According to Torsten Sløk, the chief international economist at Deutsche Bank Securities, income inequality is a major factor that has been holding back the U.S. economy for nearly a decade.The wealthy and the corporate CEOs continue to recite the mantra that wealth "trickles down."
“One important reason why the expansion since 2009 has been so weak is that wealth gains have been unevenly distributed,” he wrote. “A decline in the homeownership rate and the number of households holding stocks has dampened consumer spending growth for the bottom 90% of households.”
Per his data, the median net worth for all income percentiles except the wealthiest one dropped between 2007 and 2016, usually by double-digit amounts.
"We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both."Reposted from 2018 to add new data:
---- Supreme Court justice Louis Brandeis
The chart at the top of the post reported data up through 2016. A new report by the Federal Reserve includes data through 2018, and presents it in a graph that is more intuitive for interpreting:
The purple (the 1%) and the green (the next 9%) households own 70% of the wealth in this country, and it has continued getting more imbalanced. The wealth of half of the households in this country is represented by the red.
Discussed at MarketWatch:
Deutsche Bank’s Torsten Sløk says that the distribution of household wealth in America has become even more disproportionate over the past decade, with the richest 10% of U.S. households representing 70% of all U.S. wealth in 2018, compared with 60% in 1989...An extensive detailed discussion is at the Federal Reserve report, with additional data and graphs.
To make a finer point, Fed researchers say the increase in wealth among the top 10% is largely a result of that cohort obtaining a larger concentration of assets: “The share of assets held by the top 10% of the wealth distribution rose from 55% to 64% since 1989, with asset shares increasing the most for the top 1% of households. These increases were mirrored by decreases for households in the 50-90th percentiles of the wealth distribution,” Fed researchers said.
Sløk said the financial crisis has played a significant part in this growing gap, which resulted in the Federal Reserve stepping in to stem a massive ripple of losses through the global financial system as the housing market imploded.
As a result, the Fed lowered interest rates, which had the knock-on effect of pushing easy money into the hands of the already-wealthy.
He's an additional perspective
ReplyDeletehttp://www.aei.org/publication/explaining-us-income-inequality-by-household-demographics-2016-edition/
Correction, "Here's an additional perspective"
DeleteThanks for posting that link, MJD. That article is, as you describe it, a "different perspective," but not a contradictory one. There are, as the article you linked notes, MANY reasons for being in one quintile or another. He discusses several (age, two earners, education) and there are probably dozens more reasons.
DeleteAlso, there is nothing evil about having a bottom quintile. It has to exist by simple definition of the term of what a quintile is.
And there IS mobility through the quintiles. I personally (and my parents) have been in different quintiles during different stages of my (and their) lives. Not the top and bottom quintiles, but the others.
I think one of the viewpoints to be gleaned from the graph and article I posted is that the quintiles are changing in different directions. When a country's economy is improving (or falling), there will still be 20% of the population in each quintile, but with an improving economy, each quintile should be improving (and vice versa in a recession). As this graph shows, the top quintile has improved dramatically in the past ten years; all the other quintiles have gotten worse.
To me that would indicate structural faults in how the system is set up and anomalies in how economy is behaving.
As long as the Republicans are the majority in Congress, the inequality will continue to grow. Their tax cuts always favor the richest people.
ReplyDeleteAs long as corporatists and their oligarchs have us fighting Left and Right, we won't fight upwards.
DeleteThe corporatists and oligarchs are pretty much all on the right though, aren't they?
DeleteI taught a graduate course on Poverty and Inequality for the first time last fall. I'm not an economist, but a social welfare researcher. I used a lot of graphs in my class, as one of the goals was for students to first understand the scope and nature of inequality. The graph I remember most is this one:
ReplyDeletehttps://commons.wikimedia.org/wiki/File:US_productivity_and_real_wages.jpg
It shows, since 1948, the change in major sector productivity (output per worker/capital input) layered with the change in worker wages. It presents a pretty compelling argument that neoliberal economic policies largely created the type of wealth disparity we see today and that corporate profits do not ultimately trickle down to their employees.
I think of this graph each time folks argue against raising the minimum wage or for giving tax cuts to corporations - clearly, corporations doing well is not translating into the rest of us doing well.
That is a very dramatic graph! Were you able to define anything specific happening at the inflection point other than just "politics"?
DeleteThere's no singular event I can think of, really, but rather a conflation of likely causes. It is interesting that there's an unnatural point at which the path changes, but I can't think of any specific policy or movement that would be responsible.
