The Distribution of Household Wealth

Linda Levine
Specialist in Labor Economics

The distribution of wealth (net worth) across households has been an underlying consideration in congressional deliberations on various issues, such as taxation and social welfare. The net worth (assets minus liabilities) of households is of particular importance to the well-being of the elderly as labor income typically falls upon retirement and those retirees who had accumulated assets (e.g., certificates of deposit) can use them to maintain their standard of living. Congress has enacted tax incentives to help people amass savings to be drawn on in their retirement years. Some elderly among other households find themselves without sufficient wealth to maintain their customary, or some socially acceptable, living standard in the face of expected and unexpected events. Congress has developed publicly funded programs that supplement the income and other assets of these households (e.g., retirement, disability, and health benefits under Social Security). Nonetheless, disagreement persists over whether policy measures meant to promote a more equal distribution of wealth than exists today will affect the ability of the economy to grow by reducing incentives to invest and work.

The distribution of wealth across U.S. households is far from equal, according to data from the triennial Survey of Consumer Finances (SCF). Two summary measures are mean and median household net worth. (The median is the point in the overall distribution of wealth above and below in which one-half of all households lie. It is a better indication of the wealth of the “typical” household than is the mean, which can be greatly affected by the upper end of the distribution.) Mean household wealth has been consistently and substantially above the median. In 2007, for example, mean household net worth was $556,800 while median net worth was $120,800. The large gap between the two measures suggests substantial concentration of wealth at the high end of the distribution. (Data from the 2010 SCF are expected to become available in early 2012.)

A more detailed picture of inequality emerges from examining the share of total wealth held by households in selected percentiles of the distribution. If wealth were distributed equally, the share of households in the wealth distribution (e.g., the top 1%) would be the same as its share of total net worth (in this example, 1%). Instead, in 2007, the wealthiest 1% of households accounted for one-third of total net worth. The next 4% of households held more than one-fourth of total net worth. The top 5% of wealth owners thus accounted for about 60% of all wealth that households had accumulated in 2007.

Wealth also has become increasingly concentrated in recent decades, according to the SCF. The share of wealth in the top 10% of the distribution grew from 67% in 1989 to 72% in 2007. Declines occurring among the remaining 90% of wealth-owning households.

To assess the impact of the financial crisis and 2007-2009 recession on household wealth, respondents to the 2007 SCF were reinterviewed shortly after the recession ended. According to results released in March 2011, the net worth of most households decreased during the recession. Expressed in 2009 dollars, mean household wealth fell from $595,000 in 2007 to $481,000 in 2009, and median wealth fell from $125,000 to $96,000. Declines in home and stock prices seemingly contributed the most to the drop in net worth. As homes are a more widely held asset than stocks, however, the bursting of the housing bubble appears to have played the bigger part in reducing household wealth over the period. Although stock prices have rebounded in recent years, continuing problems in the real estate market suggest that it will be a drag on the wealth of homeowners for some time to come.


Date of Report: December 2, 2011
Number of Pages: 13
Order Number: RL33433
Price: $29.95

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