The wealth gap has never been greater

[bpwallace49]

Graphs about how concentrated the wealth in the US has become.

 

Hopefully Az will read this . . it is right up his alley with defined graphs.

[driveby]

so?

[SEC=UGA]

so?

 

When all the money is concentrated in the hands of the few, they can squash the little people like bugs.... or something like that.

 

There are issues with concentration of money, however, with the relatively high standard of living/income of the US populace this isn't as big of a deal as it would be in many countries.

[westvirginia]

Looking at that graph, looks like slick willie increased the gap, and then the dem congress in 2006...

[bpwallace49]

Looking at that graph, looks like slick willie increased the gap, and then the dem congress in 2006...

 

Which one? there are multiple graphs . . .

 

And I agree . . this trend has been going on for the last several decades, and isnt limited to one partisan side or the other . . .

[Azazello1313]

the question for me, is this wealth inequality the problem in and of itself, or is it symptomatic of some other problem in the economy? if you view the inequality itself as "the problem", then you probably advocate steeper, more progressive taxes -- along with more subsidies to the poor -- to "level the field". but does that actually work? or is it possible that increasing the implicit marginal tax rates across the income spectrum (which is an inevitable result of both more progressive taxes and more low-income, which means they phase out, subsidies) actually makes the underlying problem worse? it seems to me that the more the government takes away from the next dollar you make, the more class mobility is thwarted, current poverty and current wealth are relatively locked into place, and the less incentive people across the spectrum have to better their station in life. and what do those incentives lead to? consider this excerpt from an awesome paper by jim manzi:

 

The wealthier and better-educated segments of our ­society, for ­example, have re-established the primacy of stable families and revived their ­intolerance of crime and public disorder. But they have combined this return to tradition with very non-traditional attitudes about sex, ­masculinity, and overt piety.

 

More important, while affluent and educated Americans are returning to the traditional family model, the poor and less educated are not. The gap between rich and poor today is also a gap in cultural norms and mores to a degree unparalleled in our modern experience. The overall divorce rate, for example, exploded in the 1970s, but has since returned to just about its 1960 level for those with a college education. For the less ­educated, however, the rate has continued to climb — and women without high-school diplomas are now about three times as likely to divorce within ten years of their first marriage as their college-educated counterparts.

 

Child-rearing has seen a similar split. In 1965, almost no mothers with any level of education reported that they had never been married. Today, this still holds true for mothers who have finished college: Only 3% have never been married. But that figure stands in stark contrast with the nearly 25% of mothers without high-school diplomas who say that they have never been married. In fact, last year, about 40% of all American births occurred out of wedlock. And about 70% of African-American children — as well as most Hispanic children — are born to unmarried ­mothers. But this situation obtains for low-wage, non-­college-­educated whites as well: It is estimated that about 70% of children born to non-Hispanic white women with no more than a high-school education and income below $20,000 per year were born out of wedlock.

 

The level of family disruption in America is enormous compared to almost every other country in the developed world. Of course, out-of-wedlock births are as common in many European countries as they are in the United States. But the estimated percentage of 15-year-olds living with both of their biological parents is far lower in the United States than in Western Europe, because unmarried European parents are much more likely to raise children together. It is hard to exaggerate the chaotic conditions under which something like a third of American children are being raised — or to overstate the negative impact this disorder has on their academic achievement, social skills, and character formation. There are certainly heroic exceptions, but the sad fact is that most of these children could not possibly compete with their foreign counterparts.

 

As the lower classes in America experience these alarming regressions, wealthier and better-educated Americans have managed to re-create a great deal of the lifestyle of the old WASP ascendancy — if with different justifications for it. Political correctness serves the same basic function for this cohort that "good manners" did for an earlier elite; environmentalism increasingly stands in for the ethic of controlling impulses so as to live within limits; and an expensive, competitive school culture — from pre-K play groups up through graduate school — socializes the new elite for constructive competition among peers. These Americans have even re-created the old WASP aesthetic preference for the antique, authentic, and pseudo-utilitarian at the expense of vulgar displays of wealth. In many cases, they live in literally the same homes as the previous upper class.

 

Such behavior enables multi-generational success in a capitalist ­economy, and will serve the new elite well. But what remains to be seen is whether this new upper class will have the nerve, wit, and sense of purpose that led the old WASP elite to develop a social matrix that offered broadly shared prosperity to generations of Americans.

 

Their task will be made very difficult by the growing bifurcation of social norms in America. A welfare state can best perform its basic ­function — buffering the human consequences of the market, without unduly hampering its effectiveness — where enough widely shared social capital exists to guide the behavior of most people in a bourgeois direction. But as it performs that function, the welfare state creates incentives that push people toward short-term indolence, free riding, and self-absorption — thus undermining the very norms, and consuming the kind of social capital, it needs to operate. (The market often does the same thing: relying on rules and behaviors made possible by traditional morality even as it undercuts it.)

