One way of looking at measuring inequality is to look at the earnings of people at the top vs. the typical worker in the middle. Let’s compare 1978 to 2010.
This was the top 1% vs. the typical worker in 1978.
And here is the top 1% vs. the typical worker in 2010.
Since 1929, GDP has been growing.
But if you look at the average hourly earnings of production workers, here is what you find:
Wages track GDP until the 1970’s, but something happens. Look at THE GAP.
Since 1970’s, pay to middle class workers flattened, but executive pay went through the roof.
You might ask why we didn’t deal with it.
Well, the middle class came up with 3 ways to keep spending even while wages were flat.
Those 3 coping mechanism were:
For many who worry about income inequality, their primary concern isn’t its affect on our economy; it’s the growing divide’s affect on democracy.
As the rich get richer, they have more resources with which to influence democracy.
Any questions about whether that consolidation of money works to affect policy can be answered by looking at top marginal tax rates – the rates on any earnings over the highest tax threshold.
Over the last century, as inequality has gone up, these top tax rates has gone down.
Many citizens have started to feel the game is rigged. And losers of rigged games can get very angry. It’s easiest to blame the other side, and as a result, there’s been a growing body of evidence for political polarization.
But the problem with money isn’t partisan. There are liberal billionaires and there are conservative billionaires.
The problem of widening income inequality is structural. There are various solutions out there that depend on your political persuasion, but there is no doubt that economic inequality is a major challenge of our time.