Income and Wealth Inequality in the United States

For this week, I have also included a video presentation to help provide visuals of the statistical information. If you are like me, visuals greatly aid in making sense of the information. This video is 3 years old now, but it is still really helpful and I use it in both Intro to Sociology and Social Problems. The information is taken from a study conducted by Harvard and the link is provided below.  

https://www.youtube.com/watch?v=QPKKQnijnsM

U.S. Income Inequality (Mooney, Linda, Knox, David, and Schacht)

In 2012, the top 1 percent of U.S. taxpayers earned 22.5 percent of all U.S. income (Sommeiller and Price 2015). Wages used to be tied to worker productivity, meaning the amount of goods and services produced per hour worked. From 1948 to 1973, worker productivity increased 97 percent and wages increased nearly as much (91 percent). But from 1973 to 2013, although worker productivity increased by 74 percent, wages rose by only 9 percent (Mishel 2015). The wage stagnation of middle and low-income earners is in stark contrast to the huge increase in wages of the top earners. From 1973 to 2013, wages of the top 1 percent grew 138 percent, while wages for the bottom 99 percent rose by only 15 percent (Mishel et al. 2015).

One reason why workers’ wages have not increased in sync with their productivity is that CEOs are taking a larger piece of the pie. In 2014, CEOs at the top 350 U.S. corporations received, in salaries and other compensation (such as bonuses and stocks), 303 times the average compensation of U.S. workers (Mishel and Davis 2015). That means that a typical worker would have to work 303 years to earn what a CEO makes in 1  year.

 U.S. Wealth Inequality (Mooney, Linda, Knox, David, and Schacht)

 Wealth in the United States, like in the rest of the world, is unevenly distributed and concentrated at the top. More than 40 percent of U.S. wealth in 2012 was owned by the top 1 percent, but more than half of that wealth was owned by the top 0.1 percent (Saez and Zucman 2014).

There is a saying: The best way to make a million dollars is to start out with $900,000! Wealth tends to snowball, and the bigger the snowball you start off with, the bigger it grows. Consider that between 1963 and 2013 (Urban Institute 2015):

·         Families at the 99^th percentile saw their wealth increase six-fold.

·         Families at the 90^th percentile qualdrupled their wealth.

·         Families in the middle of the wealth distribution roughly doubled their wealth.

·         Families in the bottom 10 percent of the wealth distribution went from having no wealth, on average, to being about $2,000 in debt.

In the 2011 Forbes 400 annual list of the wealthiest Americans, more than 70 percent of the 282 billionaires on the list were described as “self-made,” suggesting that these individuals achieved financial success on their own, without assistance from family or society. But the notion that wealthy individuals have created their own financial success ignores the importance of gender, race, and family background as well as the role that tax policies play in creating wealthy individuals. United for a Fair Economy (2012) examined the 2011 Forbes list and found that:

·         17 percent of the Forbes 400 have family members who are also on the list

·         About 40 percent inherited a “sizeable asset” from a spouse or family member

·         More than one in five of the Forbes 400 inherited enough wealth to make the list

·         Just one African-American is on the list, and of the women on the list (who comprise just 10 percent of the list), 88 percent inherited their fortune

·         60 percent of the income owned by those on the list comes from capital gains (investments) that are taxed at a lower rate than other income.

There are, indeed, true “rags to riches” success stories in the United States that exemplify the idea that anyone can achieve the American dream. Approximately one-third of the individuals on the 2011 Forbes 400 list came from a lower- or middle-class background. Oprah Winfrey, for example-the only black person and one of 40 women on the list, was born to a low income mother, yet she developed a successful career in television, film, and publication. However, such stories are the exception and not the rule.

Sources (In order of appearance)

Sommeiller, Estelle, and Mark Price. 2015 (Janaury 26). “The Increasingly Unequal States of America.” Economic Policy Institute. Available at www.epi.org

Mishel, Lawrence. 2015 (February 4). “Congressional Testimony: Policies That Do and Do Not Address the Challenges of Raising Wages and Creating Jobs.” Economic Policy Institute. Available at www.epi.org

Mishel, Lawrence, and Alyssa Davis. 2015 (June 21). “Top CEOs Make 300 Times More Than Typical Workers.” Economic Policy Institute. Available at www.epi.org

Saez, Emmanuel, and Gabriel Zucman. 2014 (October). “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Data.” NBER Working Paper No. 20625. National Bureau of Economic Research. www.nber.org

Urban Institute. 2015 (February). “Nine Charts about Wealth Inequality in America.” Available at www.datatools.urban.org

United for a Fair Economy. 2012. Born on Third Base: What the Forbes 400 Really Says About Economic Equality & Opportunity in America. Available at www.faireconomy.org

Mooney, Linda, Knox, David, and Schacht, Caroline 2015. Understanding Social Problems. Cengage Learning: Boston, MA.