Changes in Family Wealth, 1989 to 2013
1 like7,392 views
The Congressional Budget Office report analyzes the distribution of family wealth in the United States from 1989 to 2013, highlighting a significant inequality where the top 10% held 76% of total wealth by 2013. The research indicates that while the wealth of the top half of families grew, the bottom half saw a decline, intensifying wealth disparity over the period. Factors such as changes in demographics and educational attainment contributed positively to overall family wealth, although significant differences remained across various groups.
Changes in Family Wealth, 1989 to 2013
- 1. Congressional Budget Office Changes in Family Wealth, 1989 to 2013 Savings and Retirement Foundation Washington, D.C. January 18, 2017 Nadia Karamcheva Microeconomic Studies Division The information in this presentation is drawn from Trends in Family Wealth, 1989 to 2013 (Congressional Budget Office, August 2016), www.cbo.gov/publication/51846.
- 2. 1CONGRESSIONAL BUDGET OFFICE Research Questions ■ How is family wealth distributed? ■ How did the distribution of family wealth change from 1989 to 2013? ■ How did changes in families’ assets and debt contribute to changes in the wealth distribution from 1989 to 2013?
- 3. 2CONGRESSIONAL BUDGET OFFICE Preview of Results ■ Family wealth in the United States is unevenly distributed. In 2013: – Families in the top 10 percent of the wealth distribution held 76 percent of all family wealth, – Families in the 51st to the 90th percentiles held 23 percent, and – Families in the bottom half of the distribution held 1 percent. ■ Over the period from 1989 through 2013, family wealth grew at significantly different rates for different segments of the U.S. population. The distribution of wealth among the nation’s families was more unequal in 2013 than it had been in 1989. ■ In 2013, average wealth for families in the top half of the distribution was greater than it had been in 1989. The opposite was true for families in the bottom half.
- 4. 3CONGRESSIONAL BUDGET OFFICE Data: Survey of Consumer Finances ■ This study uses data from the Survey of Consumer Finances (SCF), which: – Is conducted every three years; – Includes detailed information on family wealth, income, and pensions; and – Covers nearly the full distribution of family wealth (but excludes the nation’s 400 wealthiest people, as listed by Forbes magazine). ■ CBO supplemented the SCF with aggregate wealth data from Forbes. ■ The study uses the cross-sectional waves in the SCF from 1989 through 2013. ■ The unit of analysis is the family.
- 5. 4CONGRESSIONAL BUDGET OFFICE Definition of Wealth ■ The measure of wealth in this study is marketable wealth—the difference between a family’s assets and its debt. – Assets consist of financial assets (including 401(k)-type plans and IRAs), home equity, and other assets (such as real estate, vehicles, and business equity). – Debt is nonmortgage debt, which consists of a family’s consumer debt (including credit card debt and auto loans) and other debt (including student loans). – Mortgage debt is subtracted from the value of a family’s primary residence and is therefore accounted for in the family’s assets.
- 6. 5CONGRESSIONAL BUDGET OFFICE Alternative Analytical Approaches and Measures of Wealth ■ Sources of data – SCF and the Forbes 400 – Tax data ■ Ways to define wealth – Marketable wealth – Nonmarketable wealth
- 7. 6CONGRESSIONAL BUDGET OFFICE Holdings of Family Wealth, by Wealth Group Trillions of 2013 Dollars 1989 1992 1995 1998 2001 2004 2007 2010 2013 0 15 30 45 60 75 Top 10 Percent 51st to 90th Percentiles Bottom 50 Percent
