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Inequality in America

As promised in my last blog, I will summarize the current level of inequality in the United States.  In a word, it is ugly!  By most measures, we are far behind other democratic societies, such as Canada, most European countries and Australia.


One of the most common measures of income inequality is known as the Gini Index of Inequality (a value of 0 means perfect equality--everyone earns the same amount; and a value of 100 means perfect inequality--one person earns all), has gone up since the late 1960s. Whereas in 1970 the index for the United States was 35, in 2007 it was at 45, larger than any other industrialized nation (in contrast, the Gini for Canada is 31; the Netherlands is 31, while Sweden is the most equal with a score of 23). (This information can be found in the CIA World Fact Book.)


An excellent web site for data on inequality is Inequality.org. On a couple of charts shown on this web site it is noted that "Between 1979 and 2009, the top 5 percent of American families saw their real incomes increase 72.7 percent, according to Census data. Over the same period, the lowest-income fifth saw a decrease in real income of 7.4 percent. This contrasts sharply with the 1947-79 period, when all income groups saw similar income gains, with the lowest income group actually seeing the largest gains." The top 1% also own 50.9% of all stocks, bonds, and mutual fund assets.  In the post-World War II growth period (1947--79) it was literally the case that a "rising tide lifts all boats." Since that time, it has been more like a "rising tide lifts all yachts," writes Ezra Klein in the Los Angeles Times.


This same web site also reports that the average wage in constant dollars increased from the early 1950s until the early 1970s. Real dollars (what money will actually buy) have declined since then. Wages have not kept up with inflation for the average worker.  For instance, between 1972 and 1993, in 2008 dollars, the average hourly wage dropped from $20.06 to $16.82. In 2008, the average wage was lower than it was in 1979, in constant dollars. As for the minimum wage and what it can purchase, the news is not good: according to the "State of Working America," in 2007 dollars, the minimum wage in 1960 was $5.98 and in 2009 it was $6.92. Meanwhile, what these workers actually produced (called "productivity") increased by 64% between 1979 and 2004. In other words, workers produced more for the owners while getting proportionately less.

According to the latest census report, there are about 112 million households in the United States. One-quarter of the households are single member while the remaining 75% have two or more members. Almost two-thirds (62%) of African-American families are single-parent families. A closely related development has been described as the feminization of poverty. This refers to the increase in female-headed households, which are the most likely to be living in poverty. In fact, in 2008 about 40% of black female-headed households lived under the poverty level, in comparison to 27% of white females.


According to a recent report, in 2007, the median family income was $50,233, while "the top-earning 400 households earned a median $345 million, almost 6900 times as much income.  In contrast, in 1992 the ratio was just a sixth as large, with the top 400 households having 1124 times as much income."  For these wealthy families, recent years have been extremely kind.  For instance, between 1992 and 2007 there pre-tax income went up by 409%; their after-tax income increased by 476%.  This is mostly the result of all the generous tax cuts during this period of time.


The effects on the typical male worker have been especially negative. According to the Bureau of Labor Statistics, the median earnings of males have decreased, while wages for females have increased. In fact, many male workers have in effect disappeared from the labor force. While in 1950 almost 90% of the men in the United States were "in the labor force" (meaning they were either working or actively seeking work), by 2010 this percentage had shrunk to about 73%; in contrast the proportion of women in the labor force had gone from 34% to 60%.


Another Bureau of Labor Statistics report notes that a portion of the gains for women may be accounted for by the incredible increase in the proportion of workers employed as temporary workers. As of 2009 one-fourth of women workers worked part time, compared to only 11% of the men; about 17% of all workers are working part-time. Temporary workers have been utilized more often in the last two decades, and the trend appears to be one that will continue, according to another report by Luke Shaefer writing in the Bureau of Labor Statistics.


While all of this has been going on, the share of the total wealth going to the top wealth holders has been on an upward move since the late 1960s. The latest figures show that while in 1976 the percentage of total income that went to the top 1% of American households was about 9%; in 2007 the percentage had grown to almost 24. Also, in 2007, the richest 1% of U.S. households owned one-third of the all the private wealth in the nation, which is more than the all the wealth of the bottom 90 percent combined, according to Inequality.org.

These numbers help explain the vast differences in crime rates between the United States and other democratic societies.  If we want to seriously reduce crime, the first step is to reduce inequality.

Keywords: economy, national, Randall Shelden

Posted in Blog, Social Justice

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