We’re All Rich Now?

Reading the daily newspapers can be a source of great entertainment—though not always in ways the authors intended. I was struck the other day by an article in the Los Angeles Times reporting that the wealth of the average American household had dropped by more than $100,000 between 2007 and 2009, from $598,000 to $481,000. The figures, derived from a recent Federal reserve survey, seemed a little high to me. (Or else this household is way below average). So I went on-line to discover, in a article in CNN Money based on the same Fed survey, that median net worth in the US fell from $125,000 to $96,000 during that two-year interval. These numbers are only a fifth of the ones reported by the LA Times. I guess the differences between average and median might account for some of the discrepancy. But if a few extremely wealthy households can account for four fifths of all wealth, that’s a real story. And if they lost their shirts in the downturn, who cares?

Buried in the CNN report, and also in an article by Mark Ryabstav at the website Obama.net, was the fact that “families below the median national income in 2007 actually saw their earnings increase by 2009.” Across the board, average family income dropped by $300 a year. In other words, the average family has to get by on 82 cents less per day today than they did two years ago. The average household size is somewhat more than three, which means that on average, we’ve all been out 25 cents every day since the crash! Bummer.

Averages are worth little, I know, and anyone who’s unemployed or carrying a big mortgage is in a terrible jam. But the article in question was dealing with averages. It was using such figures to justify the use of lines like: “The numbers paint a stark picture.” and “Now, a new report has come out about just how bad Americans are hurting because of the economic crisis.” How bad? Take a close look and the answer would be: On average, not too bad.

Meanwhile, I’m having a hard time figuring out why, if those below the median increased their earnings while the earnings of those above the median declined, we keep hearing reports of a widening income gap between rich and poor.

Seriously. Any ideas?