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Most Americans own less than they did in 2005

How hard has this 'wealth drain' hit the middle class?

By Sep 2, 2014 10:56AM

This post comes from Bob Sullivan at partner site on MSN MoneyThere are two ways to measure how people are doing financially: How much they earn, and how much they own. The second category gets less attention, but it can be just as important. And it’s very likely that you own a lot less than you did before the Great Recession. In fact, odds are roughly 50/50 that you own less than you did in the year 2000, according to the latest Census data. That’s stunning. And it’s another reason you might feel restless.

Dollars down drain © Stockbyte/SuperStockWith so much talk about "1 percenters" and the minimum wage recently, I feel like the big, often economically silent middle of America hasn’t gotten the attention it has deserved.  Let’s call them the “20 to 80 percenters.” I know that doesn’t have much of a ring to it, but it’s a pretty important group. And here’s the sad truth about what they own.

Last week, the Census Bureau released new figures on net worth, broken out in quintiles -- the top 20 percent, the 20-40 percent, the 40-60 percent, and so on.  Net worth is a pretty simple, but important, number. It’s basically the value of folks’ homes, savings, retirement accounts and other financial assets minus their debts -- mortgage debt, credit card debt and so on. So a $400,000 home with a $300,000 mortgage counts as a $100,000 asset. The census released data for 2000, 2005 and 2011, meaning the data isn’t quite current.  Still, it’s incredibly illuminating.

It shouldn’t surprise anyone that all five groups own less than they did in 2005, at the height of the housing bubble. Housing values have a big impact on net worth measures, at least in the top 3 quintiles.

But if you dig into the numbers a bit, you can see how punishing this drop is on the middle class. Up there in the richest fifth of Americans, the median net worth of that group dropped 19 percent. That’s a bit harsh, sure. But look at the middle group, where net worth dropped from $106, 591 to $68,839. That’s 35 percent.

The “middle” middle class lost more than one-third of its net worth between 2005 and 2011!

Drop down a quintile and you’ll see even worse punishment. The 60-80 percenters lost more than half of their net worth. Even the pretty-well-off Americans in that second group, the 20-40 percenters, lost more than a quarter of their wealth (26 percent).

I’d argue these dramatic numbers actually understate the problem.  Losing one quarter to one-half of  your net worth when you didn’t have much to begin with is a heck of a lot bigger kick in the teeth than losing that much as a wealthy person. After all, that awful number, “zero net worth,” starts staring up at you. By now, I hope you’ve noticed that the bottom quintile lives with negative net worth and the 20-40 percenters aren’t too far off.

But climb up the scale again, and you’ll see that folks have assets that are roughly equal to one year's wages. That means their lives are teetering on a razor’s edge. As I’ve argued many times -- middle-class and upper-middle class Americans have a lot more in common with those below them than those above on the income class scale.

Courtesy Credit.comI’ve concentrated here on the impact of the recession on net worth between 2005 and 2011, but the chart above tells another alarming story. The bottom two quintiles have lost ground since 2000…after 11 years of work, school, hopes and dreams…that massive group owns less than it did at the turn of the century. Even the next two groups -- the 40-80 percenters -- have seen their assets grow by less than 10% during that time. If it feels like you aren’t getting anywhere, you probably aren’t.

Net worth is a very rough measure of how people are doing. Another housing bubble could reverse this chart within a couple of years. Still, when you look at where the assets in America are, it’s not with these 20-80 percenters. Look at the jump in median asset value between the top 20 and the next 20. This is one reason America should consider an asset tax in addition to, or as a replacement for, the income tax. 

It’s certainly a reason you feel restless.

This story is an Op/Ed contribution to and does not necessarily represent the views of the company or its affiliates.

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Sep 2, 2014 1:06PM
Home prices then were as overvalued as the stock market is today. How about looking back 5 and 10 years earlier for your comparison.
Sep 2, 2014 2:41PM

"This is one reason America should consider an asset tax in addition to, or as a replacement for, the income tax." I disagree with this opinion from the above article. Every homeowner currently pays a property tax that is based on the value of the home. Some states even have the renewing of auto registration based on the value of the car. An additional asset tax will make the assets that get taxed less desirable, which will reduce the value of the assets that the 20% to 80% already own. This is probably not the end result the author of this article wants.

I do not disagree with the author that the 20% to 80% have lost real asset value. They probably have also lost real earning power.

Increasing the earning power and asset value of the 20% to 80% will take learning new skill sets, better education, allowing the 20% to 80% to keep more of their money when it is earned, increased savings and less debt fueled consumption, fair trade with countries that have similar protection of workers as the US and an immigration policy that rewards legal immigration over illegal immigration.