 

Post-war America had much more widely shared bourgeois norms, and so was better able to contend with the negative side effects of the welfare state. Today's American underclass, however, is increasingly developing in the absence of such norms — to a large degree as the result of the welfare state itself. Meanwhile, the need for innovation and the pressures of a global economy only continue to reinforce the causes of our social bifurcation.

 

Perhaps the best illustration of these pressures — to innovate and deregulate without coming apart at the seams — is found in widening economic inequalities. It has often been noted that American society has become increasingly unequal in economic terms over the past 30 years. As Federal Reserve chairman Ben Bernanke noted in a 2007 speech, "the share of income received by households in the top fifth of the income distribution, after taxes have been paid and government transfers have been received, rose from 42% in 1979 to 50% in 2004, while the share of income received by those in the bottom fifth of the distribution declined from 7% to 5%. The share of after-tax income garnered by the households in the top 1% of the income distribution increased from 8% in 1979 to 14% in 2004." A typical senior partner in a high-end ­investment-banking, corporate-law, or ­management-consulting firm can now expect to make upwards of $1 million per year. In the stratosphere of the economy, the increases in wealth have been mind-­boggling: Even after the recent market meltdowns, there are about 30 times as many American billionaires today as there were in 1982.

 

The growth in inequality that began in the 1970s was driven by the social and economic forces outlined earlier. In 1970, "non-­distributive ­services" (finance, professional services, health care, and so on) became for the first time a larger part of the private economy than goods-­producing industries. This shift to services tended to enhance the prospects of the cognitive elite at the expense of traditional industrial workers. At the same time, as we have seen, the combination of changes in cultural mores and the growth of social programs began to disassemble the traditional family — ultimately leading to a class-based divide in family structure, which privileges the better-educated Americans already reaping the benefits of the shifting economy. The social capital transmitted by intact families has therefore become a more and more relevant source of competitive advantage.

 

Two exogenous shocks were also important. First, American domestic production of oil peaked in 1971; oil imports doubled between 1970 and 1975; and OPEC was able to drive large price increases. This oil shock was directly regressive, but it also tended to disproportionately harm those industries that were the source of high-wage union jobs. Second, the percentage of the U.S. population born abroad — which had reached its historical minimum in 1970 — began to rise rapidly as mass immigration resumed after a multi-decade hiatus. This development increased inequality further by introducing a large low-income group to the population, and by intensifying wage competition among lower-skill workers.

 

The Reagan economic revolution exacerbated the problem. Its success resulted, in part, from forcing extremely painful restructuring on ­industry after industry. One critical consequence of this restructuring was a new compensation paradigm — one that relies on markets rather than on corporate diktats, regulation, or historical norms to set pay. This new regime also accepts a much higher degree of income disparity based on market-denominated performance, and it expects that most people will exploit the resulting demand for talent by moving from company to company many times during a career. Growing inequality was a price we paid for the economic growth needed to recover from the '70s slump and to retain our global position.

 

Rising inequality would have been easier to swallow had it been merely a statistical artifact of rapid growth in prosperity that substantially benefited the middle class and maintained social mobility. But this was not the case. Over the same period in which inequality has grown, wages have been stagnating for large swaths of the middle class, and income mobility has been declining.

 

Evaluating the real change in economic circumstances of a typical American family over the past 30 years is extremely complicated. To begin with, the typical family is smaller than it was three decades ago. Further, how we adjust for inflation has an enormous impact on any comparative calculations. Finally, family budgets must increasingly account for previously unpaid work — like child care, or attending to sick relatives.

 

Despite these complicating factors, a few trends still emerge rather clearly. First, average living standards have continued to rise since 1980. Second, the real hourly wages for a typical non-supervisory job have not increased very much over this period. Third, this wage stagnation is at least partly explained by the rising costs of health care — which, because of the American system of employer-based health insurance, are usually deducted implicitly from what workers see as wages. Fourth, personal indebtedness has risen dramatically over the same period and accelerated rapidly during the past decade — so that at least some of the increased consumption was simply borrowed. And last, income ­mobility — the likelihood of an individual's moving up the relative income distribution — appears to have declined slightly over the past three decades, according to multiple studies by the Federal Reserve Banks of Boston and Chicago.

 

Furthermore, the divisive effects of this cluster of trends — ­rising income inequality and reduced income mobility, some degree of ­middle-class wage stagnation, increased personal debt, and increased class stratification of stable social behavior — are only intensified by climbing rates of assortative mating and residential segregation, as well as an increasingly crude and corrosive popular culture combined with the technology-driven fragmentation of mass media.

 

So economic inequality is likely to cause problems with social ­cohesion — but far more important, it is a symptom of our deeper ­problem. As the unsustainable high tide of post-war American dominance has slowly ebbed, many — perhaps most — of our country's workers appear unable to compete internationally at the level required to maintain anything like their current standard of living. And a shrinking elite portion of the American population, itself a shrinking fraction of the world ­population, cannot indefinitely maintain our global position.

