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Income Inequality Continues to Rise in America



The rich continue to amass fortunes at a record pace while the majority of Americans see income gains which barely exceed inflation. A new Census Bureau report shows that income inequality is now at its highest level since they started tracking it in 1967.


Income inequality is measured by the Gini index [or Gini coefficient] which shows how wealth is distributed in a nation. The coefficient ranges from 0 (or 0%) to 1 (or 100%), with 0 representing perfect equality and 1 representing perfect inequality. The index has been rising steadily for decades in America. When the Census Bureau began studying income inequality in 1967, the Gini index was 0.397. According to the most recent data, it has climbed to 0.485, much higher [unequal] than Europe and other developed nations. For instance, "no European nation had a [Gini] score greater than 0.38 last year."


And the results of our inequality can be startling. "The richest 1% of the U.S. population possessed 38.6% of the nation's wealth in 2016, according to a 2017 Federal Reserve report." And, the wealthiest among us take an even larger slice of annual income according to new research published in the Quarterly Journal of Economics.

Thomas Piketty, Emmanuel Saez, Gabriel Zuckman, Quarterly Journal of Economics: "First, our data show a sharp divergence in the growth experienced by the bottom 50% versus the rest of the economy. The average pretax income of the bottom 50% of adults has stagnated at about $16,000 per adult (in constant 2014 dollars, using the national income deflator) since 1980, while average national income per adult has grown by 60% to $64,500 in 2014. As a result, the bottom 50% income share has collapsed from about 20% in 1980 to 12% in 2014. In the meantime, the average pretax income of top 1% adults rose from $420,000 to about $1.3 million, and their income share increased from about 12% in the early 1980s to 20% in 2014. The two groups have essentially switched their income shares, with eight points of national income transferred from the bottom 50% to the top 1%. The top 1% income share is now almost twice as large as the bottom 50% share, a group that is by definition 50 times more numerous. In 1980, top 1% adults earned on average 27 times more than bottom 50% adults before tax, while they earn 81 times more today."

America's inequality is the result of a complex mix of policy choices and a changing global economy. This isn't a complete list, but the reasons include:

1. Tax cuts which have generally favored the rich since the 1980s

2. Income derived from investment profits has grown much faster than wage income.

3. Investment income is often taxed as long-term capital gains at the lower rate of just 20 percent and some bond income is tax exempt.

4. Americans without a college education face stiff competition from low-wage workers in Asia and other developing countries.

5. As technology has increased at an ever faster rate, businesses have rewarded highly skilled workers much more lavishly than blue collar workers.

6. Organized labor has collapsed in America.

7. We haven't raised the minimum wage in decades.


The new statistics from the Census Bureau remind us that these factors continue to exacerbate income inequality, and, specifically, that those who garner much of their income from investments [also called capital income] have seen their incomes jump much faster than wage laborers since the 2008 recession.

AP: ... "At the same time, the sustained economic growth from the recession a decade ago has enriched people who own stocks, property and other assets, and have sources of income other than wages, said Donna Ginther, an economist at the University of Kansas."

While Republicans have ignored the issue during the Trump Administration, all of the Democratic candidates for President, including Joe Biden, outlined plans to decrease income equality if elected. We will address Biden's plan to tackle the issue as the election gets nearer.


#news #economics

By: Don Lam & Curated Content

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