Trends In Family Wealth, 1989 To 2013
CONGRESS OF THE UNITED STATESCONGRESSIONAL BUDGET OFFICECBOTrends inFamily Wealth,1989 to 2013Trillions of 2013 Dollars75Holdings of Family Wealth6045Top 10 Percent30150198951st to 90thPercentilesBottom 50 Percent19921995199820012004AUGUST 2016200720102013
NotesNumbers in the text and exhibits may not sum to totals because of rounding.Unless otherwise specified, all dollar amounts are reported in thousands of 2013 dollars. Family wealth over time isadjusted for inflation using the price index for personal consumption expenditures as calculated by the Bureau ofEconomic Analysis.The analysis for this report used data from the Survey of Consumer Finances, a triennial survey of U.S. familiessponsored by the Board of Governors of the Federal Reserve System in cooperation with the Department of theTreasury. In some places, those data were supplemented with information from Forbes magazine’s list of the nation’swealthiest 400 people.Shaded vertical bars in some exhibits indicate periods of recession, which extend from the peak of a business cycle to itstrough. Annual statistics from the data taken from the Survey of Consumer Finances are positioned with August of eachyear as the midpoint of the collection period.Supplemental data for this report are available on CBO’s website lication/51846
ContentsSummary and IntroductionHow Is the Nation’s Wealth Distributed?How Did the Distribution of Wealth Change From 1989 to 2013?How Did Changes in Families’ Assets and Debt Contribute to Changes in the Wealth Distribution From 1989 to 2013?What Sources of Data Did CBO gs of Family Wealth, by Wealth GroupWealth for Families at Selected Percentiles of the DistributionAverage Wealth for Families in the 51st to 90th Percentiles of the Wealth DistributionChanges in the Assets and Debt of Families in the 51st to 90th Percentiles of the Wealth DistributionAverage Wealth for Families in the 26th to 50th Percentiles of the Wealth DistributionChanges in the Assets and Debt of Families in the 26th to 50th Percentiles of the Wealth DistributionAverage Wealth for Families in the Bottom 25 Percent of the Wealth DistributionChanges in the Assets and Debt of Families in the Bottom 25 Percent of the Wealth DistributionShare of Families in Debt and Average Indebtedness for Those FamiliesMedian Family Wealth, by Age GroupMedian Family Wealth, by Education Group4567891011121314Appendix: Data, Measures of Wealth, and Previous Analyses of Income15Definitions20About This Document21
Trends in Family Wealth, 1989 to 2013Summary and IntroductionIn 2013, aggregate family wealth in the UnitedStates was 67 trillion (or about four times thenation’s gross domestic product) and the medianfamily (the one at the midpoint of the wealthdistribution) held approximately 81,000, theCongressional Budget Office estimates. For thisanalysis, CBO calculated that measure of wealth asa family’s assets minus its debt. CBO measuredwealth as marketable wealth, which consists ofassets that are easily tradable and that have valueeven after the death of their owner. Those assetsinclude home equity, other real estate (net of realestate loans), financial securities, bank deposits,defined contribution pension accounts, and business equity. Debt is nonmortgage debt, includingcredit card debt, auto loans, and student loans, forexample.How Is the Nation’s Wealth Distributed?In 2013, families in the top 10 percent of thewealth distribution held 76 percent of all familywealth, families in the 51st to the 90th percentilesheld 23 percent, and those in the bottom half ofthe distribution held 1 percent. Average wealth wasCBOabout 4 million for families in the top 10 percentof the wealth distribution, 316,000 for familiesin the 51st to 90th percentiles, and 36,000 forfamilies in the 26th to 50th percentiles. On average, families at or below the 25th percentile were 13,000 in debt.There are significant differences in wealth amongdifferent age and education groups. In 2013, themedian family wealth of families headed by someone who was age 65 or older— 211,000—wasmore than 3½ times the median wealth of familiesheaded by someone between the ages of 35 and 49.Similarly, median wealth of families headed bysomeone with a college degree— 202,000—wasalmost four times the median wealth of familiesheaded by someone with a high school diploma.How Did the Distribution of Wealth ChangeFrom 1989 to 2013?Over the period from 1989 through 2013, familywealth grew at significantly different rates for different segments of the U.S. population. In 2013,for example:BThe wealth of families at the 90th percentileof the distribution was 54 percent greater thanthe wealth at the 90th percentile in 1989, afteradjusting for changes in prices.BThe wealth of those at the median was 4 percentgreater than the wealth of their counterparts in1989.BThe wealth of families at the 25th percentilewas 6 percent less than that of their counterpartsin 1989.The distribution of wealth among the nation’s families was more unequal in 2013 than it had been in1989. For instance, the difference in wealth held byfamilies at the 90th percentile and the wealth ofthose in the middle widened from 532,000 to 861,000 over the period (in 2013 dollars). Theshare of wealth held by families in the top 10 percent of the wealth distribution increased from67 percent to 76 percent, whereas the share ofwealth held by families in the bottom half of thedistribution declined from 3 percent to 1 percent.
