Distributing the dollars up!

By Mike Andrew

Income inequality in the United States is at its highest level since the “Gilded Age” of trusts, monopolies, and Robber Barons.
The numbers are staggering.

In 1915, a time when the likes of John D. Rockefeller and J.P. Morgan dominated the US economy, the richest 1% of Americans pulled in roughly 18% of all income. Today, the top 1% account for 24% of all income.

A CBO study in 2011 found that the top 1% increased their incomes 275% over the period 1979-2007. During that same period, the incomes of the bottom 80% actually declined.

In 1980, top-paid US CEOs made 42 times more than the average worker. By 2007 they made 531 times more.

As of 2006, the US had one of the highest levels of income inequality among similar high-income, developed countries. It is one of only a few developed countries where inequality has increased since 1980.

According to Nobel Prize-winning economist Paul Krugman, income inequality in the US was very high from 1870 to sometime around 1937. In part as a result of the New Deal – and also because government spending on World War II acted as a massive stimulus package – inequality dropped dramatically between 1937 and 1947.
The level of inequality remained fairly steady for about three decades until the late 1970s when income again began to become more concentrated in the hands of the richest Americans.

Inequality increased during the 1980s – the Reagan era – decreased slightly during the late 1990s, and has since continued its overall increasing trend.

The productivity of US workers continues to be one of the economic wonders of the world, increasing steadily year by year.

Real wages, on the other hand, have stagnated during the same period. By some measures, they have actually declined.

The steadily increasing gap between the “productivity” line and the “real wage” line represents, in graphic form, wealth flowing from working people to corporate employers.

Part of that stream of wealth goes to pay CEOs more and more lavish wages and bonuses, increasing income inequality even as workers produce more than ever.

“Real compensation,” by the way, includes benefits as well as wages, and much of the increase in that category can be accounted for by increases in healthcare premiums. In other words, insurance companies and healthcare providers benefit from increases in “real compensation” but workers might not.

All of this amounts to a huge redistribution of income – but a redistribution upwards, favoring the richest Americans at the expense of working families.

Along with this redistribution of wealth has come a dramatic shift in the structure of the US economy.

In 1950, 70% of US workers were employed in manufacturing, generally high-paid jobs. Some 20% were employed in generally low-paid service industries. One-third of US workers at that time were union members.

Within the space of a single lifetime, the situation has been reversed. Today, only 21% of the workforce is in the manufacturing sector while 70% work in service industries.

In the same period, union membership has declined to a mere 11%, and less than 9% in the private sector. In other words, workers are losing both their fair share of the national wealth, and their ability to fight back against income inequality.

No wonder the Occupy movement has struck such a chord!