The Pardu

The Pardu
Watchful eyes and ears feed the brain, thus nourishing the brain cells.

Sunday, June 22, 2014

Wealth And Income Inequality

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American Pie: Wealth and Income Inequality in America

No matter how you slice it, when it comes to income and wealth in America the rich get most of the pie and the rest get the leftovers. The numbers are shocking. Today the top 1 percent of Americans control 43 percent of the financial wealth (see the pie chart below) while the bottom 80 percent control only 7 percent of the wealth. Incredibly, the wealthiest 400 Americans have the same combined wealth as the poorest half of Americans — over 150 million people.
In 2007, the share of after-tax income going to the top 1 percent hit its highest level (17.1 percent) since 1979, while the share going to the middle one-fifth of Americans shrank to its lowest level during this period (14.1 percent).
Between 1979 and 2007, average after-tax incomes for the top 1 percent rose by 281 percent after adjusting for inflation — an increase in income of $973,100 per household — compared to increases of 25 percent ($11,200 per household) for the middle fifth of households and 16 percent ($2,400 per household) for the bottom fifth.
If all groups’ after-tax incomes had grown at the same percentage rate over the 1979-2007 period, middle-income households would have received an additional $13,042 in 2007 and families in the bottom fifth would have received an additional $6,010.
In 2007, the average household in the top 1 percent had an income of $1.3 million, up $88,800 just from the prior year; this $88,800 gain is well above the total 2007 income of the average middle-income household ($55,300).” collects more data in an article titled The Great Divergence In Pictures: A Visual Guide to Income Inequality.”:
Income for the top 20 percent has increased since the 1970s while income for the bottom 80 percent declined. In the 1970s the top 1 percent received 8 percent of total income while today they receive 18 percent. During the same period income for the bottom 20 percent had decreased 30 percent.
In the 1970s the top 0.1 percent of Americans received 2 percent of total income. Today they get  8 percent.
In 1980 the average CEO made 50 time more money than the average worker while today the average CEO makes almost 300 time more than the average worker.
Over the past 30 years the rich in America have become a lot richer, while many millions of Americans have seen their income stagnate or decline. As Warren Buffett, the second richest man in America, famously said, “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”
Wealth and income inequality today is by far the worst in the industrialized world and has fallen in line with many Third World countries. Nobel Prize winning economist Joseph E. Stiglitz explains why this is bad news:
Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong. An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul.
The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.

Where Has All the Money Gone?

This may be the one of the most important graphs you will ever see. It show the reason for the decline of the American middle class — how the rich have become so much richer in the last 30 years and why the rest of us have been left behind:
Productivity and Family Income
In the post World War II period through the mid 1970s the productivity of the American worker increased at a steady rate. During this period workers were rewarded for their increased productivity with a commensurate increase in wages. Then something happened. Productivity continued to increase, but workers’ wages stagnated.

Trickle Up Economics

As Nobel Prize winning economist Paul Krugman points out, since 1973 national Gross Domestic Product (GDP) per household has increased 46 percent in real Inequality and Unsustainable Growth: Two Sides of the Same Coin?terms, but median income per household has only increased 15 percent. Where did the other 31 percent go? It went to the wealthy.
… the gap between economic growth and median incomes has a lot to do with rising inequality.
… it remains striking how little of growth has trickled down to the typical family.
Supply Side economics is the cornerstone of Republican economic theory and has driven U.S. economic policy since the Ronald Reagan presidency. This is how Investorpedia describes it:
Supply-side economics is better known to some asReaganomics“, or the “trickle-down” policy espoused by former U.S. president Ronald Reagan. He popularized the controversial idea that greater tax cuts for investors and entrepreneurs provide incentives to save and invest and produce economic benefits that trickle down into the overall economy.
In other words, if government economic policy focuses on making the rich richer, the benefits will “trickle down” to everyone else. As supply-siders are fond of saying, “A rising tide lifts all boats.” Since Supply Side economics came to dominate American economic policy during the Reagan administration, the rising economic tide has certainly lifted a lot of yachts, but at the same time it has left most of the row boats stuck in the mud.
The past quarter century of Republican economics has proven that the trickle down theory is just a convenient excuse to justify an economic policy favoring the rich, with the benefits trickling up to make the very wealthy even wealthier.

Must-See Videos on Wealth Inequality in America

Shocking Wealth Inequality

Nick Hanauer’s “Banned” TED Talk

The wealthy are not job creators.


6 Ways Extreme Income Inequality Is Making Your Life Worse

Below are the most shocking consequences of this income inequality:
1. Income inequality forces Americans into debt.
As the wealthy become wealthier, they create an “economic arms race in which the middle class has been spending beyond their means in order to keep up,” a 2013 study from the University of Chicago’s Marianne Bertrand and Adair Morse concludes.
2. Income inequality makes America sick.
Researchers at Harvard University’s School of Public Health found that women living in areas with large gaps between the “haves” and “have-nots” are at greater risk of being depressed and are nearly twice as likely to suffer from depression compared to the women living in areas that have a more equal income distribution.
3. Income inequality makes America less safe.
Statistical patterns show that crime rates increase with rising economic inequality. For instance, a 1999 Harvard analysis of the homicide rates in each state and the District of Columbia found that as the gap between the rich and the poor rose, the rate of homicide rose along with it. Income inequality alone accounted for 74 percent of the variance in murder rates and half of the aggravated assaults,” the research concluded. A 2002 World Bank study confirmed these results, concluding that homicide and an unequal distribution of resources are inextricably tied throughout the world.
4. Income inequality makes America less democratic.
A large body of research suggests that high inequality leads to lower levels of representative democracy and a higher probability of revolution, as poorer citizens become convinced that the government is only serving and representing the interests of the rich. And today’s political candidates and parties are relying more on deep pocketed campaign donors than at any other time since the early 1970s, when Congress first enacted campaign finance laws.
5. Income inequality undermines the American dream.
New research finds that while economic mobility in the United States has stayed flat for two decades, the distance between the richest Americans and the poorest has grown dramatically. So if social mobility is a ladder, this means “the rungs of the ladder have grown further apart (inequality has increased), but children’s chances of climbing from lower to higher rungs have not changed,” the researchers note.
6. Income inequality is undermining long-term economic growth.
Societies with greater income inequality experience slower and less stable economic growth, a recent global comparison from the International Monetary Fund concludedand see far shorter economic expansions.
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