- The wealth gap in America has widened dramatically over the past three decades, with the top 10% of earners now holding 68% of the nation’s wealth.
- Housing and stock market gains have disproportionately benefited wealthy Americans while lower-income families face higher inflation on necessities.
- The economic divide creates a cycle where the rich have better opportunities to grow wealth that less affluent Americans cannot access.
AI-generated summary was reviewed by a CNN editor.
America’s economy has been split in two for a long time.
In 1989, households in the top 10% of earnings held 32% of America’s overall wealth, according to the Federal Reserve.
By 2025, that number had climbed to 68%.
There’s a name for the phenomenon: the K-shaped economy. The rich keep getting richer, and everyone else is getting left behind, at least by comparison.
The K has gotten significantly wider recently – particularly over the past 3 years since the inflation crisis.
But it’s not just about how much people make: It’s about what they own and how they spend their money.
Good news: Americans across all income brackets got richer over the past 3 years!
But wealthy Americans’ net worth is growing at a much faster pace than middle- and lower-income Americans’. The net worth of the top 1% grew 30% over the past 3 years. The middle 40% grew by less than 10% over that same period.
Why? It comes down two three things: housing, stocks and inflation.
The top 20% own more than half of America’s overall home value — which has surged in the past several years. And as mortgage rates have risen, lower-income Americans have gotten locked out from the American Dream. Just 3% of America’s home value is owned by the bottom 20%.
Further exacerbating the divide: Immediately after the pandemic, when mortgage rates plunged to historic lows, American homeowners unlocked $430 billion worth of home equity by refinancing their mortgages. That gave homeowners a significant economic advantage.
More than three-quarters of America’s financial assets, including stocks, are owned by the top 20% — and more than a quarter by the top 1%. The S&P 500 has gained 86.2% over the past 3 years. In contrast, cash has gained less than 1% a year over the past several years, on average.
Americans in different income brackets experience inflation differently: The necessities that lower-income Americans spend a larger percentage of their incomes on (particularly housing and food) have gotten more expensive compared to the stuff wealthier Americans buy. That adds up over time: Between 2005 and 2023, actual consumer prices grew 57% for the bottom 20% and just 46% for the top 20%, according to the Minneapolis Fed.
Americans who made less than $40,000 a year pulled back on their spending starting in January 2023 and only started treading water again in September 2024. And over the past three years, they’ve grown their inflation-adjusted spending by just 1.3% — compared to 7.6% for households who make $125,000 or more.
High-earners’ strong spending has boosted overall demand for goods and services, helping keep some prices higher for all Americans.
So wealthy Americans don’t just have more money, they have better opportunities to grow their wealth than less well-off Americans: They have access to the housing and stock markets that lower-income Americans are locked out of. And they’re more insulated from inflation.
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