Here’s a letter to a Café patron.
Z__:
I thank you for your email, especially because it led me to uncover a careless error that I made in an earlier post – namely, mistaking, at the end, real median household income for real median household net worth.
In response to my pointing out that the real net worth of the average U.S. household today is more than triple what it was in 1975, the year when America last ran an annual trade surplus, you sensibly ask:
I do wonder whether you considered looking at median household net worth or quintiles or deciles of net worth. I don’t know the answer, but I have an intuition that the accumulation of wealth has disproportionately benefited the wealthiest, hence the average could be skewed. How much different is the growth in the median or say the bottom two quintiles of net worth compared to the average?
Thirty or so minutes of searching the internet for data on median U.S. household net worth going back to the 1970s turned up nothing reliable. (I’m sure such data are out there; I’ll keep looking.) In the meantime, I found these Federal Reserve data on the distribution of household wealth going back to the third quarter of 1989. These data are in dollar terms – seemingly nominal dollars. So I converted 1989 dollars into 2024 dollars using this person-consumption-expenditure price-index calculator.
I then used this data source to get information on the number of U.S. households in 1989 and in 2024. I divided each of these years’ numbers by two.
Using the Fed data on the dollar wealth of the bottom 50 percent of households for 1989 and today (2024) – and, again, converting 1989 dollars into 2024 dollars – I found that the average household in the bottom 50 percent of the household-wealth distribution had, in Q3 1989, a net worth in 2024 dollars of $32,991. Today (Q4 2024), the average household in the bottom 50 percent of the household-wealth distribution has a net worth of $60,658 – or a real net worth that’s 84 percent higher than in the third quarter of 1989.
These figures aren’t precisely those for real median household net worth, but they do reveal that it’s not only the rich households in the U.S. that have, at least compared to 1989, enjoyed an increase in real net worth. Such an increase occurred for households in the bottom half of the wealth distribution.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
