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Truth about Income Inequality

It’s a simple truth.  Numbers do not lie.

Interpretation is not so simple.  With income inequality, the interpretation tends to run to a very narrow opinion like  investors.com’s op-ed piece that income inequality is a racket and seeks to pit higher paid professionals against wage earners while invoking the stereotypical view of lower income poor work ethic to Senator Elizabeth Warren’s oversimplification of the development of the middle class was a result of 90% of the population receiving 70% of the income in 1935 to 1980.  However in the end, it boils down what affects us on a daily basis – do you make enough to live comfortably? Do you have enough to safely plan for the future? Unfortunately, the bulk of America answers those questions with a no.

Income inequality should not be reduced to a war of classes, but should be addressed as what it is, a disparity of income growth.  As Senator Warren also pointed out, “1980 to 2004, … 100 percent of the growth in income went to 10 percent of the population and the remaining 90 percent received none of the growth.”  That 10%, the wealthiest of Americans, are also the ones that control the wealth or as they’ve been referred to in the past as “job creators.”  It is not about taking money away from that 10% or punishing, but insuring that 90% of society has the income growth that is necessary to grow consumer spending, quality of life, and improve society as whole.  We aren’t talking about jealously singling out professionals.  It isn’t about us against them.  It’s not about the poor versus the rich.  It’s about not understanding the harmful effect of seeking higher profits at the expense of wage earners. 

The truth of the situation is in the numbers and they show the widening gap of  lopsided growth of the top 10% growth.

The Economic Policy Institute published a report on 1/6/2015 Wage Stagnation in Nine Charts.  It brings startlingly clarity to the situation in very simple terms with the bonus of charts!  

 

  1. “In 2007, the last year before the Great Recession, the average income of the middle 60 percent of American households was $76,443. It would have been $94,310, roughly 23 percent (nearly $18,000) higher had inequality not widened”


  2. “From 1973 to 2013, hourly compensation of a typical (production/nonsupervisory) worker rose just 9 percent while productivity increased 74 percent.”

  3. “Top 1 percent wages grew 138 percent, while wages of the bottom 90 percent grew just 15 percent. If the wages of the bottom 90 percent had grown at the average pace over this period—meaning that wages grew equally across-the-board—then the bottom 90 percent’s wages would have grown by 32 percent.”  

     
  4. “The wages of middle-wage workers were totally flat or in decline over the 1980s, 1990s and 2000s, except for the late 1990s. The wages of low-wage workers fared even worse, falling 5 percent from 1979 to 2013.”

     
  5. “A four-year college degree has been no guarantee of decent wage growth. In 2013, inflation-adjusted hourly wages of young college graduates were lower than they were in the late 1990s, a trend that held for both young male and female college graduates.”

     
  6. “The share of young college graduates who have employer-sponsored health insurance coverage fell from 61 percent in 1989 to 31 percent by 2012. … For high-school graduates, the decline was even steeper, from 24 percent in 1989 to just 7 percent in 2012.”

     
  7. “In 1965, these CEOs made 20 times what typical workers made. As of 2013, they make just under 300 times typical workers’ pay.”

     
  8. "Had the federal minimum wage kept pace with productivity it would be over $18 today. …  The minimum wage essentially establishes the wage levels of the bottom fifth of wage earners. These low-wage workers are far more educated and are older than low-wage workers in 1968."

     
  9. "The figure shows that the drop in the share of workers under collective bargaining contracts is the mirror image of the rise of incomes of the top 10 percent. This occurs because collective bargaining not only raises wages for organized workers but also leads other employers to raise the wages and benefits of nonunion workers to come closer to union wage standards."

     

The numbers are undeniable.  We all suffer when income inequality comes into play.  It’s not about punishing a group of “haves.”  It’s about improving everyone’s life.  It’s also equally obvious that it will require action.  Leaving it to the market forces has brought us to this point.  It isn’t correcting itself, but getting worse.  Action needs to be taken.

 



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Blog | by Dr. Radut