Numbers, Facts and Trends Shaping Your World, By Juliana Menasce Horowitz, Ruth Igielnik and Rakesh Kochhar. These are not the better angels of our nature. EIN 83-3840337. Inequality has been building for decades in the U.S., but experts say the pandemic 'ripped it open' Published Fri, Oct 23 2020 2:07 PM EDT Updated Fri, Oct 23 2020 … Updated June 15, 2020 Income inequality is a wide gap between the money earned by the richest people in an economy when compared to the poorest. From 2000 to 2018, the average salary for workers in America rose only 17%. This is an argument for equal opportunity. And while some of us choose to work, provide for families, and strive to get ahead, others use free will to lay about, absorb funds from government programs, and engage in self-destructive behavior. The growth in income in recent decades has tilted to upper-income households. Whatever the causes, the uninterrupted increase in inequality since 1980 has caused concern among members of the public, researchers, policymakers and politicians. Question 4: God gave us free will. But that is not what we are talking about here. It’s attractive to the masses because, sadly, exploitation is part of our nature, like greed and envy. And the good news is that the people have formed their opinions on this issue. The evidence was all around him in his lifetime as the productivity gained by the Industrial Revolution improved the life of the worker dramatically. 2016: Top 1% had 29.5$ T, bottom 50%? See. I hope—I pray—that your assertion that income inequality will not lead to civil unrest in America is correct. Consequently, the median net worth of families fell to $87,800 by 2013, a loss of 40% from the peak in 2007. His eclectic career has included military and civilian aviation, engineering, marketing and marketing communications. Your other questions presume that those who are wealthy worked hard and have made good choices while those who are poor are lazy and have made bad choices. See Gallup polling: “Americans’ Long-Standing Interest in Taxing the Rich.” There may be disagreements about the extent and degree to tax the wealthiest Americans, but there is consensus that something should be done. The naïve renaissance of collectivism is even more out of date today than it was just 20 or 30 years ago because we are now in the information age. The top 1 percent’s share of our country’s wealth is approaching 40 percent. A similar pattern prevailed in the 1990s, with even sharper growth in income at the top. This is not sustainable. But what about the rest? Some in this country believe that cutting the taxes of billionaires and corporations is the best way to help those individuals. This is substantially greater than the average rate of growth from 1970 to 2000 and more in line with the economic expansion in the 1980s and the dot-com bubble era of the late 1990s. Economy ‘A tale of 2 recessions’: As rich Americans get richer, the bottom half struggles. From 1981 to 1990, the change in mean family income ranged from a loss of 0.1% annually for families in the lowest quintile (the bottom 20% of earners) to a gain of 2.1% annually for families in the highest quintile (the top 20%). But I happened to notice that you did not respond to my pressing question about the Trump tax cuts. the bourgeoisie) or a peasant. What Americans see as contributors to economic inequality, The median income splits the income distribution into two halves – half the households earn less than the median and half the households earn more. Gains on the jobs front are also reflected in household incomes, which have rebounded in recent years. From 2015 to 2018, the median U.S. household income increased from $70,200 to $74,600, at an annual average rate of 2.1%. Hell, you likely would not be able to last one week. In which contexts? We look forward to your submission. The logical inconsistency of Republicans pumping defense spending while slashing federal spending on entitlements, healthcare, education, and the environment is outrageous. These trends in income reflect the growth in economic inequality overall in the U.S. in the decades since 1980. This was nearly double the 45% increase in the wealth of the top 20% of families overall, a group that includes the richest 5%. The wealthiest families are also the only ones to have experienced gains in wealth in the years after the start of the Great Recession in 2007. To deny the truth of that is to cling to dead ideas of the past. In 2019, the number of employed Americans rose by 267,000. If they are taxed more heavily and their success is diminished, does that help the poor? In 1980, the 90/10 ratio in the U.S. stood at 9.1, meaning that households at the top had incomes about nine times the incomes of households at the bottom. The ratio increased in every decade since 1980, reaching 12.6 in 2018, an increase of 39%.14. The Rise of Income and Wealth Inequality in America: Evidence from Distributional Macroeconomic Accounts Emmanuel Saez and Gabriel Zucman NBER Working Paper No. (+1) 202-419-4372 | Media Inquiries. The publication of an article is not an endorsement of views, but it is the first step to open discussion. I do not. This report presents estimates of income inequality based on household income as estimated in the Current Population Survey (CPS), a survey of households conducted by the U.S. Census Bureau in partnership with the Bureau of Labor Statistics. From 1971 to 2019, the share of adults in the upper-income tier increased from 14% to 20%. Millions of low-income Americans work two jobs in order to make ends meet. Your argument—that income inequality is not fair—was valid in a time when circumstances of your birth determined your outcome in life. Trends in income and wealth inequality, Household incomes are growing again after a lengthy period of stagnation, Upper-income households have seen more rapid growth in income in recent decades, Income growth has been most rapid for the top 5% of families, The wealth of American families is currently no higher than its level two decades ago, The wealth divide among upper-income families and middle- and lower-income families is sharp and rising, Income inequality in the U.S has increased since 1980 and is greater than in peer countries, 3. 