How the rich came out winners from the Great Recession
For the richest 7 percent of America, the Great Recession and its aftermath have been very lucrative. From 2009 to 2011, this bracket saw its net worth rise by 28 percent, and its share of America's wealth jump to 63 percent, from 56 percent.
The other 93 percent? They didn't fare so well, according to a new study by the Pew Research Center. They actually saw their net worth decline by 4 percent.
"The results are entirely sensible, but depressing," Richard Fry, co-author of the study, told Bloomberg. "It’s a stark story of two Americas."
It's also a story of two indexes: The S&P 500 stock index, which rose by 34 percent, and the S&P Case-Shiller home price index, which fell by 5 percent.
The richest 7 percent of America tend to put their money in stocks and other financial assets, which have done very well since markets bottomed out during the financial crisis. Those with less money usually count their homes as their largest asset, making them vulnerable to a housing market that has yet to fully recover. The result is "a very good recovery for those at the upper end of the wealth distribution," Paul Taylor, the other author of the study, told The Washington Post. "But there has been no recovery for the lower 93, which is nearly everybody.”
The trend lines are making for a less equal America. In 2009, the mean wealth of households in the top 7 percent was 18 times that of those in the bottom 93 percent. In 2011, the ratio increased to 24-to-1.
Even if we start getting rosy jobs reports, "it is unlikely that cyclical improvements in the labor markets will do much to reverse these trends," Federal Reserve Governor Sarah Bloom Raskin recently said.
Frank Bass of Bloomberg notes that, when it comes to income inequality, the United States ranks equal to countries like Ecuador, China, and Madagascar. It's gotten so bad that, according to a Brookings Institution study published last month, growing inequality may become a permanent feature of American life.