- 8. 7CONGRESSIONAL BUDGET OFFICE Shares of Family Wealth, by Wealth Group 3 3 4 3 3 3 2 1 1 30 29 28 28 27 27 25 24 23 67 67 69 69 70 70 72 75 76 0 20 40 60 80 100 1989 1992 1995 1998 2001 2004 2007 2010 2013 Percent Top 10 Percent 51st to 90th Percentiles Bottom 50 Percent
- 9. 8CONGRESSIONAL BUDGET OFFICE Wealth of Families at Selected Percentiles of the Wealth Distribution Thousands of 2013 Dollars 1989 1992 1995 1998 2001 2004 2007 2010 2013 0 200 400 600 800 1,000 1,200 90th Percentile 75th Percentile 25th Percentile 50th Percentile
- 10. 9CONGRESSIONAL BUDGET OFFICE Average Wealth of Families in the Top 10 Percent of the Wealth Distribution Thousands of 2013 Dollars 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 1989 1992 1995 1998 2001 2004 2007 2010 2013
- 11. 10CONGRESSIONAL BUDGET OFFICE -5 0 5 10 15 20 25 30 35 40 45 50 55 -5 0 5 10 15 20 25 30 35 40 45 50 55 1989 1992 1995 1998 2001 2004 2007 2010 2013 Aggregate Wealth of Families in the Top 10 Percent of the Wealth Distribution (Excluding the Forbes 400) Trillions of 2013 Dollars Other Assets Financial Assets Home Equity Nonmortgage Debt
- 12. 11CONGRESSIONAL BUDGET OFFICE -500 0 500 1,000 1,500 2,000 2,500 Home Equity Financial Assets Other assets Debt Changes in the Assets and Debt of Families in the Top 10 Percent of the Wealth Distribution (Excluding the Forbes 400) Thousands of 2013 Dollars Home Equity Financial Assets Other Assets Nonmortgage Debt Percentage of Families That Hold Each Category of Asset or Debt 1989 2007 2013 1989 2007 2013 1989 2007 2013 1989 2007 2013 93 97 97 100 100 100 97 98 98 57 59 43 +101% -24% +135% +7% +87% -21% -1% -9%
- 13. 12CONGRESSIONAL BUDGET OFFICE Average Wealth of Families in the 51st to 90th Percentiles of the Wealth Distribution Thousands of 2013 Dollars 1989 1992 1995 1998 2001 2004 2007 2010 2013 0 50 100 150 200 250 300 350 400 450
- 14. 13CONGRESSIONAL BUDGET OFFICE -2 0 2 4 6 8 10 12 14 16 18 20 -2 0 2 4 6 8 10 12 14 16 18 20 1989 1992 1995 1998 2001 2004 2007 2010 2013 Aggregate Wealth of Families in the 51st to 90th Percentiles of the Wealth Distribution Trillions of 2013 Dollars Other Assets Financial Assets Home Equity Nonmortgage Debt
- 15. 14CONGRESSIONAL BUDGET OFFICE Changes in the Assets and Debt of Families in the 51st to 90th Percentiles of the Wealth Distribution –31%+58% Home Equity Other AssetsFinancial Assets Nonmortgage Debt 99 9910093 9194 97 9596 72 6272 -50 0 50 100 150 200 1989 2007 2013 1989 2007 2013 1989 2007 2013 1989 2007 2013 –8% +98% –19%+50% 0%–49% Percentage of Families That Hold Each Category of Asset or Debt Thousands of 2013 Dollars
- 16. 15CONGRESSIONAL BUDGET OFFICE Average Wealth of Families in the 26th to 50th Percentiles of the Wealth Distribution Thousands of 2013 Dollars 1989 1992 1995 1998 2001 2004 2007 2010 2013 0 10 20 30 40 50 60 70
- 17. 16CONGRESSIONAL BUDGET OFFICE -1 0 1 1 2 2 3 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 1989 1992 1995 1998 2001 2004 2007 2010 2013 Aggregate Wealth of Families in the 26th to 50th Percentiles of the Wealth Distribution Trillions of 2013 Dollars Other Assets Financial Assets Home Equity Nonmortgage Debt
- 18. 17CONGRESSIONAL BUDGET OFFICE Changes in the Assets and Debt of Families in the 26th to 50th Percentiles of the Wealth Distribution –44% +51% Home Equity Other AssetsFinancial Assets Nonmortgage Debt 94 979661 5872 89 9293 77 6978 1989 2007 2013 1989 2007 2013 1989 2007 2013 1989 2007 2013 Percentage of Families That Hold Each Category of Asset or Debt Thousands of 2013 Dollars –34%+64% –23%+58% +10% –77% -40 -30 -20 -10 0 10 20 30 40 50
- 19. 18CONGRESSIONAL BUDGET OFFICE Average Wealth of Families in the Bottom 25 Percent of the Wealth Distribution Thousands of 2013 Dollars 1989 1992 1995 1998 2001 2004 2007 2010 2013 -15 -10 -5 0 5 10 15
