Average American Worth Less As Well
The Boston Consulting Group (BCG) released a report in May that shows the number of American millionaires decreased by 129,000 in 2011. Households with investible assets of over $1 million dropped from 5,263,000 to 5,134,000. Total private wealth in North America dropped by 0.9 percent, to $38 trillion. The main culprits for such a drop are the unpredictability and wild swings of the stock market over the past year spurred on by the debt ceiling debate last summer and the continuing European debt crisis. The largest decrease occurred in the ultra-rich sector, with those worth more than $100 million seeing a wealth decline of 2.4 percent.
The phenomenon was a primarily North American problem as the world in total added 175,000 millionaires, increasing global millionaire households to 12.6 million, according to the BCG report. The majority of world growth occurred in “emerging markets” in Asia. Singapore has the highest “millionaire density” with more than 17 percent of homes worth one million or greater. BCG concluded that they expect future growth to primarily occur in the Asia-Pacific region, projecting an annual six percent increase in millionaires in those regions in coming years.
Released at the same time, the Federal Reserve produced a report showing that median U.S. wealth has fallen by nearly 40 percent since 2007. In 2007, the average American family had a median worth of $126,400. Just three years later, by 2010, that number had plummeted to $77,300, reports the Fed. The report states, “The decreases in median net worth appear to have been driven most strongly by a broad collapse in house prices.” Low and middle-income families were affected most by the housing collapse, as this is usually their biggest asset. Net worth and median income fell most severely in the West, as the real estate markets in states like Nevada, Arizona and even California bottomed out in 2008. In the LA Times, economics professor Sung Won Sohn of CSU-Channel Islands says, “the drop in real estate has been so large, it will probably take years to recover. It will probably be a decade.”
Overall, capital gains income dropped from 6.7 percent to 0.9 percent of earnings and self-employment from 13.6 percent to 12.2 percent. Concurrently, income from salaries, Social Security and pensions all rose. The Fed report followed a week of bad news from the Labor Department, whose revised job numbers from March through May were drastically lower than initially reported. They had predicted 150,000 new jobs in May; the real number was 69,000. Though the Obama administration has proposed several new programs and policies to help raise employment rates, his presidency thus far has seen a net wealth decline for the average American.