Association for Public Policy Analysis & Management

The 2007-2009 Great Recession has resulted in a significant decline in U.S. family wealth and has greatly weakened their economic security. Six years after the onset of the Great Recession, various data suggest that U.S. families still have not fully recovered from wealth loss and wealth inequality has increased. This paper provides a comprehensive analysis of this slow and uneven episode of wealth recovery across different American families and try to unravel their underlying causes. Specifically we look at the three questions: (1) By the year of 2013, wealth of which families have (have not) returned to pre-recession level? (2) What are the roles played by housing market, labor market, and financial market in the post-recession wealth recovery process? (3) What factors are the most important in driving the uneven recovery of family wealth across different socioeconomic groups? Using the Survey of Consumer Finances 1989-2013, both descriptive results and regressions controlling for life cycle wealth accumulation show that the post-recovery wealth recovery has been slow and uneven for families with different demographic backgrounds. African American and Hispanic families are particularly falling behind in wealth accumulation, partly due to a wealth portfolio concentrated in housing prior to recession, together with a slow recovery in housing market. The Oaxaca decomposition suggests that homeownership alone accounts for about 30 percent of the racial/ethnic wealth gap. The wealth disparity between higher educated and lower educated families has also increased over the past two decades. Homeownership and whether having quasi-liquid retirement accounts each account for 19 percent of the wealth gap between college graduates and high school dropouts. Housing market conditions and stock prices account for less than two percent of the wealth gap.  Understanding the uneven wealth recovery has important implications for redesigning asset related policies and close the wealth gap.