During the initial phase of the COVID-19 pandemic, the financial landscape for middle and lower-income families witnessed a notable surge in wealth growth, surpassing the rate observed among higher-income individuals, as indicated in a recent study unveiled by the Pew Research Center.
Between December 2019 and December 2021, the median wealth of lower-income households catapulted by 101%, while the middle-class segment experienced a substantial 29% upturn. Conversely, upper-income households saw a modest 15% increase in their net worth.
Despite this positive shift, a significant wealth gap persists. As of December 2021, high earners possessed a median net worth of $803,400, significantly higher than the $204,100 and $24,500 held by middle-class and lower-income households, respectively, according to Pew’s findings.
Despite the economic challenges wrought by the pandemic, leading to a decline in median income and a surge in long-term unemployment, there was a widespread increase in wealth among Americans.
Several factors likely contributed to this growth. Government initiatives, including multiple relief packages disbursing funds, particularly to lower-income and middle-class families, played a pivotal role. These measures encompassed various aids such as three rounds of stimulus checks totaling $3,200, an unprecedented expansion of unemployment benefits, augmented food stamps, an enhanced child tax credit, and substantial housing assistance for both renters and homeowners.
Additionally, the surge in home prices by 31% between December 2019 and December 2021 significantly bolstered homeowners’ equity. Historically low mortgage rates presented homeowners with opportunities to reduce their monthly payments. Simultaneously, after initially plummeting at the pandemic’s onset, stock prices rebounded significantly.
However, despite these overall gains, households with lower incomes were more likely to be in debt both prior to and at the end of 2021. Half of these households possessed a net worth of $500 or less by December 2021, compared to zero net worth two years earlier.
Rakesh Kochhar, a senior researcher at Pew, highlighted, “What we witnessed during the pandemic was widespread financial gains across households, but these gains weren’t enough to alleviate the debt burden for the poorest segments in the country.”
Specifically, poorer Black households had a median negative net worth of $4,000 by the end of 2021, marking an improvement from their median negative net worth of $10,000 two years earlier.
Similarly, while Hispanic households saw a median net worth of $0 by December 2021, it improved from a negative net worth of $1,100 in 2019.
The financial strides experienced by lower-income and middle-class Americans might not be sustainable. According to Pew, the trends that facilitated wealth accumulation between 2019 and 2021 have either reversed or stabilized. Income levels declined between 2021 and 2022, and household spending surged by 9%, partially due to the utilization of savings accumulated earlier in the pandemic.
Furthermore, the growth in property values decelerated, and stock prices experienced a decline in 2022, although they recovered most losses this year.
Other government reports indicate that lower-income Americans faced setbacks in 2022. The proportion of individuals, especially children, living in poverty notably increased last year after declining in 2021, according to data from the US Census Bureau.