SUMMARY AND INTRODUCTIONTwo developments contributed to the change inthe distribution of wealth: Compared with familiesin the top half of the distribution, families in thebottom half experienced disproportionately slowergrowth in wealth between 1989 and 2007, andthey had a disproportionately larger decline inwealth after the recession of 2007 to 2009.Estimates of the trends in wealth dispersion at thevery top of the distribution differ depending on dataset and methodology. Estimates based on data fromthe Survey of Consumer Finances (SCF), supplemented with data on the nation’s 400 wealthiestfamilies, suggest that the share of wealth held bythose in the top 1 percent increased by 6 percentagepoints—from 31 percent to 37 percent—between1989 and 2013. By contrast, estimates based onother data and methodologies suggest that theshare of wealth held by the top 1 percent increasedby 14 percentage points—from 28 percent to42 percent—between 1989 and 2012.1CBO’s analyses in this report—including that oftrends in the share of wealth held by the top 10 percent of the distribution—are not very sensitive tothe differences in estimates of wealth in the top1 percent of the distribution. A detailed investigation of the sources of the differences in estimatesof wealth held at the very top of the distribution1. See Emmanuel Saez and Gabriel Zucman, “WealthInequality in the United States Since 1913: EvidenceFrom Capitalized Income Tax Data,” Quarterly Journalof Economics, vol. 131, no. 2 (May 2016), pp. TRENDS IN FAMILY WEALTH, 1989 TO 2013would have been a significant undertaking thatwas outside the scope of this analysis.Changes in wealth over the period were not thesame for families headed by people of different agesor with different amounts of education. Familiesheaded by someone who was age 65 or older heldgreater median wealth in 2013 than their counterparts did in 1989, but the same was not true forfamilies headed by a person younger than 65.Median wealth was greater in 2013 than it hadbeen in 1989 for families headed by someone withat least a bachelor’s degree; the opposite was truefor their less educated counterparts. (Examiningmedian wealth for those groups over time allowedCBO to avoid placing disproportionate weight onchanges in wealth at the top of the distribution.)How Did Changes in Families’ Assets and DebtContribute to Changes in the WealthDistribution From 1989 to 2013?To explore changes in assets and debt, this reportfocuses on wealth held by those in the bottom90 percent of the wealth distribution. A detailedanalysis of the categories of assets and debt heldby families above the 90th percentile of the wealthdistribution is not possible because informationabout the composition of wealth for the nation’s400 wealthiest families is incomplete. Also, estimates of the share of total wealth held by familiesin the bottom 90 percent and its change over timeare generally consistent, regardless of data ormethodology. (See the appendix for additionaldiscussion.)In 2013, average wealth for families in the 51st to90th percentiles was greater than it had been in1989. In contrast, average wealth for families in thebottom half of the distribution was less in 2013than in 1989. (Examining average wealth for various groups below the 90th percentile allowed CBOto assess the relative contributions of changes inassets and debt to the changes in those averagesover time. Because those averages exclude the top10 percent of the distribution, they are not influenced by the wealth at the top of the distribution.)Although average wealth had increased for familiesin the 51st to 90th percentiles and for those in the26th to 50th percentiles between 1989 and 2007,the decline in wealth associated with the recessionmore than offset earlier increases for the latter group.For those families, increases in home equity and infinancial and other assets contributed to risingwealth between 1989 and 2007, and conversely,losses in home equity and in financial and otherassets after 2007 contributed to the decline in average wealth over the period. Average wealth of families in the bottom 25 percent changed little between1989 and 2007 but declined after 2007. Declinesin home equity and increases in nonmortgage debtwere among the factors contributing to the declinein average wealth for those families.For those at the bottom of the distribution ofwealth between 1989 and 2013, but especially after2007, the share of families that had more debt thanassets increased, as did their average indebtedness.For instance, 8 percent of families had more debtthan assets in 2007, and they were, on average, 20,000 in debt. By 2013, 12 percent of familieshad more debt than assets, and they were, onaverage, 32,000 in debt.2
