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Middle Class Squeeze

Who Cares About the Stock Market?

Research & Commentary
February 08, 2017

by Josh Hoxie

Ignore the hyping of Dow 20,000 and other market gyrations. Only the affluent are really benefiting from rising share prices.

Originally published by US News and World Report.

Champagne bottles were popping on Wall Street as bankers rang in the Dow Jones hitting 20,000 points for the first time ever in late January. The media got in on the celebration as the story of record high stock prices spread around the country.

Left out of the excitement was the vast majority of Americans whose lives are largely unaffected by the bullish market.

Dow20000For the bulk of the 20th century, most Americans had no connection to the stock market. It could creep up or down, but short of a major downturn or boom it was largely not the affair of working people. Their jobs might go away if a recession came, but if profits soared they didn’t share much in that prosperity.

That’s changed a bit with the decline of pensions and rise of 401k retirement plans. With the advent of those plans, just under half the country became stock owners – albeit indirectly – with a stake in the daily dalliances of the major stock indices.

So are things therefore much different today? It would be easy to think so, since the ubiquitous reporting on the ups-and-downs of the stock market tends to treat it like a barometer for economic stability. The two major meters of such success are the Dow Jones and S&P 500, both of which have been on steady historic rises since the November election. Markets, you could say, are fond of the new president, despite the potential volatility his reign might bring.

But who exactly is benefiting from this rise? Here’s a hint: Probably not you.

Corporate stock makes up just 3.4 percent of assets for the middle 20 to 80 percent of wage earners, also known as the middle class, according to New York University economist Ed Wolff. By contrast, home values make up 62 percent of their wealth.

It shouldn’t be surprising that stocks make up such a small portion of middle-class wealth when we consider that the middle class together owns only 8 percent of all stocks.[pullquote]The top 1 percent hold nearly 40 percent of all stock.[/pullquote]

The wealthiest 20 percent of households owns the other 92 percent. They own a similar portion of bonds, trusts, business equity and non-home real estate. This concentration of ownership reflects the concentration of wealth and income that drives today’s extreme inequality.

Further up the wealth spectrum, the top 1 percent owns about four out of 10 dollars in the stock market.

The figures look similarly stark when we consider race. Stock ownership amounted to 18 percent of the total assets of white households in 2010, compared to just 5 percent for African-Americans and Latinos.

So when we cheer for the growth in stock prices, what we’re really cheering for is the further swelling of the bank accounts of the already wealthy.

This concentration of wealth has been growing over the past several decades, to the point today when the 400 richest Americans now own more wealth than 36 million typical American middle-class families combined. (For context, that’s as many households as own cats in the United States.)

The ups and downs of the stock market plays little roles in most working families’ lives. Of much greater concern is the ability of families to earn a living wage and to afford to own a home. Unfortunately, this daily trend line is much less entertaining.

The federal minimum wage of $7.25 is less than the cost of living in every major city in the country, and the rate of homeownership for low- and moderate-income workers has flat-lined.

Addressing stagnant wages and out-of-reach housing costs would have a major and measurable impact on the well being of working families, unlike the daily stock market readings.

So next time you see a sensational story about the stock index hitting some big round number, ask who really benefits? And who cares?

Read the full article at US News and World Report.

Josh Hoxie directs the Project on Opportunity and Taxation at the Institute for Policy Studies and is co-editor of

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