The Economist reports:
A new paper by Mr Saez and Gabriel Zucman of the London School of Economics ... examine[d] the share of total wealth held by the bottom 90% of families relative to those at the very top. Because the bottom half of all families almost always has no net wealth, the share of wealth held by the bottom 90% is an effective measure of “middle class” wealth, or that held by those from the 50th to the 90th percentile. In the late 1920s the bottom 90% held just 16% of America’s wealth—considerably less than that held by the top 0.1%, which controlled a quarter of total wealth just before the crash of 1929. From the beginning of the Depression until the end of the second world war, the middle class’s share of total wealth rose steadily, thanks largely to collapsing wealth among richer households. Thereafter the middle class’s share grew along with national wealth thanks to broader equity ownership, middle-class income growth and rising rates of home-ownership. The expansion of tax breaks for retirement savings also helped. By the early 1980s the share of household wealth held by the middle class rose to 36%—roughly four times the share controlled by the top 0.1%.
From the early 1980s, however, these trends have reversed. The ratio of household wealth to national income has risen back toward the level of the 1920s, but the share in the hands of middle-class families has tumbled (see chart). Tepid growth in middle-class incomes is partly to blame; real incomes for the top 1% of families grew 3.4% a year from 1986-2012 while those for the bottom 90% grew 0.7%. But Messrs Saez and Zucman reckon the main cause of falling middle-class net worth is soaring debt. Rising home values did little to raise middle-class wealth since mortgage debt also soared. The recession battered home prices but left the debt untouched, further squeezing middle-class wealth.
On the other side of the spectrum, the fortunes of the wealthy have grown, especially at the very top. The 16,000 families making up the richest 0.01%, with an average net worth of $371m, now control 11.2% of total wealth—back to the 1916 share, which is the highest on record. Those down the distribution have not done quite so well: the top 0.1% (consisting of 160,000 families worth $73m on average) hold 22% of America’s wealth, just shy of the 1929 peak—and exactly the same share as the bottom 90% of the population. Meanwhile the share of wealth held by families from the 90th to the 99th percentile has actually fallen over the last decade, though not by as much as the net worth of the bottom 90%.