In '80s, most folks got richer, especially the rich Fed, IRS report millionaires own more of U.S. economy.

April 21, 1992|By New York Times News Service

The very rich increased their share of the nation's total pool of privately held property during the 1980s economic boom, according to researchers at the Federal Reserve and the Internal Revenue Service.

Total private wealth grew in the decade, and people at many income levels owned more assets at the peak of the boom in 1989 than they had six years earlier. But the richest 1 percent of American households, all of them millionaires at a minimum, owned a bigger share of the total at the end of that period, according to the Fed's triennial Survey of Consumer Finances issued yesterday. They accounted for 37 percent of private net worth in 1989, up from 31 percent in 1983.

By 1989, the top 1 percent (834,000 households with about $5.7 trillion of net worth) was worth more than the bottom 90 percent of Americans (84 million households, with about $4.8 trillion in net worth.)

The jump in wealth at the top is the first significant rise in wealth concentration since the 1920s, economists said.

These findings on wealth follow a recent report by theCongressional Budget Office that showed the 1 percent of American families with the higher incomes also reaped the overwhelming share of the gains in average after-tax family income during the late 1970s and the 1980s.

A household's wealth, or net worth, is what it owns (including stocks and bonds, housing and other real estate, checking and savings accounts and so forth) minus what it owes in debt (including mortgage loans, credit card balances and business loans).

"It's another example of a big unprecedented jump in inequality to Great Gatsby levels," said Paul R. Krugman, an economist at the Massachusetts Institute of Technology, who was one of the first economists to calculate how much of the income gains had gone to the top income-earners.

The new data on the growing concentration of wealth are likely to provide yet more ammunition to the election-year debate over how best to restart economic growth and distribute the gains.

Alan Greenspan, chairman of the Federal Reserve, reviewed the data before its release, according to a Fed spokesman, Robert Moore.

Although Mr. Greenspan would not comment on the survey results, he has recently voiced concern over rising inequality, and held a meeting of the nation's top income experts at the central bank in February. In a speech last month, he attributed some of Americans' present pessimism to the trend.

"A potentially significant factor in the current state of long-run concerns is that the distribution of family income has become more dispersed," he told an audience of aspiring MBAs at the University of Washington last month.

The wealth surge during the 1980s boom was spurred partly by the big gains in pay by the top income earners, which helped increase their wealth. But it also reflected a sharp rise in asset values, such as real estate and stocks. The share of the top 1 percent hardly budged between 1962 and 1983.

"Inequality is at its highest since the great leveling of wages and wealth during the New Deal and World War II," said a Harvard University economic historian, Claudia Goldin.

This latest look at the gains of the rich was released in a technical working paper by Arthur B. Kennickell, an economist at the Federal Reserve, and R. Louise Woodburn, a mathematical statistician at the Internal Revenue Service.

Mr. Kennickell and his associates at the Fed had already reported the survey's general results in the Fed Bulletin's January 1992 issue, noting at the time that "the distributions of income and net worth became more concentrated between 1983 and 1989." But they did not provide any detail then.

The survey sampled some 3,143 households, concentrating especially on families with very high incomes who are typically under-counted in most surveys, including those by the Census Bureau.

The Fed survey, and especially the results for the very rich, is subject to significant sampling error.

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