Jun 8, 2022 - Economy

Wealth soars for bottom half of households, but inflation looms

Illustration of a large coin squeezing into a small U.S.-shaped wallet

Illustration: Annelise Capossela/Axios

The bottom half of American households — ranked by total net worth — have more than doubled their cash savings during the pandemic, though inflation threatens to claw back some of their financial gains.

Why it matters: The wealth gap and income inequality have been worsening in recent decades, undermining the working class.

The big picture: Economic stimulus efforts — namely the thousands of dollars in checks sent to Americans during the first year of the pandemic — have bolstered the bank accounts of average folks, while the booming housing market has also added to their net worth.

  • The bottom half held 2.6% of Americans’ net worth in the fourth quarter of 2021, up from 1.8% in the first quarter of 2020, according to the Fed.
  • The same families had $242.9 billion in cash as of the third quarter of 2021 (the latest period for that data) — their most ever and up from $110.4 billion in the first quarter of 2020.

What they’re saying: “For the first time since the late 1990s, low-wage workers are gaining ground compared to other workers,” Columbia University economics professor Suresh Naidu told Bloomberg, which first reported the development today.

Yes, but: A couple of years of gains doesn't reverse decades of inequality. In 2018, the top 1% of Americans took in 16.4% of household income, up from 8.9% in 1979, according to a report published May 24 by the Economic Policy Institute.

  • Critics say that a sudden influx in cash can’t make up for structural policies that continue to prevent low-income Americans from getting ahead.

What we're watching: Whether inflation eats away at the gains many people have made. Prices have soared in the months since the Fed reported those economic advancements, forcing many lower-income Americans to rethink their finances.

  • "Without policy changes, inequality will likely drag on household spending, further slowing overall economic growth in the future as well,” EPI report authors Josh Bivens and Asha Banerjee wrote.
Go deeper