SUMMARY AND INTRODUCTIONWhat Sources of Data Did CBO Use?For this analysis, CBO examined the distributionof wealth chiefly using data from the Survey ofConsumer Finances, supplemented with data fromthe Forbes 400 list, where necessary. That choice ofdata allowed CBO to examine trends in wealth forall families. The supplemented SCF covers theentire wealth distribution. The appendix presents alonger discussion of the data and methods used forthis analysis. A list of definitions appears at the endof the publication.This report provides a series of snapshots of familywealth; it does not provide information aboutCBOTRENDS IN FAMILY WEALTH, 1989 TO 2013changes in the wealth of particular families overtime. Because the SCF samples different families ineach year of the survey, families in a particulargroup in one year will be different from theircounterparts in an earlier or later survey.The information presented in this report focuseson measures of family wealth—the stock of economic resources that a family holds at a point intime. In contrast, family (or household) incomemeasures the economic resources that a familygains or loses during a particular period.2 For adiscussion of changes in the distribution of incomeand how they might relate to changes in thedistribution of wealth, see the appendix. Otherfactors also influence the distribution of wealth overtime, including differences among families in inheritances and plans to leave bequests, propensities tosave and rates of return on savings, investment skillsand strategies, and composition of assets. 2. In the past, CBO has examined trends in the distributionof income. See for example, Congressional Budget Office,The Distribution of Household Income and Federal Taxes,2013 (June 2016), pp. 21–24, www.cbo.gov/publication/51361.3
AUGUST 2016TRENDS IN FAMILY WEALTH, 1989 TO 2013Exhibit 1.Holdings of Family Wealth, by Wealth GroupTrillions of 2013 Dollars756045Top 10 Percent301551st to 90thPercentiles01989Bottom 50 Percent19921995199820012004200720102013Source: Congressional Budget Office, using data from the Survey of Consumer Finances, supplemented with data from Forbes magazine’slist of the nation's 400 wealthiest people.The Survey of Consumer Finances is conducted every three years.CBOIn 2013, total family wealth in the UnitedStates—that is, families’ total assets minustheir total debt—was nearly 67 trillion, orabout four times the size of the nation’s grossdomestic product, CBO estimates. After anadjustment for price changes over the period,that is more than double the amount of familywealth in 1989. The overall increase in wealthwas different for families in different segmentsof the population, however. For instance,between 1989 and 2013, wealth held by families in the top 10 percent of the distributionincreased by 153 percent, whereas wealth heldby families in the bottom half of the distribution declined by 19 percent. (Families in thetop 10 percent of the wealth distribution in2013 were not necessarily the same as thosein the top 10 percent in earlier years.)The distribution of wealth was more unequalin 2013 than it had been in 1989. In 2013,families in the top 10 percent held more thanthree-quarters of all family wealth, whereas in1989, their counterparts had held two-thirds ofall family wealth. Over the period, the shareof wealth held by families in the 51st to the90th percentiles declined from 30 percent to23 percent, and the share of wealth held byfamilies in the bottom half of the distributiondeclined from 3 percent to 1 percent. 4
AUGUST 2016TRENDS IN FAMILY WEALTH, 1989 TO 2013Exhibit 2.Wealth for Families at Selected Percentiles of the DistributionThousands of 2013 Dollars1,2001,00090th Percentile80060040075th Percentile20050th Percentile01989199219951998200120042007201025th Percentile2013Source: Congressional Budget Office, using data from the Survey of Consumer Finances, supplemented with data from Forbes magazine’slist of the nation's 400 wealthiest people.The Survey of Consumer Finances is conducted every three years.Between 1989 and 2013, family wealth (totalassets minus total debt) grew at different ratesfor families at different points on the wealthdistribution. In 2013, families at the 90th and75th percentiles had significantly more wealththan their counterparts did in 1989: 54 percent and 29 percent more, respectively. Families at the median had 4 percent more in 2013than in 1989, but families at the 25th percentile had 6 percent less than their counterpartsdid in 1989.The changes from 1989 to 2013 generallyreflect increases in wealth from 1989 to 2007(before the start of the recession of 2007 to2009) and decreases in more recent years.From 1989 through 2007, wealth grew similarly in percentage terms for families at the25th, 50th, 75th, and 90th percentiles ofthe wealth distribution. During and after therecession, wealth declined for all groups, andby 2013 no group had regained its prerecessionlevel. The decline was larger between 2007and 2013 for families at the 25th, 50th, and75th percentiles (44 percent, 39 percent,and 23 percent, respectively) than for familiesat the 90th percentile, whose wealth declinedby 7 percent during that time.Some of the growth in family wealth, particularly before the recession, can be attributedto the aging of the population and to risingeducational attainment among all age groups:Older or more educated people tend to havemore wealth than their younger or lesseducated counterparts (see Exhibit 10 andExhibit 11). CBO5
