Middle Class Wealth - 2020 Update

When I saw CBS's video on how America's wealth was divided between quintiles, the five groupings that each hold 20% of all households, I remembered that it had been over five years since I'd written a post outlining how much wealth each quintile had.

How had things changed?

Unfortunately, the Census Bureau stopped providing wealth data in a quintile format right after I'd written that post in 2015.

So without access to the raw data for future years (and let's be honest, I'm no data scientist so I'm not sure what good I could do even if I had those figures) I just was not going to be able to provide the same breakdown from the Census Bureau's data.

Luckily, the Census Bureau did provide something approaching quintiles: showing how much of the population had various ranges of net worths. We can do something with that, so let's dive in.

*Net Worth figures include home equity.

Looking at these figures, roughly 20% of all households (what we might think of as the top quintile) had a net worth over half a million in 2016, the most recent year available for Census Bureau data in 2020. That is higher than what I would have expected. (And for those wondering, that is also the group that the Done by Forty household is in.)

However, over fifteen percent of all households have a net worth that is at or below zero. When we look at the net worth figures for the groups just above zero, we can see just how much of the country barely has a positive net worth, even when including home equity.

While I'm sad the Census Bureau no longer has data available for quintiles, I'm going to try to approximate the best I can. Below is another representation of how each group fits into something close to a quintile, or at least as close as this English major could manage.

Almost-Kinda Wealth Quintiles for 2016
"Lower Class", representing 24.5% of households: Negative to $4,999
"Lower Middle Class", representing 26.4% of households: $5,000 to $99,999
"Middle Class", representing 17.1% of households: $100k to 249,000
"Upper Middle Class", representing $12.5% of households: $250k to $499,999
"Upper Class", representing 19.4% of households: above $500k

To be honest, I kind of hate representing the data this way. I'm trying to force the Census figures into a quintile format that just isn't there.

A blogger who actually understands data, PK from DQYDJ.net, analyzed at a different data set from the Federal Reserve Survey of Consumer Finances, and broke those down into deciles. I highly recommend going and checking out PK's excellent article for a detailed breakdown of net worth in the US. Here are how his top line numbers would translate to true quintiles, each containing 20% of US households:

Wealth Quintiles for 2017
First Quintile, "Lower Class": Negative to $4,798 net worth
Second Quintile, "Lower Middle Class": $4,798 to $49,932 net worth
Middle Quintile, "Middle Class" $49,932 to $169,951 net worth
Fourth Quintile, "Upper Middle Class": $169,951 to $499,264 net worth
Upper Quintile, "Upper Class": above $499,264 net worth

Some early takeaways:

• Twenty percent of U.S. households have a net worth below five thousand dollars. More than ten percent of U.S. households have a negative net worth: their debt exceeds the value of their assets.
• Forty percent of U.S. households have a total net worth below fifty thousand dollars. When we look at income quintiles, this becomes less surprising: forty percent of U.S. households had income below $47,111 in 2017. With nearly half the country bringing in less than $48k a year, it's not all that shocking that the lowest two quintiles also have a low net worth. It bears mentioning: you need a surplus to build your net worth, and you can only cut so much.
• When we add in the middle quintile, we can see that sixty percent of U.S. households have a net worth below $169,952. When we consider that these figures include home equity, I find that a bit depressing. A majority of households seem to have total assets at levels that seem insufficient to fully fund retirement.
• Twenty percent of all US households have a net worth approaching half a million. My gut says this is where a majority of FIRE households already live, or are on their way to: the upper quintile, or what I would call the upper class. 

While I love quintiles, a limitation with this framing is that that it really only says what the lower boundary is for the upper quintile, and completely understates the truly shocking wealth held by those at the very top of that group.

That is to say, the quintiles somewhat clumsily lump in a family that has a $500k net worth with a family that has a $60B net worth, like presidential candidate Michael Bloomberg's. They exist in the same quintile, even though Bloomberg's family has a net worth that is over 120,000 times greater than that of the family with $500k.

This is why the video from CBS was so telling. Here it is, in case you have not seen it yet.

Rather than just pointing out the amount of wealth required to break into the top 20%, it shows just how much of the wealth is concentrated in the top 20%, as well as how much is held by those just in the top 1%.

CBS pulled its data from a National Bureau of Economics Research paper that showed how the share of wealth has shifted more and more to the top quintile since the 1960s. In fact, only the top quintile has seen a net gain in its share of total wealth since 1962: all other quintiles have seen their share decline over that period.

I could create a pie chart showing how the top quintile has 90% of all the wealth, but why do that when CBS has illustrated that using actual pie?

See that plate on the right? The top 20% has nearly a whole damn pie.

And within that top quintile, the tiny group of people who make up the top 1% amazingly has 40% of all the net worth: four times more than the bottom 80% of all U.S. households have...combined.

At the heart of these figures is a question: whether you, dear reader, find any of this problematic or not. For conservatives and libertarians, perhaps they don't think this inequality is much of a problem. America's brand of capitalism is not only the system we have, but the best economic system possible. And if they believe we live in a meritocracy, then the people in the top 1% have worked hard and earned it. We are living in a system which rewards innovation and effort, so anyone can hypothetically move up to the top 1% with enough skills and motivation, right?

For those who lean left, they might see this sort of distribution as a drastic problem for the majority of US workers. Yes, we believe in a capitalist system, but does that mean so much of the capital should be held by so few?

Normally I would try to persuade you good readers at this point. I'd explain some common sense reforms that would level out the distribution of capital, even a bit, and that they would be of huge benefits to US workers and the economy as a whole. Then I'd pitch that we vote for politicians pursuing those sorts of policies, and call it a day.

Instead, today I'd just like to ask that we try to deal from the same sets of facts. Because the thing I found most striking in the CBS video was not the top-heavy distribution of pie-wealth itself but, rather, how nearly every person interviewed thought our system gave far, far more to the middle quintiles than it actually did.

No one understood that 90% of the wealth was already in the hands of the upper class.

Regardless of how you feel our economy ought to be run or which way you lean politically, none of us are well served if we believe we hold more of the economic pie than we actually do. And we don't benefit by believing the 1% have a smaller fraction of the wealth they truly hold.

While we'll probably never all agree on politics or policy, I'd like to believe we could agree on the facts.


*Photo is from slgckgc at Flickr Creative Commons.