Economic Snapshot | Wages, Incomes, and Wealth

Dow’s all-time high inconsequential for most Americans

SWA 2006/2007

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This week’s Snapshot previews data to be presented as part of the forthcoming The State of Working America 2006/07.

Snapshot for October 11, 2006.

Dow’s all-time high inconsequential for most Americans

By Sylvia Allegretto

Much attention was paid last week to the Dow Jones recovery to its prior peak level first reached in 2000. It is important to put this milestone into perspective for average working families. Fostered by the constant focus and widespread attention given to the performance of the stock market, conventional wisdom has it that everyone in the United States is heavily invested in the stock market. However, the data tell a different story.

The most recent triennial data from the Survey of Consumer Finances show that the historically increasing trend in the shares of all households owning any stock reversed course from just over half in 2001 (51.9%) to just under half in 2004 (48.6%)1 —the first such decline on record (Figure A ). In 2004, only about a third of Americans had stock holdings valued at more than $5,000.

Figure A. Share of households owning stock

The distribution of stocks, by value, is highly tilted to the wealthiest Americans as shown in Figure B. In 2004, the wealthiest 1% owned 36.9% of all stocks, while the next 9% owned 41.9%. Hence, the wealthiest 10% controlled about 80% of all stocks while the bottom 90% owned just over 20%. Given the starkness and persistence of inequality in stock holdings, there is no reason to think those in the bottom 90% are doing any better today.

Figure B. Distribution of stock market wealth by wealth class, 1989-2004

For the most part, lower-, middle-, and even upper-middle-income working-age households depend on their paychecks, not stock portfolios, to meet their everyday needs. Typical working families that own stock do so in retirement plans that are costly to turn into cash. Therefore, increasing stock value does little to help them make ends meet at a time when wages for most workers have been stagnant for several years now.


1. Stock ownership may be direct (owning shares in a particular company) or indirect (owning shares through a mutual fund or a retirement account).

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