The comeback of the ‘bottom half’ in US!

Which part of the US wealth distribution saw its net worth rise the fastest over the past year, five years and decade? No, not the top 1%, according to the distributional financial accounts published last month by the Federal Reserve.
The rich had a great run, but they didn’t even come close to the percentage gains in real wealth seen by the bottom 50%. These amounted to 21.9% over the past year, 125.6% over five years and 526.2% over 10 years, compared with the one-percenters’ 10.3%, 33.8% and 83.9%.
This is partly a reflection of how awful the 2007-2009 recession and its aftermath were for the less-affluent half of Americans. Even after the gains of the past decade, the bottom 50% control only 2% of US household wealth, lower than at any time on record before 2007.
One can thus just as easily tell a discouraging story with this data as an encouraging one. Media coverage of the quarterly distributional-accounts releases tends to emphasize the continued gains at the very top, and even when Niskanen Center economist Ed Dolan focused on the lower 50% for an essay early last year in the Milken Institute Review, it was headlined “The Bottom Falls Out for the Bottom Class.”
Dolan was taking the long view, focusing on how much ground the less-wealthy half of Americans had lost in 1990s and 2000s. He was not wrong to do so. But with another year-plus of data, the comeback of the bottom 50% is starting to look big and sustained enough that maybe we should start paying attention to it.
The Federal Reserve only started publishing its distributional accounts in 2019, following on recent work by economists Thomas Piketty of the French School for Advanced Studies in the Social Sciences and Paris School of Economics, and Emanuel Saez and Gabriel Zucman of the University of California at Berkeley.
Government measures of inequality have long focused on income rather than wealth, mainly because there’s lots of income data available from tax returns and Census Bureau surveys. To estimate the wealth distribution, the Fed combines household-level data from its triennial Survey of Consumer Finances with aggregate data from its quarterly Financial Accounts of the United States.
This indirect approach helps explain why the entire bottom 50% of the wealth distribution is lumped together (the other categories are the 50th to 90th percentile, 90th to 99th and top 1%). The Fed simply does not possess enough information about the balance sheets of less-affluent households to get much more granular than that. It is able to slice things by income quintile, though, and the differing trajectories of the bottom three quintiles hint at some of the drivers behind the wealth gains of the bottom half.
Note that big rise and fall in the 2000s in the middle of the income distribution (40% to 60%), which is less apparent for the next quintile down and far less so for the bottom one. That was the housing bubble and bust, and the bulk of the recent fall and rise in net worth among the bottom half of the wealth distribution can probably be chalked up to its impact on the more affluent part of that bottom half.

—Bloomberg