Tuesday, January 24, 2012
U.S. Wealth & Income Disparity Reach Alarming Proportions
In America today, wealth and income inequality have reached levels not seen in generations — specifically, the years leading up to the Great Depression.
The current statistics are simply stunning.
The top 400 individuals now own more wealth than the bottom 150 million Americans and the top one percent earn more income than the bottom fifty percent.
This disparity has gotten the attention of an increasingly frustrated and struggling American public. In recent decades, things have gone from bad to worse.
Today, the top 1% of Americans controls 40% of the country’s wealth. Twenty-five years ago, the top 12% controlled 33% of the country’s wealth. Meanwhile, the poorer 50% now owns less than 2.5% of the nation's wealth.
The middle class has disappeared before our eyes.
This matters for reasons above and beyond fairness. In an economy that is 70 percent reliant on consumer spending, such massively unequal income and wealth levels don't bode well for growth, now or in the future.
It is abundantly clear that American consumers will not spend the nation out of its economic doldrums. Two-and-a-half years after the recession "officially" ended, unemployment remains stubbornly high and home values continue to sink.
However, the American middle class had already been in long-term decline, even before the Great Recession took hold. Worker's paychecks have been stagnant for decades.
Yes, that's decades.
According to Census figures, the $47,715 median annual income earned by a male, full-time, year-round worker in 2010 was less than the $49,065 a male earned in 1973, adjusted for inflation.
This means that median incomes have actually gone backward over the previous four decades. That's simply stunning.
Meanwhile, the Census reveals that during the same span, the top 5% of earners saw their earnings increase by over 40%.
The evidence is abundant: Over the past few decades, the richest Americans have managed to become continually richer, even as the vast majority have regressed.
According to the Washington Post, since the 1970s, median pay for executives at the nation’s largest companies more than quadrupled even after adjusting for inflation. Yet, during the same period, pay for non-supervisory workers has dropped more than 10 percent.
In 2010, the average American earned $26,487 — down over $2,000 in real terms from 2006. This figure includes females and part-time workers who may be looking for full-time positions.
The above income level amounts to roughly $500 per week. Think about that for a moment; that's the average American income.
There is still plenty of money in the U.S. economy. The problem is that most of it is going to a select few at the top.
Last year, a remarkable report from the AFL-CIO got widespread media attention.
The report found that in 2010, the CEOs of just 299 companies received a combined total of $3.4 billion in pay — enough to support 102,325 jobs paying the median wages for all workers.
Most troubling, perhaps, the report found that in 2010, CEO pay had grown to 343 times workers' median pay — by far the widest gap in the world. Back in 1980, CEO pay was 42 times the average blue collar worker's pay.
In just three decades, inequality has grown to extreme proportions. As Federal Reserve Chairman Ben Bernanke noted, the U.S. now has the biggest income disparity gap of any industrialized country in the world and this is "creating two societies."
In America today, the divide between the haves and have-nots has become enormous. The statistics seem fantastical.
The top one percent of American earners control 40 percent of the country's wealth. Most shockingly, the total net worth of the bottom 60 percent of Americans is less than that of the Forbes 400 richest Americans.
Obviously, wealth can be passed on generationally. There will always be some level of inequality. However, incomes are not inherited. Yet, even there, the level of inequality is astounding.
The top one percent saw their incomes rise by 275 percent between 1979 and 2007, according to the Congressional Budget Office. Meanwhile, the bottom fifth of earners only saw their incomes grow by 20 percent during that same period.
This stark divide worries most Americans.
A new survey finds that 66 percent of Americans see strong or very strong conflicts between the haves and have-nots, up sharply from the figure in 2009. This has become a contentious matter and will surely be a campaign issue this year.
The concerns aren't simply about the differences between the upper class and what's left of the middle class. The concerns are about how fast so many people have fallen into the lower classes and into poverty.
In 2010, poverty hit a new record in the U.S. The 46.2 million Americans below the poverty line was the highest number in the 52 years of reporting. The number of people in poverty rose for the fourth consecutive year, as the poverty rate climbed to 15.1% (the highest since 1993), up from 14.3% in 2009.
In December of 2007, there were 27.385 million food stamp recipients. However, according to the latest data, this had ballooned to 46.268 million. In L.A. County, alone, one million residents subsist on Food Stamps.
While the Great Recession and its lingering after-effects have had a particularly devastating effect on huge segments of American society, the upper class has carried on largely unaffected. Sales of luxury goods at high-end retail stores are booming.
From 2000 to 2010, median income in the U.S. declined 7% after adjusting for inflation, according to Census data. That marked the worst 10-year performance in records going back to 1967.
According to a Wall Street Journal survey of economists' forecasts, incomes won't return to year 2000 levels until 2021. That's a two-decade span. How will all of these millions of Americans hang on that long, even as all their expenses continue to rise?
Between June 2009, when the recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7 percent, to $49,909, according to a study by two former Census Bureau officials.
The typical household now has at least two workers. That's because, at current income levels, two workers are a necessity in most households.
Keep in mind, the above income decline continued even after the recession was declared over. So, things have indeed gone from bad to worse. That's why most Americans are still asking, What recovery?
From the start of the recession in December 2007 to June 2011, incomes dropped 9.8 percent, apparently the largest in several decades, according to other Census Bureau data. The result has been a significant reduction in the American standard of living.
Ultimately, less disposable income is being redirected back into the economy, which hurts economic growth.
But while so many millions of Americans are struggling just to pay their mortgage, rent, food and prescription costs, the rich have carried on as if the recession never happened.
While the wealthiest Americans continue buying second and even third homes, plus high-end, luxury vehicles, millions of young Americans are contending with the fact they they will have a lower standard of living than their parents, a start contrast to most of the 20th Century, at least. For the majority of Americans, the American dream has slipped away.
A recent study by Dan Ariely, James B. Duke professor of behavioral economics, found that 20 percent of Americans rake in 84 percent of the nation’s wealth, while the bottom 40 percent only owns a low 0.1 percent. The study found that the U.S. has one of the worst levels of income inequality—not just in the West, but in the entire world. U.S. inequality is now comparable to that of China and some South American nations.
What a sad and disturbing development; instead of China becoming more like the U.S., we're instead becoming more like China.
America is no longer the "land of opportunity" it once was for previous generations.
A report from the Organization for Economic Co-Operation and Development (OECD) finds that America is 10th in social mobility between generations, dramatically lower than in nine other developed countries.
This means that America is now 10th in the world in the American dream.
It wasn't supposed to be like this. The current state of affairs seems so... un-American.