The Typical US Household Is Now Worth One Third Less Than a Decade Ago

Procter and Gamble, the world's largest manufacturer and purveyor of household products announced that it is being forced to sell or close down over 100 brands due to falling sales.

That was in the same week that data were released confirming that the typical US household was 36 percent poorer than it had been a decade earlier.

Any connection, inquiring minds want to know? Why yes, it appears that there is. It's the same problem faced by Walmart, Target and even Amazon: consumers without the means to consume will cease doing so.

What is curious is that certain organizations like the US Chamber of Commerce and other powerful business lobbies continue to focus on ancient and increasingly irrelevant shibboleths like taxes and regulation. They persist in claiming it is all about them, the impact on their stock price and on their compensation formulae - and not about their customers.

This has little or nothing to do with global competitiveness in the corporate sense;  it is about whether or not business recognizes the need for a trade-off between financialization and broader economic imperatives that affect the ability of the society that nurtures these enterprises to continue to do so. JL

Anna Bernasek reports in the New York Times:

“The housing bubble basically hid a trend of declining financial wealth at the median that began in 2001,”

Credit Source: Russell Sage Foundation

Economic inequality in the United States has been receiving a lot of attention. But it’s not merely an issue of the rich getting richer. The typical American household has been getting poorer, too.

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.

The Russell Sage study also examined net worth at the 95th percentile. (For households at that level, 95 percent of the population had less wealth.) It found that for this well-do-do slice of the population, household net worth increased 14 percent over the same 10 years. Other research, by economists like Edward Wolff at New York University, has shown even greater gains in wealth for the richest 1 percent of households.

For households at the median level of net worth, much of the damage has occurred since the start of the last recession in 2007. Until then, net worth had been rising for the typical household, although at a slower pace than for households in higher wealth brackets. But much of the gain for many typical households came from the rising value of their homes. Exclude that housing wealth and the picture is worse: Median net worth began to decline even earlier.

“The housing bubble basically hid a trend of declining financial wealth at the median that began in 2001,” said Fabian T. Pfeffer, the University of Michigan professor who is lead author of the Russell Sage Foundation study.

The reasons for these declines are complex and controversial, but one point seems clear: When only a few people are winning and more than half the population is losing, surely something is amiss.