The Unequal COVID Saving and Wealth Surge

IMF Blog, November 9, 2021

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Household saving increased sharply during the COVID-19 crisis in many countries as lower consumption (from lockdowns or precaution) combined with an increase in disposable income from government transfers.
Alongside saving, surging equity and housing prices made certain households substantially wealthier.
The analysis uses US data published by the Federal Reserve and is presented as part of the IMF's External Sector Report.

Changes in household net wealth are plotted by percentile and expressed as a ratio of total nationwide personal disposable income.
Two comparison periods are used:
- "Pandemic": between the end of 2019 and the second quarter of 2021.
- "Normal times": between the end of 2014 and end of 2019.

The net wealth of the top 1 percent richest households rose by nearly 35 percentage points of the economy’s disposable income.
Households in the bottom 50 percent experienced a modest 5-percentage-point increase in net wealth.
The overall increase in net wealth, in percent of disposable income, was considerably larger during the pandemic than during normal times.

Valuation changes due to booming equity and housing prices were a main driver.
The “COVID saving surge” contributed, shown by a jump in “other assets,” including bank deposits.
Government support—direct stimulus or support to firms—also contributed to higher disposable income and saving for households.

The overall increase in net wealth was unevenly distributed, with much of it accruing to people at the top of the distribution.
- The equity price boom mostly benefited the rich.
- Lockdowns more heavily affected spending on dining and travel, which are a larger part of wealthier households’ consumption habits, contributing to higher saving among those households.
- Government support also tended to benefit the saving of wealthier households compared to poorer households that were more likely to spend the extra cash.
Despite the uneven increases, the distribution of wealth across groups did not change much, as the increases in net wealth were relatively in line with the pre-pandemic shares in the wealth distribution.

Sharp asset price increases and differential saving behavior during the pandemic contributed to an outsized rise in wealth for the richest households relative to lower-income households.
The composition of the wealth surge (valuation gains versus increased deposits/other assets) matters for which groups captured the gains.

Source: The Unequal COVID Saving and Wealth Surge — Cian Allen, Cyril Rebillard; November 9, 2021.