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No. 2 in the Opportunity and Ownership Facts series
Abstract
Between 1989 and 2004, middle-income parents experienced moderate income growth, but only married parents have gained net worth—a significant fact given that the share of households headed by an unmarried parent increased from 26 to 33 percent over the same period. Using data from the Federal Reserve Board's Surveys of Consumer Finances, income measures alone show that middle-income unmarried parents gained some ground relative to married parents. However, trends in net worth—the value of what households own minus the value of what they owe—diverged by marital status, demonstrating the importance of looking beyond income data.
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Have Middle-Income Parents Improved Their Economic Status?
Between 1989 and 2004, all middle-income parents
experienced moderate income growth, but only
married parents have gained net worth. Using
data from the Federal Reserve Board's Surveys of
Consumer Finances (SCF), we focused on households
with children having incomes between the
40th and 60th percentiles of their group's income
distribution. The results show similar increases
in income for middle-income married parents
(1.2 percent per year to $69,900 in 2004) and
middle-income unmarried parents (1.6 percent
per year to $28,160 in 2004).1
In contrast, trends in net worth—the value of
what households own minus the value of what
they owe—diverged by marital status. Middle-income
married parents expanded their net worth
by 2.8 percent per year
(to $240,400 in 2004), or
52 percent for the 15-year
period. All increases took place
between 1995 and 2001, when
net worth doubled and
incomes rose by 27 percent.
Meanwhile, net worth among
middle-income unmarried parents
was more unstable and
was 15 percent lower in 2004
(or $46,500) than in 1989. These
parents increased their assets
by nearly $15,000, but debt
rose even more, by nearly
$23,000. Unmarried parents
did achieve wealth gains during
1992–1995 and 1998–2001.
Surprisingly, increases in
home equity played only a
modest part in raising net
worth for middle-income married parents. Their home values net of mortgage
debt rose by about $17,000, while net worth as
a whole jumped by $81,000. Still, the rise in home
equity for married parents was over four times the
increase for unmarried parents. The relative wealth
of unmarried-parent households declined at a time
when unmarried-parent households were becoming
more common. Between 1989 and 2004, the
share of households headed by an unmarried parent
increased from 26 to 33 percent.
The figures show the importance of looking
beyond income data. Using income measures
alone, middle-income unmarried parents gained
some ground relative to married parents. But,
the wealth gap widened, with middle-income
unmarried parents holding only 19 percent of the
wealth held by middle-income married parents in
2004, down from 34 percent in 1989.
Notes
1 Since 1989, the Federal Reserve Board has conducted the SCF
every three years to measure income, assets, and liabilities.
Asset data include bank accounts, mutual funds, stocks, and
401(k) and other defined-contribution pensions, as well as
automobiles, businesses, and homes. The SCF excludes most
consumer durables such as furniture or appliances, the current
value of defined-benefit pensions, and future Social
Security payments.
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