The Unequal COVID Saving and Wealth Surge – International Monetary Fund
By Cian Allen and Cyril Rebillard
Household saving increased sharply during the COVID-19 crisis in many countries. Lower consumption, both as a result of lockdowns or precaution, combined with an increase in disposable income from government transfers allowed households to put more money into their bank accounts, buy shares, a house, or pay back their debt. Along with saving, surging equity and housing prices also made certain households a lot wealthier.
In our latest chart of the week, an analysis of US data as part of our recent External Sector Report found the bulk of the increase in saving and wealth occurred at the top of the wealth distribution. Indeed, while recent research has documented that household saving has historically been very unevenly distributed in the United States, very little is known of how the increase in saving or wealth since the beginning of the pandemic was distributed.
Our chart, based on data published by the Federal Reserve, tries to answer this by plotting the changes in household net wealth by percentile (expressed as a ratio of total nationwide personal disposable income) during the pandemic and during a period of time before the pandemic we refer to as “normal times.”
What we found is the net wealth of the top 1 percent richest households rose by nearly 35 percentage points of the economy’s disposable income compared to a modest 5-percentage-point increase for households in the bottom 50 percent.
The chart unveils four key points:
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