27922 October 2020 JEL No. The table demonstrates widespread abundance in our land, touching all classes. If you think that level of poverty, one of the highest amongst developed countries worldwide, is “a reason for joy”, then you are even more deluded than your prose portrays you to be. Here is part of a. He is a frequent contributor to Divided We Fall’s Political Pen Pal discussions. Robert Wilkes is a writer in Bellevue, Washington, in the Pacific Northwest. What degree of inequality may be acceptable or unacceptable and why? Immigrants, like our own ancestors and relatives, have come to this country for generations with little more than the clothes on their backs. But fairness has a dark, pernicious side to it. Ranaldi, M (2020), “Income Composition Inequality”, Stone Center Working Paper Series 7. If America’s level of income inequality had remained constant since 1970, the median U.S. worker would now make $100,000 a year, according to a new study from the RAND Corporation. Your argument—that income inequality is not fair—was valid in a time when circumstances of your birth determined your outcome in life. We did not block your “well thought out” post, buddy. But middle-class incomes have not grown at the rate of upper-tier incomes. We the people, and the elected officials who represent us, must think in terms of extent and degree. Stand there! As of 2016, upper-income families had 7.4 times as much wealth as middle-income families and 75 times as much wealth as lower-income families. Sorry, your blog cannot share posts by email. The world is a much different place than when Hobbes, Malthus, and Marx commanded our attention. We’ve all seen the stats on America’s extreme inequality. While I do not agree with you that income inequality is a blessing, my argument is not for total equality. More globally, the Gini coefficient of inequality ranges from lows of about 0.25 in Eastern European countries to highs in the range of 0.5 to 0.6 in countries in southern Africa, according to World Bank estimates. What a treat to write about a subject so central to the foundational beliefs of our nation yesterday, today, and tomorrow. But the overall trend masks two distinct episodes in the evolution of household incomes (the first lasting from 1970 to 2000 and the second from 2000 to 2018) and in how the gains were distributed. What level of income and wealth inequality is fair? From 1983 to 2016, the share of aggregate wealth going to upper-income families increased from 60% to 79%. Notice how much wealth has been generated by this incredible economy. You stated that “…10-15% of our fellow citizens (40 million in 2017) have remained in poverty.” That is a remarkably low number, not a cause for dismay. This is not one of them. Henry Ford’s assembly line put the final nail in the coffin of Marxist theory. The table demonstrates widespread abundance in our land, touching all classes. Income Inequality and What to Do About It: Part II, But Marx was dead wrong. From 1991 to 2000, the mean income of the top 5% of families grew at an annual average rate of 4.1%, compared with 2.7% for families in the highest quintile overall, and about 1% or barely more for other families. The tilt to the top was most acute in the period from 1998 to 2007. These are the people who pay most of the taxes that fund the social programs for the poor. It is not possible to compute the ratio of the wealth of the top 5% of families to the wealth of the poorest 20% because the median wealth of the poorest families is either zero or negative in most years examined. Not only is income inequality rising in the U.S., it is higher than in other advanced economies. The recession dates are as designated by the, It is likely that household incomes did not return to their 2000 level till 2016 or later. If there had been no such slowdown and incomes had continued to increase in this century at the same rate as from 1970 to 2000, the current median U.S. household income would be about $87,000, considerably higher than its actual level of $74,600. To put this in perspective, it means that three people—Bill Gates, Jeff Bezos, and Warren Buffet—have more wealth than half of the population of the U.S. (160 million people) combined. No one would be wealthier than anyone else. These ratios are up from 3.4 and 28 in 1983, respectively. The median household income in America is $63,000. More tepid growth in the income of middle-class households and the reduction in the share of households in the middle-income tier led to a steep fall in the share of U.S. aggregate income held by the middle class. Empirically, consumption can be harder to measure than income. Nonetheless, my counter to your rebuttal is in four parts: Let’s start by placing income inequality in historical perspective. Over the same period, the share held by upper-income households increased from 29% to 48%. Everything belonged to the state. Does this sound like socialistic principles to you? Meanwhile, the share held by middle-income families has been cut nearly in half, falling from 32% to 17%. But don’t be fooled. Income inequality is described as the unevenness in the distribution of income within a particular population. But the run up in housing prices proved to be a bubble that burst in 2006. Let’s start by placing income inequality in historical perspective. All eye-popping numbers to be sure. I, instead, believe Albert J. Nock’s argument that the first law of human nature is survival and the second law is exploitation. It will creep in slowly and inexorably. Over 20 percent of our nation’s income flows to the top 1 percent. I will respond to your questions in turn. The period from 1983 to 2001 was relatively prosperous for families in all income tiers, but one of rising inequality. The Congressional Budget Office (CBO) offers an alternative estimate of income inequality that accounts for federal taxes and a more comprehensive array of cash transfers and in-kind services than is possible with Current Population Survey data. From 1970 to 2018, the share of aggregate income going to middle-class households fell from 62% to 43%. (Incomes are expressed in 2018 dollars.). The labor market is on a job-creating streak that has rung up more than 110 months straight of employment growth, a record for the post-World War II era. Asking the government to reduce income inequality does not help the poor. ... His 2020 Democratic challengers demand an array of federal initiatives, including higher minimum wages, tax hikes on … As part of our ongoing Political Pen Pals series, Joe and Robert continue their conversation on income inequality. We publish curated debates, interviews, and op-eds between individuals who disagree in order to demonstrate productive civil discourse and bipartisanship. Good people don’t let it get the better of them. Meanwhile, the net worth of families in the second quintile, one tier above the poorest 20%, increased by only 16%, from $27,700 in 1998 to $32,100 in 2007. The unemployment rate in November 2019 was 3.5%, a level not seen since the 1960s. Peasants had it bad. This is a national accomplishment. Said another way, everything belonged to everyone. If you enjoyed this debate, be sure to check out more of our Political Pen Pals debates. And it has dramatic implications for the income inequality debate. Let me now try to respond to some of your questions. But 2007 also marked the onset of the Great Recession, and that delivered another blow to household incomes. 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