Changes in Household Wealth in the 1980s and 1990s in the U.S.
Year: 2004
Type: preprint
Study design: Observational Study
Abstract: American families did advance relative to white families.In 1983, the richest households were those headed by persons between 45 and 69 years of age, though between 1983 and 1989, wealth shifted away from this age group toward both younger and older age groups.However, the relative wealth holdings of both younger and older families fell between 1989 and 1998.Though wealth and income are positively correlated among households, the correlation is far from perfect and there exists a large variation of wealth holdings within income class.One issue that generated some controversy over the last few years is that the largest wealth gains from 1983 to 1989 were being received by middle income families.From 1989 to 1998, the situation reversed and non-elderly middle income families actually experienced the largest losses in wealth.With the release of the Federal Reserve Board's 2001 Survey of Consumer Finances, I can now extend some of my earlier analysis on the ownership of household wealth to 2001.Section 1 discusses the measurement of household wealth and describes the data sources used for this study.Section 2 presents results on time trends in average wealth holdings, Section 3 on changes in the concentration of household wealth, and Section 4 on the composition of household wealth.Section 5 investigates changes in wealth holdings by race; Section 6 reports on changes in the agewealth profile, as well as on wealth by marital status; and Section 7 examines wealth differences by income class.Section 8 provides details on stock ownership for different demographic groups.A summary of results and concluding remarks are provided in Section 9. DATA SOURCES AND METHODSThe data sources used for this study are the 1983, 1989, 1992, 1995, 1998, and 2001 Survey of Consumer Finances (SCF) conducted by the Federal Reserve Board.Each survey consists of a core representative sample combined with a high-income supplement.The supplement is drawn from the Internal Revenue Service's Statistics of Income data file.For the 1983 SCF, for example,an income cut-off of $100,000 of adjusted gross income is used as the criterion for inclusion in the supplemental sample.Individuals were randomly selected for the sample within predesignated income strata.The advantage of the high-income supplement is that it provides a much "richer" sample of high income and therefore potentially very wealthy families.However, the presence of a high-income supplement creates some complications, because weights must be 3 constructed to meld the high-income supplement with the core sample.2 The SCF also supplies alternative sets of weights.For the 1983 SCF, I have used the socalled "Full Sample 1983 Composite Weights" because this set of weights provides the closest correspondence between the national balance sheet totals derived from the sample and the those in the Federal Reserve Board Flow of Funds.For the same reason, results for the 1989 SCF are based on the average of SRC-Design-S1 series (X40131 in the database itself) and the SRC Designed Based weights (X40125); and results for the 1992, 1995, 1998, and 2001 SCF rely on the Designed-Base Weights (X42000)-a partially design-based weight constructed on the basis of original selection probabilities and frame information and adjusted for nonresponse.3 In the case of the 1992 SCF, this set of weights produced major anomalies in the size distribution of income for 1991.As a result, I have modified the weights somewhat to conform to the size distribution of income as reported in the Internal Revenue Service's Statistics of Income (see Wolff, 1996, for details on the adjustments).The Federal Reserve Board imputes information for missing items in the SCF.However, despite this procedure, there still remain discrepancies for several assets between the total balance sheet value computed from the survey sample and the Flow of Funds data.As a result, the results presented below are based on my adjustments to the original asset and liability values in the surveys.This takes the form of the alignment of asset and liability totals from the survey data to the corresponding national balance sheet totals.In most cases, this entails a proportional adjustment of reported values of balance sheet items in the survey data (see Wolff, 1987Wolff, , 1994, 2 , 2 Three studies conducted by the Federal Reserve Board -Kennickell and Woodburn (1992) for the 1989 SCF; Kennickell, McManus, and Woodburn (1996) for the 1992 SCF; and Kennickell and Woodburn (1999) for the 1995 SCF -discuss some of the issues involved in developing these weights.
Author: Edward N. Wolff
Language: English
Subfield: Sociology and Political Science
Field: Social Sciences
Domain: Social Sciences
SDG: Reduced inequalities
Open Access status: green
OpenAlex ID: W2097268161