Who Are the Asset Poor ? : Levels , Trends , and Composition , 1983 – 1998

The booming U.S. economy of the 1990s has created the impression that all American households are doing well, particularly in terms of wealth acquisition. Our results show that this is decidedly not the case. In this paper, we develop several measures of “asset poverty” and use them to document changes from 1983 to 1998 in the extent to which American households are unable to rely on an asset cushion to sustain themselves during temporary hard times. These measures indicate that in the face of the massive growth in overall assets in the United States, the level of asset poverty has actually been rising. In addition to showing the trends in overall asset poverty in the United States, we describe the patterns of asset poverty rates for various socioeconomic (e.g., race, age, schooling, family structure) groups over the 1983–1998 period. We find that the prosperity of the 1990s brought an unexpected increase in asset poverty for groups that are generally viewed as not particularly vulnerable (such as whites and college-educated families), and a sizable reduction in asset poverty for vulnerable groups such as racial minorities and single-parent families. Who are the Asset Poor?: Levels, Trends and Composition, 1983–1998 The booming U.S. economy of the 1990s, particularly the big run-up in the stock market, has created the impression that all American households are doing well, particularly in terms of wealth acquisition. As we shall show, this is decidedly not the case. In this paper, we develop several measures of “asset poverty,” and use them to document changes from 1983 to 1998 in the extent to which American households are unable to rely on an asset cushion to sustain themselves during temporary hard times. These measures indicate that in the face of the massive growth in overall assets in the United States, the level of asset poverty has actually been rising. In addition to showing the trends in overall asset poverty in the United States, we describe the patterns of asset poverty rates for various socioeconomic (e.g., race, age, schooling, family structure) groups over the 1983–1998 period. In the next two sections, we briefly describe the current measure of official income poverty that serves as the basis for assessing the status of the nation’s least well-off citizens and show the levels of official poverty for the years for which asset poverty measures are available. We also present the trend in median family income for these years. Section 3 presents the alternative asset poverty measures that we use in the paper and describes the data sources used in our analysis. These alternative measures employ various concepts of wealth, but use the same poverty cutoff thresholds; we also measure asset poverty by employing an absolute dollar cutoff, regardless of family size. Section 4 presents our estimates of asset poverty for the entire population that flow from our definitions. In Section 5, we present more details on asset poverty in 1998 for the entire population, as well as for subgroups of the population distinguished by race, age of the household head, education of the household head, tenure status, and family type. Section 6 investigates trends in asset poverty over the entire 1983–1998 period for the entire population and for the various subgroups. Section 7 shows the decomposition of these trends for subperiods of this entire period, namely for the period from 1983 (a recession year) to the recovery year of 1989, and from 1989 to a later peak year, 1998. Finally, in section 8, we summarize our results and offer a few conclusions.