You may have heard it said that the rich always get richer while the poor get poorer. You might not think that really is true in America today. A study of the statistics of the distribution of the wealth in our country might surprise you. As of 2007, The top 20% of Americans own 93% of America’s financial wealth, leaving just 7% for the bottom 80%. The top 1% of the US population earned an average of more than 33 times as much as the lowest 20 percent, in 1979. In 2000, that had grown to more than 88 times as much as the lowest twenty percent. The causes for this disparity include workers wages, educational system and upward mobility. The system of economics supported by each political party has an influence through taxation and financial regulation.
The concentration of wealth and the power that creates is also a factor. The effect of this disparity on society is thought to be detrimental. Many studies show Countries with a high level of disparity don’t do as well in crucial social problems. Cures are not well agreed upon or guaranteed. We often hear that opportunity is open to everyone. The increase in the inequity of wealth, it’s reasons, effects and the difficulty of change demonstrate that may not be true.Taxation is another way for the government to intervene and make the playing field more level. But, this depends on which political party is in power and how they view taxation. Conservatives and Libertarians tend to believe that if the wealthy are allowed to be very wealthy, they create jobs and wealth for the lower classes. They favor lower taxes for rich Americans. Liberal policy would tend more toward redistributing wealth through higher taxation for the upper classes.
When George W. Bush took office in 2001, he signed tax cuts for the rich into effect. President Ronald Reagan also gave massive tax cuts to the upper classes. In 1960, the average tax rate for the top 10% was 67%. In 2007, that average was 17%. That may sound shocking, but Conservative financial policy supports very low taxes for the top earners. This is called “Trickle Down” economics. It is the idea that if the top earners create more wealth, it will trickle down to the masses. Unfortunately, it does not seem to be working. Also, Conservatives maintain that if the poor just work harder, they would not be poor. Of course, that makes no sense when you have fewer and fewer resources for more and more people as a constant. It is impossible when 80% of participants are sharing 7% of resources to claim that all 80% could maintain better lifestyles if they just work harder, there is still a fixed number of resources and a growing number of people sharing those resources.
The majority of the concentration of wealth has always been with the top twenty percent of citizens in America. Yet, in the last 30 years, it seems to have accelerated. The top one percent of Americans claimed 22 percent of the national income in 2005, while the top ten percent took half of the total national income. The largest share since 1928 just before stock market crash and the depression in the 1930’s. The percentage of U.S. total income in 1976 that went to the top 1% of American households was 8.9. By 2007 that percentage was 23.5. Between 1979 and 2008, the top 5% of American families saw their real incomes increase 73%. While the lowest fifth saw their income go down by 4.1%. The average income of the top 5% of American earners was 10.9 times as large as the average income of the bottom 20 percent in 1980. By 2008, the ratio had reached 20.6 times.
More for the top seems to be working out to less for the bottom these days. The average hourly wage in 1972, adjusted for inflation was $20.06. By 2008, the working class had received a pay cut. The average hourly wage by 2008 was $18.52. They don’t do well in assets, either. The bottom fifty percent of Americans own only .2% of all the stocks, bonds and money market funds. The largest decline in median household income on record was in 2008 when it fell 3.6 percent. The average state U.S. minimum wage is $7.25 an hour. Hourly pay of Chesapeake Energy CEO Aubrey McClendon, for an 80-hour week is $27,034.74 an hour. It doesn’t look good for the workers.
Workers wages is one aspect of wealth distribution. In a Capitalist economic system, wages are determined by the market alone. If employers offer too little in wages, no one will want to work for them and the people they do hire may not be the best workers in the field. But, because of profit margins, the pure Capitalist does not want to pay too much in wages, either. Minimum wage laws attempt to address this in America today. Yet, many who support pure Free Market economy would argue to abolish minimum wage laws because they think of those laws as artificial intervention of the government. Because the total number of workers cannot be artificially limited, the laws of supply and demand are also thought by many economists, to effect wages. If there are very few people who can do a certain job, they will be paid higher. This is true of the Coe’s of large Corporations. Corporations offer very high wages to attract the best talent. In 2007, the average Ceo made 319 percent more than the average worker. If there are many workers and not enough jobs, wages will tend to be lower. This is a good argument for the minimum wage laws we now have. If there are too many workers in one vocation, they have a guarantee to receive a living wage.
Arguments are made that people’s wealth is determined by their natural talents, their intelligence and personal strength. America is thought to be a Meritocracy. Your merit and hard work determine your wealth. Even though in a real Meritocracy, the harm of inherited or unjustified wealth or opportunities are also figured in, we still seem to think you can be anything you want. If you work really hard, anyone can be wealthy. No matter where you are born, or who you are, you can make it. Yet, studies show a direct link between people’s environment growing up and their earning ability later in life. Children who experienced high levels of fear for their safety, performed more poorly in average income later in life. Intelligence does help some people make their way up the ladder, but it does not change the fact that the minority of citizens still owns the majority of wealth. Talent does give a few an advantage, especially if they are hard workers, but no matter who or how many people are part of the top twenty percent of earners, they still own the a disproportionate amount of the wealth of America.
Education plays a major role in wealth inequality. Workers armed with a desired skill or College degree can expect much higher wages than untrained workers, as we just saw with Ceo’s. People with no education earn much lower average wages. As of 2007, of the top twenty percent of Americans, 62% of householders were college graduates, 80% worked full-time and 76% of households had two or more income earners, while the overall the national percentages were 27%, 58% and 42%, respectively. This makes them much better income earners and more powerful in our economy.
