealth, as per Reuters.
Reports also highlighted that the bottom 40 percent (40%) has also witnessed a rise at the swiftest pace in the years. At the same time, the net worth of the bottom one-fifth also increased to 27 percent (27%) to US$ 4.2 trillion at the end of the second quarter of 2023 from US$ 3.3 trillion in the year 2019. It is to be noted that the country’s wealth shrank from 7 percent (7%) to 6.7 percent (6.7%) during the above-mentioned duration.
As per the latest data reported by Reuters, after a chaotic period during which the labor market leverage seemed to swell among lower-income families and less educated workers. The situation was created with the double-digit wage increase given by the companies that were facing worker shortages and struggling to fill less-skilled positions, too.
According to Elise Gould – the senior economist at the Economic Policy Institute, “If you think they have any leverage, it is leverage to what end?” She added, “Share matters because if profits have been so high, wages could have done even better.” Economic Policy Institute is a think tank, which is based in Washington, that focuses on labor issues.
It is to be highlighting that the pandemic economy started on a very ugly note of deep recession. Along with this, the unemployment rate was also too low – at around 14.5 percent (14.5%) in spring 2020. However, stock prices, real estate values and savings witnessed a historic fiscal response, with a record increase of nearly US$ 153 trillion in household net worth by early 2022.
As per the reports by Reuters, the latest data suggested that the trends of higher wealth and income concentration survived pretty much intact.
An economics professor at Harvard University – Karen Dynan’s comment
Karen Dynan, an economics professor at Harvard University, has outlined that among the bottom one-fifth of households, the swift increase in wealth was “striking for a period when we had this enormous job loss.”
Dynan also outlined that the rise in wealth over the period was around 30 percent (30%) for the families in the 80th to 99th income percentiles. However, the growth was around 40 percent (40%) for the top 1 percent (1%).
“We are seeing some cracks around the edges, given inflation, slowing wage growth, and the depletion of pandemic-era savings for many households,” the economics professor stated, adding, “We are seeing subprime (mortgage) delinquency rates going up. We are seeing people borrowing more on their credit cards,” as per Reuters.