Sep 2, 2014 3:41PM
Bob Sullivan and credit .com. Why don't you investigate what the cost of the federal reserve's printing of money has done to people.   Your buds in the gov keep telling everyone the inflation rate is low and things are getting better in the overall economy. Might be time to hire some real investigative reporters.  If i wanted regurgitated vile from the politicos i would not comment here and just go with the flow.
Sep 2, 2014 4:46PM
But, But, But How can this be???   You all, including our feckless leader, keep espousing how great the economy is... how many "new" jobs you've everyone one is so much better off with Obamacare, etc., so how can our net worths' have decreased  when everything is supposed to be so great????   Obama, Reid, Pelosi, any of you care to comment???   Thought not......
Sep 2, 2014 4:02PM

The reason I feel restless?  It's because jerks like this author are espousing an "asset tax" in ADDITION TO THE INCOME TAX.  Welcome to Putin's Russia, my friends.  Anything to continue feeding this always starving government...... 

 That's why only a fool would put assets in a Roth IRA.  The government is promising a "1-time" tax on assets to convert to a Roth IRA, with the promise of letting you withdraw those funds tax-free down the line.  Does anyone out there REALLY believe that, if/when the government runs out of OUR MONEY, they will reneg on that Roth IRA promise??  HA

Sep 2, 2014 4:27PM
Oh yeah, another tax would definitely help the have nots have more.  Another source for our government to cover their free handouts, I'm out!  We are already taxed out of our a$$ ets.  My net worth has actually gone up by $300,000, because I live within my means and started saving for my retirement since all my assets are paid for.  I sell cars for a living, and see peoples credit.  They are nuts, with their debt to income ratios.  It doesn't matter how much they earn, but they manage to spend it all and then some.  It's a road to financial disaster, the reason they don't have a net worth is because they are over run with debt.
Sep 2, 2014 3:49PM
Hoax and Chains baby, hoax and chains!!
Sep 2, 2014 6:13PM

Mike820 TOTALLY agree!!!

You probably know as well as I do what an "asset tax" would be like. It would be sold to people as taxing ONLY the "richest" part of the population, and then sooner or later [most likely sooner, than later] we'll have a "crisis", and then they'll extend the tax downward to the people that are middle class and, even the "upper" working class [which means ANYBODY with a job] and this country will be stuck with ANOTHER confiscatory tax!!!

THIS is EXACTLY what happened with the Federal income tax!!  The first year, 1913, the year the tax was implemented, the TOP rate was 7% [seven percent] on incomes over $500,000 the equivalent of $12,000,000 today!!! Does ANYBODY but an IDIOT, OR A "PROGRESSIVE" STATIST, really believe we should have MORE taxes?????

Sep 2, 2014 6:06PM

"I’ve concentrated here on the impact of the recession on net worth between 2005 and 2011, but the chart above tells another alarming story. The bottom two quintiles have lost ground since 2000…after 11 years of work, school, hopes and dreams…that massive group owns less than it did at the turn of the century. Even the next two groups -- the 40-80 percenters -- have seen their assets grow by less than 10% during that time. If it feels like you aren’t getting anywhere, you probably aren’t."

You are assuming that it is the same people in this group.  11 years ago I was in the bottom 20% by household income (I was 23) and I had a very small net worth.  11 years later I am in the top 50% and have a much larger net worth from savings, retirement, and from moving up in value in my housing. Where I would have been counted in these statistics 11 years ago is not where I am counted now. I am not stating that things are not bad, they are, but hard work and actually saving 15-20% of what you make will always improve your economic situation.

Sep 2, 2014 4:27PM
That's hard to believe considering the wonderful job Obama has done.  

(By the way that's sarcasm for those lacking sarcasm awareness)
Sep 2, 2014 7:30PM
On the bright side foreign investors and immigrants have had huge gains.
Sep 2, 2014 5:30PM
we are being screwed by the politicians that work for the corporations that are owned by the top few.
Sep 3, 2014 10:50AM
This article is good only for saying what's changed in terms of net worth . . . but because it deals with the sum of assets minus liabilities, you can't reliably conclude much else, especially about certain classes doing better or worse.

One example:  if previously I had a $50,000 mortgage on a $100,000 home and now I have a $150,000 mortgage on a different $200,000 home that is much better than the prior one, my living standard improved despite having the same "net worth" in the home . . . although I tripled my actual debt load. 

Sep 3, 2014 12:46PM

So much of the loss of asset value is attributed to the consumer over-extending their credit capacity and having a mortgage greater than 35% (with utilities) of their monthly pay.  They committed their entire financial stability on two paychecks NOT changing for the worse for a 30 year loan. 

I bought our house in 94 based solely on my pay, when the wife went unemployed in 2007, it didn't matter...we finished the loan in 2012.  While she was employed I paid extra and the 30 year loan was done in 18. 

And funded my IRA during that period.  I only make $50,000 but our net worth is over twice it was in 2000 now.

Sep 2, 2014 4:00PM
"The bottom two quintiles have lost ground since 2000"? Really?

How does the author determine that, given that the bottom quintile want from $905 to $6,029 - an over six-fold increase...and the only group to show an increase? Just what has this author been smoking?

I guess ignorance and deceit for political gain have no bounds.
Sep 2, 2014 4:44PM

And what have the gop/teabags done to help America and it's economy?



A lot, they continue to sabotage it!

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