Changes in society and government programs also effect the work force and wealth distribution. In the 1940’s, America focused on increasing the number of citizens with high school educations. The government built more high schools. This led to an increase in skilled workers which led to a decrease in the cost of skilled labor for businesses. Many economists believe one of the main reason for the increase in wealth inequity since the 1980’s, is the high demand for workers in hi-tech industries. Those workers bring home higher wages. For this reason, the disparity for un-educated or un-skilled workers has grown larger.
Unfortunately today, gender and race seem to play a key role in who makes up the poor classes. Less resources being shared by more people has contributed to an alarming reality. Among all the sectors of society, single mothers have the lowest personal wealth. This would seem to have a very high impact on society. We do know the vast majority of inmates in Federal Prison come from poor homes and single moms. The average wealth for White single women is $42,600. The average wealth for Black single mothers is $5. That is true wealth inequity. In 2004, the average white household had a net worth almost seven times larger than the average African American or Hispanic household. Home ownership plays a major role in this disparity. When value of homeownership is figured in, White households averaged $143,000 in net worth, Black households averaged $9,300. When homeownership was removed from the equation, White households averaged $43,000 in net worth, while Black households averaged $500.
The reality that power and wealth create more power and wealth may be to blame, also. This theory is called “The Axioms of Power”. The first is: “Power corrupts, and absolute power corrupts absolutely.” This was quoted first by, Lord Acton in Britain, who saw that when people have absolute power, they become absolutely corrupt. People and organization try to hold on to power at all costs. Once a power structure takes hold, it is very hard to change it or remove it. The second basic axiom of power is that the powerful always try to create an outside enemy, so that the people have to have a savior, so they look to the powerful. The third basic axiom is “divide and conquer.” If the followers can be turned against each other, they loose focus on who is actually in power. If the masses are arguing with each other, they won’t be able to bond together and change the power structure. This is generally done through propaganda and rhetoric not based in facts or truth. The fact that 20% of America’s citizens own 93% of her financial wealth equals a high amount of power for those citizens to keep and grow their portion, while causing the lower classes to survive on less resources.
The effects of the inequality of wealth are hotly debated. Some statistics do show that for every 1% that the lower classes lose in total wealth, 1 million more citizens fall below the poverty line in income. Conservatives who believe inequity is part of a thriving economy disagree that there are detrimental effects worthy of a change in taxes. They believe more and more people sharing less resources is balanced out by higher overall wealth for the country. Liberal Democrats often try to change the tax code and enact regulation to try and help the situation because they believe it is socially unjust. Studies do show that societies with a high level of inequity perform poorly in basic social issues. The overall health of the population and life expectancy is lower in countries where inequity is high. Lower paid workers suffer more chronic stress, heart disease, ulcers, type 2 diabetes, rheumatoid arthritis, certain types of cancer, and premature aging. mental health, drug abuse, education, imprisonment, obesity, social mobility, trust and community life, violence, teenage pregnancies, and child well-being, outcomes are substantially worse in more unequal countries. In fact, America ranks among the worst of all developed countries in these areas, which, I think, would surprise many people. In all of these important areas of social concern, having a very high level of inequity between the classes, resulted in the US having the worst wealth distribution and the worst overall performance. This makes a vicious circle, as the poor do not do well in school, then they and up in prison, they have poor health, they become a burden on the rich.
Another detrimental effect can easily be seen in the amount of time workers spend at work. The work-year for the typical American has expanded 184 hours since 1970. That's an additional 4-1/2 weeks on the job for roughly the same pay. Household working hours in the US reached 3,149 in 1998, roughly 60 hours a week for the typical family, moving Americans into first place worldwide in the number of hours worked. American workers now labor 350 hours more per year than typical Europeans. Parents in the US spend 40 percent less time with their children than in 1970. Since enactment of the North American Free Trade Agreement, another government invention, 33,000 US farms with under $100,000 annual income have collapsed. That rate s six times steeper than before NAFTA was enacted. Since that time, farm incomes have declined in the US, Mexico and Canada, consumer prices rose, and Congress appropriates emergency farm supports every year. Over that same period, the largest US agri-businesses reported record profits. Prosperity does not seem to be trickling down. It looks more like it's gushing up.
What can, or should be done to stop the loss of the wealth of the middle class, is also hotly debated. The possible ways to make America more financially just fall into two categories: Government sponsored and market driven. Government approaches include better public education, progressive taxation, higher minimum wage laws, government Corporate regulation that favors small business over large. These are just a few ways the government could intervene. Yet, even those who might benefit from these measures often oppose them as giving the government too much power. Still, the American people have a say over the government, we can vote them out of office. We can’t vote the top 20% that owns the vast majority of our wealth out of power.
Conservative Americans believe in a “Free Market” system. This is when all markets act on market forces, only, and have no government intervention. The idea is markets regulate themselves through supply and demand and basic consumerism. In a market-driven economy, too much economic disparity could generate pressure for its own removal. In an extreme example, if one person owned everything, that person would immediately (in a market economy) have to hire people to maintain his property, and that person's wealth would immediately begin to dissipate. This may not sound like a solution, but true Free Market Capitalists believe the market always corrects itself on its own. The Conservative answer is always tax cuts for the Elite and Corporations.
As an American, I feel these facts are very disturbing. If the trickle up of the wealth of the middle classes continues at the same pace that it has for the past 80 years, by 2050 that top 20% will own 97% of the total wealth of this country. The bottom 80% will then have to share just 3%. That would mean 8 million more of us living under the poverty line. The effect of such a loss of wealth is something I don’t believe any of us can imagine today. I hope we never have to.