Americans’ average income grew by 4 percent from 2010 to 2013, a misleading number since it was pulled up by the richest Americans who grew wealthier during the period, according to a Federal Reserve report released Thursday.
In its Survey of Consumer Finances, conducted every three years, the Fed found that while average income rose by 4 percent, the midpoint income for American families actually fell 5 percent “consistent with increasing income concentration during this period.”
Translation: The growing wealth of the richest Americans pulled up the average. It’s the same phenomenon as if you and Microsoft founder Bill Gates pooled your salaries, you too would be a billionaire.
The trend actually represents a reversal because during the financial crisis of 2008 and 2009 the wealthiest Americans lost disproportionately more as markets cratered. They pulled down average wealth as their income fell in that period.
For Americans at the bottom of the income ladder, the period between 2010 to 2013 was a continued downward spiral.
“Families at the bottom of the income distribution saw continued substantial declines in average real incomes between 2010 and 2013, continuing the trend observed between the 2007 and 2010 surveys,” the report said.
The report showed largely a flat line for the broad category of middle income earners_ a group representing the top 40 percent to 90 percent of all families reporting income. They saw little change in average real income from 2010 to 2013, the Fed survey said, suggesting they missed the wealth rebound that the rich enjoyed.
When homes and other assets are factored in, the average net worth of American households ticked up negligibly but the midpoint net worth actually fell a modest 2 percent from 2010 to 2013. Ownership rates of housing and businesses fell sharply between 2010 and 2013, the Fed report added.
During this period, the average debt load for families fell 13 percent, and the midpoint level for families reporting debt fell 20 percent. That underscores how households have busily tried to pay down debts in the aftermath of the Great Recession and explains the weak consumption reported during the period.