AUGUST 2016TRENDS IN FAMILY WEALTH, 1989 TO 2013Exhibit 3.For the group between the median and the top10 percent of the nation’s wealth distribution,average family wealth (measured as a family’stotal assets minus its total debt) was 35 percenthigher in 2013 than it had been for theircounterparts in 1989. The group’s averagewealth in 2007 was significantly above what ithad been in 1989 but declined by about onefifth between 2007 and 2013. The overallincrease between 1989 and 2013 was the resultof rising wealth before the recession of 2007 to2009 but with partially offsetting decreasesduring the recession and its aftermath.Average Wealth for Families in the 51st to 90th Percentiles of the Wealth DistributionThousands of 2013 20012004Source: Congressional Budget Office, using data from the Survey of Consumer Finances.The Survey of Consumer Finances is conducted every three years.CBO200720102013Increases in the value of home equity, financialassets, and other assets (such as other real estateand business assets) all contributed to theincrease in wealth between 1989 and 2007for families in this group. Those increases,however, were offset somewhat by rising nonmortgage debt over that period. The recessionand its aftermath were marked by declines inall asset categories (see Exhibit 4). 6
AUGUST 2016TRENDS IN FAMILY WEALTH, 1989 TO 2013Exhibit 4.Changes in the Assets and Debt of Families in the 51st to 90th Percentiles of theWealth DistributionHome EquityFinancial AssetsOther AssetsNonmortgage DebtPercentage of Families That Hold Each Category of Asset or Debt9394919910099979695727262Thousands of 2013 Dollars200 58%–31%–8%150 98% 50%100–19%500–49%-5019892007 201319892007 201319892007 201319890%2007 2013Source: Congressional Budget Office, using data from the Survey of Consumer Finances.The Survey of Consumer Finances is conducted every three years.Positive percentages indicate an increase in assets or a decrease in debt; negative percentages indicate a decrease in assets or anincrease in debt. Dollar amounts are average values for families that hold each category of asset or debt.CBOFrom 1989 until the recession of 2007 to2009, increases in home equity and in thevalue of financial assets (such as retirementaccounts and financial securities) and otherassets (such as business assets and real estateother than a family’s primary residence) allcontributed to rising wealth for families thatwere above the median but at or below the90th percentile in the nation’s distribution ofwealth. Those increases, however, were offsetsomewhat by rising nonmortgage debt overthat time.The recession and its aftermath were markedby declines in all asset categories for families inthe 51st to 90th percentiles of the distribution.In particular, between 2007 and 2013, steepdeclines in home equity and losses in the valueof financial assets precipitated notable declinesin total family wealth. Additionally, a 14 percent drop in business equity (a subcategory ofother assets consisting of holdings of privatelyowned businesses that is not shown in theexhibit) diminished the wealth of the roughly15 percent of families that owned such assets.The declines in assets were moderated byreductions in the number of families withnonmortgage debt in 2013 relative to theircounterparts in 2007: The share of familiesholding nonmortgage debt declined from72 percent to 62 percent between 2007 and2013. For the families that held such debt, theamount of debt remained about the same, onaverage. 7
AUGUST 2016TRENDS IN FAMILY WEALTH, 1989 TO 2013Exhibit 5.Average family wealth (total assets minustotal debt) for families in the 26th through50th percentiles of the wealth distributionincreased between 1989 and 2007, butdeclines in wealth for that group during andafter the recession of 2007 to 2009 more thanoffset those gains. In 2013, average wealthheld by those families was 36,000, or 6 percent less than that of their counterparts in1989, whereas in 2007, that group’s wealthwas about 68 percent greater than
1989. B The wealth of families at the 25th percentile was 6 percent less than that of their counterparts in 1989. The distribution of wealth among the nation’s fam-ilies was more unequal in 2013 than it had been in 1989. For instance, the difference in wealth held by families at the 90th percentile and the wealth of
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