- 20. 19CONGRESSIONAL BUDGET OFFICE -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 1989 1992 1995 1998 2001 2004 2007 2010 2013 Aggregate Wealth of Families in the Bottom 25 Percent of the Wealth Distribution Trillions of 2013 Dollars Other Assets Financial Assets Home Equity Nonmortgage Debt
- 21. 20CONGRESSIONAL BUDGET OFFICE Changes in the Assets and Debt of Families in the Bottom 25 Percent of the Wealth Distribution –247% +352% Home Equity Other AssetsFinancial Assets Nonmortgage Debt 64 83809 1814 60 6770 61 6868 1989 2007 2013 1989 2007 2013 1989 2007 2013 1989 2007 2013 Percentage of Families That Hold Each Category of Asset or Debt Thousands of 2013 Dollars –7%+99% –5%+76% –40% –114% -40 -30 -20 -10 0 10 20 30 40 50
- 22. 21CONGRESSIONAL BUDGET OFFICE Share of Families in Debt and Average Indebtedness for Those Families 1989 1992 1995 1998 2001 2004 2007 2010 2013 -50 -25 0 –9 –20 –32 25 50 -20 -10 0 10 20 Average Indebtedness (Left axis) Share of Families in Debt (Right axis) 7 8 12 Thousands of 2013 Dollars Percent
- 23. 22CONGRESSIONAL BUDGET OFFICE Changes in Categories of Debt for Families in Debt ■ The increase in average indebtedness between 2007 and 2013 for families in debt was mainly the result of falling home equity and rising student loan debt. 2007 2013 Share of families in debt who had negative home equity (Percent) 3 19 Average home equity for families in debt who had negative home equity (2013 dollars) -$16,000 -$45,000 Share of families in debt who had outstanding student loans (Percent) 56 64 Average student loans for families in debt who had student loans (2013 dollars) $29,000 $41,000
- 24. 23CONGRESSIONAL BUDGET OFFICE Age Distribution of Families in Debt and Families Not in Debt in 2013 44 29 20 7 18 26 30 26 0 10 20 30 40 50 Younger Than 35 35 to 49 50 to 64 65 or Older Percent Families In Debt Families Not In Debt
- 25. 24CONGRESSIONAL BUDGET OFFICE Education Distribution of Families in Debt and Families Not in Debt in 2013 8 26 34 21 1111 32 24 19 14 0 10 20 30 40 50 Less Than High School High School Some College Bachelor's Degree Graduate Degree Percent Families In Debt Families Not In Debt
- 26. 25CONGRESSIONAL BUDGET OFFICE Median Family Wealth, by Age Group Thousands of 2013 Dollars 1989 1992 1995 1998 2001 2004 2007 2010 2013 0 50 100 150 200 250 300 65 or Older 50 to 64 Younger Than 35 35 to 49
- 27. 26CONGRESSIONAL BUDGET OFFICE Median Family Wealth, by Education Group Thousands of 2013 Dollars Graduate Degree Bachelor’s Degree Less Than High School High School Some College 0 100 200 300 400 500 1989 1992 1995 1998 2001 2004 2007 2010 2013
- 28. 27CONGRESSIONAL BUDGET OFFICE Effects of Aging and Increases in Educational Attainment on Family Wealth ■ The aging of the population and increases in educational attainment contributed to an increase in overall family wealth between 1989 and 2013. ■ CBO performed a counterfactual analysis, using a reweighting technique developed by John DiNardo and colleagues. – See John DiNardo, Nicole M. Fortin, and Thomas Lemieux, “Labor Market Institutions and the Distribution of Wages, 1973–1992: A Semiparametric Approach,” Econometrica, vol. 64, no. 5 (September 1996), pp. 1001–1044, http://tinyurl.com/zyhcdbf.
- 29. 28CONGRESSIONAL BUDGET OFFICE Effects of Aging and Increases in Educational Attainment on Family Wealth (Continued) ■ Had the population not aged as it did, median family wealth would have been 19 percent lower in 2013 than in 1989. – In 1989, 21 percent of families were headed by someone over the age of 65; in 2013, 24 percent were. ■ Had the average educational attainment of families not increased as it did, median family wealth would have been 16 percent lower in 2013 than in 1989. – In 1989, 23 percent of families were headed by someone with at least a bachelor’s degree; in 2013, 32 percent were.