Back in August, Bloomberg interviewed Karen Petrou about her research on quantitative easing and the Fed’s policies since the 2008 financial crisis. What she has discovered has not been encouraging for people who aren’t already high-income, and in recent research presented to the New York Fed, she concluded “Post-crisis monetary and regulatory policy had an unintended but nonetheless dramatic impact on the income and wealth divides.”
This assessment is based on her own work, but also on a 2018 report released by the Minneapolis Fed. The report showed that both income and wealth growth in the US have been much better for higher-income households in recent decades
Notably, when indexed to 1971 (the year Nixon ended the last link between gold and the dollar) we can see the disparity between the top wealth groups and other groups:
What did we learn [from the Minneapolis Fed report]? This new dataset shows clearly that U.S. wealth inequality is the worst it has been throughout the entire U.S. post-war period. We also know now that the U.S. middle class is even more“hollowed out” than we thought in terms of income, with any gains made by the lower-middle class sharply reversed after 2007.
Indeed, the report concludes: “…half of all American households have less wealth today in real terms than the median household had in 1970.”
A closer look at income data also suggests that income growth has been especially anemic since 2007. Using data from the Census Bureau’s 2017 report on income and poverty, we find that incomes for the 90th percentile are increasingly pulling away from both the median (50th percentile) income and from the 20th-percentile income.
The household income for the 20th percentile increased 70 percent since 1971, while it has only increased 20 percent at the 20th percentile.
Of course, we might think, “we should be happy that the 20th-percentile income went up by 20 percent!”