Last week, the Federal Reserve released new data on the growing importance of corporate stock in family wealth. Continuation of this trend unquestionably will have profound implications for government and the economy.

According to the Fed study,

• The percentage of all families owning corporate stock, either directly or indirectly through mutual funds, rose to 48.8 percent in 1998.

• This represents a significant increase from 40.4 percent in 1995 and a sharp rise from 31.6 percent in 1989 (see figure).

The percentage of stock-owning families with incomes between $10,000 and $25,000 (in constant 1998 dollars) almost doubled between 1989 and 1998, from 12.7 percent to 24.7 percent. Between 1995 and 1998, the percentage of families with incomes below $10,000 owning stock rose from 5.4 percent to 7.7 percent.

• The median value of stock holdings was $25,000, up from $15,400 in 1995 and $10,800 in 1989.

• Stocks now account for 53.9 percent of all family financial assets, almost twice the 27.8 percent figure in 1989.

• Thus financial assets have risen to 40.6 percent of all family assets from 30.4 percent in 1989.

Families are also saving more, and the biggest increases were among those with lower incomes.

Rising stock market wealth and its increased dispersion among all classes of society will affect political attitudes at some point. The party that convinces the growing investor class that it will protect and increase their wealth will dominate politics for some time to come.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, January 24, 2000.

For text http://www.ncpa.org/oped/bartlett.html

For Fed study http://www.federalreserve.gov/pubs/bulletin
/default.htm