 

We are between a rock and a hard place. If we reverse the market-based reforms that have allowed us to prosper, we will cede global economic share; but if we let inequality and its underlying causes grow unchecked, we will hollow out the middle class — threatening social cohesion, and eventually surrendering our international position ­anyway. This, and not some world-is-flat happy talk, is what the ­challenge of globalization means for America. But unfortunately, by a combination of carelessness and design, we appear now to be embracing a counterproductive response to this daunting dilemma.

 

now that's a bit long, but worth reading (as is the whole paper). but it describes the real "inequality" problem we face almost perfectly, IMO. it is an inequality of values as much as anything else. so my question is, have "liberal" economic policies over the last several decades aimed at taxing the rich and benefitting the poor made this values inequality better or worse? it is my experience that values and work ethic come from having skin in the game and the hope of a brighter future. the discomfort resulting from moral and economic poverty can also provide a pretty strong incentive. what happens when we try and reverse those natural incentives in the name of reducing income inequality?

[SEC=UGA]

I love graphs that compare the US to the EU nations....

 

You are dealing with two totally different systems, thus you are comparing apples and oranges. I think what they are doing is advocating us moving to more of a European economic system, let's have a look at some issues facing them.

 

The EU nations have a great deal of social programs propping up the economy, they fleece the rich and redistribute the wealth to the masses. They have created perpetual unemployment rates of 9%+. This rate would be much higher if they didn't implement policies advocating companies employ people for 30 to 35 hours per week in order to pump up the rolls of the employed in their country. Still, they are running into some very serious issues with regard to their retirement pension/social security programs. The last two generations are not procreating, there are not enough workers to help to prop up the retirees. Further, with the low retirement age, somewhere between 58 - 60 many of these countries are having to amend the age at which people can retire and begin receiving retirement benefits.

 

The EU nations are beginning to figure out that their current system is not tenable. The EU nations are beginning to cut back services to their citizens, they are modifying their social security system, they are importing foreign labor, they are raising retirement ages. They know they are in a world of trouble. But, we here in the US seem to be headed toward their system at full tilt, we might want to rethink this.

[Ursa Majoris]

Graph 15 is the most damning of them all, if you think a successful economy should reward all participants.

[bpwallace49]

Graph 15 is the most damning of them all, if you think a successful economy should reward all participants.

 

 

Too bad most people here still dont realize that there are MULTIPLE graphs on that site, and only read the first one.

 

But I agree

[SEC=UGA]

Graph 15 is the most damning of them all, if you think a successful economy should reward all participants.

 

Doesn't mean they're making less money in real dollars... Besides, they are being rewarded, we still offer them social programs and a big percentage of that bottom 90% pays no income tax and is allowed to use all of the infrastructure paid for by the tax paying public... Back in the old days we would have used these people for firewood to run our locomotives or to plow our fields so the mules could have a day off. You go back to 1875 while one of those peckerwood sharecroppers is being whipped at the front of a plow blade by a Yankee Carpetbagger and ask them if they'd rather be alive now or then and see what kind of response you get.

[Ursa Majoris]

Doesn't mean they're making less money in real dollars <comic drivel snipped>

True and if there's $1,000,000 to go around between 100 people, I wouldn't expect it to be equally shared. That said, I don't think I'd expect to see 90 people pick up $1 apiece, the next 9 to collect $100 and the last guy to get $999,010 either, even though they all got an increase in real dollars. Somewhere between those two extremes lies the correct ratio and it should never be skewed too far in either direction.

 

It's not a question of wealth redistribution or of some arcane idea of fairness, it is a question of national stakeholder benefit.

[SEC=UGA]

It's not a question of wealth redistribution or of some arcane idea of fairness, it is a question of national stakeholder benefit.

 

Please enlighten me.

[moneymakers]

When all the money is concentrated in the hands of the few, they can squash the little people like bugs.... or something like that.

 

There are issues with concentration of money, however, with the relatively high standard of living/income of the US populace this isn't as big of a deal as it would be in many countries.

 

 

Glad I am not a bug.

 

But I dont squash either.

 

find needs and solve them.

Edited October 20, 2010 by moneymakers

[Hugh 0ne]

Glad I am not a bug.

 

But I dont squash either.

 

find needs and solve them.

 

This doesn't rhyme very well.

[Big John]

This doesn't rhyme very well.

And 1 too many syllables in the first line and 1 too few in the second line to be a haiku.

[Duchess Jack]

this is a big problem when folk can invest limitless amounts of money now (with no oversight or accountability and no need to be honest or accurate) to keep policy in favor of people of said people.

[westvirginia]

Please enlighten me.

 

Yes, I'd like to know as well...

[redrumjuice]

I hear these guys are wealthy.