AFL-CIO NOW Blog

Two reports out this week offer a telling glimpse into the direction of the nation.

• The number of U.S. households with a net worth of at least $1 million jumped 16 percent last year after dipping sharply during the financial crisis, according to a new report. The Spectrem Group study also found “ultra-high net worth families—those with at least $5 million—grew 17 percent last year to 980,000.
• Some 6 percent of all workers were living in poverty in 2008, up from 5.1 percent in 2007—the highest proportion since 6.2 percent in 1994, according to the U.S. Bureau of Labor Statistics. In 2008, some 8.9 million adults were among the “working poor”—1.4 million more than in 2007.

 

These are more than one-off data. They are the most recent indicators of the long-term trend toward growing inequality in this nation. The gap between the annual income of the top 10 percent and the rest of us has been widening sharply for the past 30 years. According to one analyst—who estimates that income inequality in the United States is now greater than it has ever been over the past century—the wealthiest 10 percent took between 30 percent and 35 percent of total national income from the early 1940s to the early 1980s. After that, their share rose to its current 45 percent to 50 percent level.

As the Economic Policy Institute (EPI) points out, the 400 American households with the highest incomes also have enjoyed a much faster pace of income growth than the vast majority of households.

The median pre-tax household income for a family of four in 2007 was $50,233, while the top-earning 400 households earned a median $345 million, almost 6,900 times as much income.

Put another way: If our income had kept pace with compensation distribution rates established in the early 1970s, we would all be making at least three times as much as we are currently making. How different would your life be if you were making $120,000 a year, instead of $40,000?

What does it mean for a nation to have an income gap that’s 6,900 times that of the median—not the lowest income, the median-income?

For one, studies show a correlation between unequal societies and an increase in illness and social problems, including mental illness and drug use. The lower the income gap in a society, the healthier it is overall.

Makes sense. Because a massive and growing income gap also means what Business Week, not exactly a radical media outlet, calls “the rise of the permanent temporary workforce.” One in which we see falling pay, vanishing benefits and where no one’s job is secure. When people work one or more jobs and still can’t afford health care or hope for retirement security—and when they can’t count on having a job at all—illness, addiction and other social ills quickly follow.

What does massive and growing inequality mean for the United States? It means that unless lawmakers directly address the crisis through coordinated policies—like establishing a national manufacturing policy and creating tax incentives for corporations to remain in the United States rather than ship jobs overseas, for starters—the United States by 2043 will have the same income inequality as Mexico.