DeleteGenerally, I'd attribute the disparity to the decline of manufacturing and pension-earning jobs, the union-busting attitudes since the 70s, and the growth of the service economy/part-time jobs as replacements. A lot of the workers' rights movements were industry-specific, and those industries have been outsourced for cheaper labor.
Of course, there were a lot of social changes that simultaneously occurred that allowed us to be accepting of this - i.e. the growth of the "culture of poverty" belief, worker support for "right to work" policies, public acceptance of outsourced products.
Thanks. I don't have an answer, either, but it is quite a graph. Glad you posted it.
DeleteTimothy Noah wrote a book about this some years back called "The Great Divergence." As I recall, the decline of unions maps almost perfectly to the increase in income inequality.
Deletehttps://www.npr.org/2012/04/26/151457067/americas-great-divergence-is-relatively-new
https://www.youtube.com/watch?v=ku3TtxjX13Y
I've always found it... amusing how so many people blame the poorest, most powerless people in the world for most of their woes. As if those on the bottom are the ones with all the money, pulling all the strings- they're the ones holding people back from their dreams and aspirations. And yet, that is exactly who gets blamed time and time again...
ReplyDeleteThose in the middle seldom look up when daring to question or examine the monied power structure that separates and uses them as pawns, keeping their heads pointed at those who have even less. Decades past, people would tell me that if only those lowly bottom feeders weren't there, more deserving Americans would happily get their jobs with the vastly increased wages that would automatically ensue- simple logic!!!
And yet... all I've seen over the decades are those on top sending as many of those very same jobs: first to Mexico for cheaper wages, then onward to China for yet cheaper wages, then onward to South Asia for cheaper wages still, all the while profits soar- profits kept off shore to avoid the very taxes that would strengthen infrastructure and job growth at home. And as for the jobs that are not outsourced... their hours and wages are continually cut, their benefits diminished! The one (1) percent is now even after worker tips- the fact is, US worker lives (or deaths) have now literally been declared... no longer even worth mention!
https://www.politico.com/story/2017/08/25/osha-worker-deaths-website-242034
And of course (U probably posted this before):
https://www.youtube.com/watch?time_continue=3&v=QPKKQnijnsM
Some thoughts that I have pondered (even though I am a conservative):
ReplyDeleteConsider this "outrageous" truth: A person with a billion dollars can spend $100,000 PER DAY...for over 27 years. That is enough to make even a conservative think that socialism is superior to capitalism--or at least believe there ought to be some cap, above which, all a person's wealth is taxed at 90%.
If we think it right to have a minimum wage, then on what grounds is it wrong to have a maximum one? We've already established, haven't we, that we are not looking to the market, but to some moral equation when it comes to minimum wage, so maybe...?
Capitalism, socialism, and communism are all attempts to do the right thing for people. At the same time, all of them eventually fall short as soon as mankind finds a way to game the system. Capitalism will use and chew up people, then find others to replace them...socialism eventually winds up with a few telling everyone else what they will or will not do...communism is fine, until someone figures out that it doesn't do them any good to work harder than the next guy, since everyone is getting the same thing (sadly, a somewhat similar conclusion is reached by people in the capitalist system).
As best I can tell, it is a MIXTURE of these three economic systems that serves us best. Capitalism is great, up to a point (which is where we try to then regulate things like wages, safety, etc.). Communism serves us in that the people of the U.S. collectively "own" the National Parks and the such. And socialism--the "free" education we give our children, etc.--also has its place.
I have heard it said that if we gave everyone the same amount of money, the rich would soon have it back. Fine. But how about we at least try that every so often? It stops "dynasties" with far too much control of American politics and power from being too long in control.
The lives of many folks in the U.S. would be dramatically impacted by as little as, say, $5000--or surely by $20,000. No one need worry that we want everyone to be a millionaire. Just the "spare change" of those with enormous wealth could significantly impact the future course of many lives.
In retrospect, when the mortgage crisis hit, it seems that instead of bailing out the banks, what we SHOULD have done was put money into the hands of the banks by paying off the mortgages owed to the banks! Consider that if we had paid off or significantly paid down millions of mortgages, the banks would have then had money in their coffers, people would have owned their property free and clear (or at least be far ahead of where they were), and the banks would have been solvent. And since the banks had to pay back the gov't anyway, I'm not sure they wouldn't have at least been better off than writing off billions in bad loans. I don't have all the financing figured out, but the only ones who should be too big to fail are the people of the U.S., NOT BIG BUSINESS.
Just my (conservative?) thoughts....