A new story from the WSJ highlights one of the peculiarities of this pandemic...that economically it has left most Americans better off, at least in the short run. Despite a near complete shutdown of the U.S. economy and over 20 million of job losses in early 2020, households added $13.5 trillion in wealth last year, according to the Federal Reserve. Thanks to trillions spent by the Federal government on stimulus checks and unemployment benefits Americans broadly were able to save more, pay off credit-card debt, and refinance into cheaper mortgages. The results are in striking contrast to the Global Financial Crisis in 2008, when U.S. households lost $8 trillion of wealth (click chart to enlarge).
And yet, even as all economic cohorts benefited from the government's actions, the winners overwhelmingly were once again the richest Americans. About $10 trillion of the $13.5 trillion (or 75% of the gain in wealth in 2020) accrued to the top income quintile. Moreover, nearly half of that $10 trillion, $4.5 trillion (or 35% of all economic gains) went to the top 1%.
For most lower-income workers much of their increase in wealth came form stimulus checks and unemployment benefits that are expected to wind down out in the months ahead. But as the WSJ notes, "Americans who gained the most during 2020 were also the ones who had much more wealth to begin with. Houses, stocks and retirement accounts...soared in value, and those boosts are likely to endure." That means wealth inequality, bad even before the pandemic, has only grown in the past year.
This outcome is not unexpected. Historically, pandemics have worsened inequality between the haves and have nots. The one exception (that proves the rule?) may have been the bubonic plague or Black Death between 1346 and 1353 which reduced world population by an estimated 20%-25%. Records from Italy show income overall fell but that inequality lessened as an extreme shortage of labor increased the wages of workers.
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