The stock market has risen dramatically over the last decade.
The Dow Jones Industrial Average is up about 340% from its post-financial-crisis low in March 2009. The widely followed index has hit several all-time highs in recent months.
This, of course, is not a bad thing. While there are a nearly infinite number of reasons why the market moves the way it does on any given day, the general upward trend in stocks largely mirrors the gradual economic recovery of the last decade as America recovered from the Great Recession.
The market's upward path also bodes well for anyone invested in stocks directly or through a retirement plan, as the value of their portfolios has likely grown.
However, most Americans don't directly own any stocks at all.
The above chart, based on data from the Federal Reserve's 2016 Survey of Consumer Finances, shows how many Americans at different parts of the wealth distribution directly own stocks. According to the Fed's data, only 2% of Americans in the bottom quarter of household net worth own stocks, with just 6% in the next quarter owning stocks.
Meanwhile, just over half of households in the top 10% wealthiest households directly own stocks. That is, richer Americans are far more likely to own any stocks at all than people in the bottom half of the distribution.
The overwhelming majority of lower-net-worth Americans who own zero stocks, then, are not directly benefiting from the massive increases in the markets we've seen in previous years.
Investing in retirement accounts like IRAs or 401(k)s, which often lead to indirect ownership of stocks, is much more common than directly owning stock, but still more concentrated in the upper echelons of the wealth distribution.
Although having a retirement account is far more common for households at the bottom of the wealth distribution, less than half of Americans in the bottom half said they had an IRA, 401(k), or similar account.
Combining direct holdings with indirect holdings like retirement accounts, the Fed estimated that 52% of American families had at least some exposure to the stock market. That leaves nearly half of households holding no stock, directly or indirectly, and thus left out from the direct benefits of a rising stock market.
Even among Americans who directly own stocks, the actual amount and value of those holdings is heavily skewed toward the top.
This chart shows the value of direct stock holdings among American families in each wealth bracket that actually own stock.
The median household among the 2% of families in the bottom quarter of the wealth distribution who own stock holds $1,700 worth of corporate equity. Meanwhile, the typical family among the half of top 10% households with stock ownership has a portfolio worth $200,000 — over 100 times the value of the bottom-quarter family's holdings.
The value saved up in retirement accounts paints a similar picture.
Even though, as noted before, retirement accounts are somewhat more common among lower-wealth households than direct stock ownership, the actual amount of money saved up in those accounts is heavily skewed toward the top.
This chart is similar to the previous one, but showing the value of the typical household's retirement account among households in each wealth bracket that actually have retirement accounts.
As we saw in the chart showing the share of households in each wealth bracket that have retirement accounts, about a fifth of the families in the bottom quarter of the wealth distribution have an IRA or similar account. The median family in that group, however, has a balance of just $4,300 in that account, while the typical family in the top 10% bracket has $630,000 saved up in their retirement accounts.
So, even though about half of American families directly or indirectly own stocks, the lion's share of the value of that ownership is still in the hands of the top part of the wealth distribution. The top 10%, then, is likely to see much more benefit from a rising stock market than the lower tiers of the wealth distribution.
While the stock market has seen double-digit annual growth rates in several years of the last decade, wage growth has been much more modest.
Year-over-year growth in average hourly wages for all employees of private companies was anemic for the first half of the decade, but has slowly ticked up since 2015. However, wages remain surprisingly slow, given that the currently very low unemployment rate should theoretically be driving employers to raise pay offers to attract increasingly scarce workers.
In the longer term, relatively low growth in real, or inflation-adjusted, wages has been a big contributor to rising inequality. While big gains in the stock market largely go to American families at the top of the wealth distribution, wages — the main form of income for working- and middle-class people — have not kept up.
