Trump won the 2016 presidential election, in large part, due to the support of the working class population in the Midwest that has suffered for decades as manufacturing wages have stagnated and jobs have been transplanted to lower cost regions like Mexico and China. On election night, Trump vowed to change the fate of the American middle class by pledging that "the forgotten men and women of our country will be forgotten no longer."
That said, with a significant amount of America's wealth held by a tiny fraction of households and a widening income gap, it's unclear what, if anything, Trump can do to reverse the collapse of America's once thriving middle class. As the St. Louis Fed points out, the median family in the U.S. today has accumulated roughly 30% less wealth than their counterparts in 1989 which has been a consistent trend now for decades.
The median family today is significantly poorer at any given age than their counterparts would have been 25 years earlier, according to the St. Louis Fed. For example, people born in 1970 have had about 40 percent less wealth at any given age, compared with people born in 1940. The median middle-aged family in 2013 had 31 percent less wealth than its counterpart in 1989, while the median young family had 28 percent less wealth than its 1989 counterpart. Meanwhile, the median wealth gap between young and old families has widened.
As Bloomberg points out, just 8mm households, or roughly 6% of the 125mm total households in the U.S., control a substantial portion of the country's overall financial wealth.
And, with middle class incomes stagnating, the wealth gap is only expected to grow wider over time.
Meanwhile, more than 50% of the people with $25mm or more in financial wealth cite "inheritance" as the source of their "success."
Others were just born lucky, as in: They inherited their cash. More than half of U.S. investors with over $25 million said inheritance was a factor in their wealth, according to a new survey by Spectrem Group, a consulting firm that specializes in polling the rich. Among these people, a whopping 73 percent of those aged 50 or younger said inheritance was a factor.
George Walper, Spectrem’s president, said there’s been an uptick in the last few years in the number of respondents who cite inheritance as a factor in their wealth. To be fair, the very wealthy people surveyed by Spectrem also cite hard work, education, and smart investing as playing a role in their riches.
But it’s become harder to build a fortune on hard work alone. Americans in their late seventies, eighties, and nineties began their careers in the midst of the U.S.’s postwar boom. More recent generations haven’t had the same economic tailwinds.
All of which leads to the inevitable conclusion that the growing pool of "old money" in the U.S. and stagnating incomes has resulted in a fairly grim outlook for millennials.
With the "old money" families taking an increasing portion of the overall American wealth pie while the overwhelming majority of American's live month-to-month with no potential to save, it is no wonder that the American electorate has grown more divided over time. Certainly, the democratic party has used the income divide over the years to rally their base of support. But, with an economy that is dependent on consumers levering and spending every single dollar they make and a central bank that has removed every possible incentive to save, we suspect the income gap won't narrow anytime in the near future.