Thomas Kiikauer and Nadine Campbell for BuzzFlash: United States Plunges to the Bottom Ranks of Income Inequality
Increasing inequality reduces many Americans to living out of boxes and tents. (Rob Howells)
June 18, 2021
By Thomas Kiikauer and Nadine Campbell
Inequality can be seen as the unequal distribution of income in a society. One way of measuring inequality is through the widely used Gini index, which calculates income distribution across a population. Used by the OECD, the World Bank, etc., the Gini index uses a number between "0" and "1". Zero means perfect equality – everyone has the same income and wealth. The number one means total inequality – one person has all the income and wealth while the rest has nothing. In other words, the higher the number, the worse the inequality.
The world's most equal country remains Iceland, with a Gini-index of 0.382. Iceland is followed by the top six OECD countries with the highest equality: South Korea, Iceland, Switzerland, Norway, Denmark, and Slovakia. The bottom six with the highest inequality are the USA, Mexico, Israel, Germany, Portugal, and Italy. Overall, many people agree that the continuous rise of inequality might be linked to five issues:
1. the persistent application of neoliberalism – at times in conjunction with austerity;
2. technological change in the economy and the move towards the Digital Age;
3. globalisation (i.e., imperialism) defined by outsourcing to the Global South;
4. the deliberate destruction of trade unions; and finally
5. the erosion of minimum wage.
In other words, the USA is among the bottom six when it comes to countries with the highest inequality. Moreover, most Americans think that the level of inequality in the USA is too high (61%). This is even more marked when split between Republicans and Democrats. While only 41% of Republicans think inequality is too high, almost twice as many Democrats (78%) think the same. On the downswing, inequality features only as of the fifth most pressing issue on the political agenda – after affordable health care, terrorism, gun violence, and global warming.
As expected, workers at the lower end of the income scale agree more strongly that inequality is a serious problem. In contrast, those at the upper level of the scale agree less with the idea that inequality needs to be reduced. For example, in 2020, the US middle-income ranges from $40,100 to $120,400 (three-person household) while lower-income people earn below $40,100 a year and upper-income families have incomes above $120,400.
Inequality can also be seen as a structural problem (capitalism, institutional racism, etc.) or an individual problem (hard work gets you ahead). Democrats, for example, tend to think that inequality is a structural problem. In contrast, Republicans think inequality is an individual issue – a proven ideology that sustains capitalism until today and into the foreseeable future.
While the Pew Research Center notes that "economic inequality in the US continues to widen", Democrats are less likely than Republicans to think that individual choices (D: 27%; R: 60%) are responsible for economic inequality. Furthermore, when asked who is responsible for inequality: 75% of Democrats think the government is responsible, while only 44% of Republicans think that is the case. Similarly, 51% of Republicans compared to 67% of Democrats think businesses and corporations are responsible.
Even though Aaron Levenstein might have been corrent when saying that statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital, still more Democrats (65%) than Republicans (56%) think that workers' necessary skill set is relevant. The gap widens when suggesting that taxing the rich might help, but only 36% of Republicans think that 69% of Democrats agree with this. Virtually the same goes when suggesting a reduction in college fees will help; only 37% of Republicans agree, while 59% of Democrats thought it would help.
However, in general economic terms, as the growth in upper-level income increased, middle- and low incomes were left behind. As a result, between 1970 and 2018, inequality in income between upper-level incomes and middle-and low-level incomes rose. Meanwhile, the overall share of middle-income people receive continued to fall.
In other words, during the last 40 years – which is roughly the time neoliberalism became the dominant global hegemony – wealth shifted upward. The shovelling up of wealth is camouflaged through the "rising boat" ideology and une idée fixe of "trickle-down economics". These are the two most common smokescreens. In reality, the opposite was engineered. A huge vacuuming up of wealth has taken place.
To realise how much inequality has risen, one might look at long-term data on who gets which share of the pie. Between 1971 and 2019, for example, the share of upper-income workers was boosted from 14% to 20% = a net gain of 6%. At the same time, the "share" of lower-income workers increased from 25% to 29% = a net gain of 4%. In short, upper-income workers increased their share further than lower-income workers. This creates inequality.
Examining plain numbers, the US middle-class has not grown at the rate of upper-income employees. Between 1970 and 2018, middle-class workers increased their income from $58,100 to $86,600 - a net gain of 49%. This was significantly less than the whopping 64% increase for those in the upper-income. In 1970, they earned $126,100. In 2018, it was $207,400.
By contrast, lower-income households gained 43% (1970: $20,000 – 2018: $28,700. In other words, low and middle-income workers wages increased by 49% and 43% over roughly 40 years while upper incomes made the largest gains: almost a 70% increase. In short, the rich get richer.
When one looks at the overall share of incomes that goes to the three groups, a similar picture emerges. Overall, the share of aggregate income (1970-2018) that went to middle-class households "fell" from 62% to 43%. Simultaneously, the share held by upper-income households increased from 29% to 48%. Worse, the share going to lower-incomes even moved downward from 10% in 1970 to just 9% in 2018. In other words, top-income people get about ½ of the cake; the middle class gets two-fifth while the poor get less and a 10th. This is what inequality means.
It also means that this development depicts a severe growth in overall economic inequality since 1980. Yet even "within" higher-income families, this development has favoured the very top end. Since 1980, incomes have increased faster for the most affluent – those in the top 5%.
The worse is yet to come. The overall wealth of American families is currently no higher than it was two decades ago. This is called "net worth", and it is the value of assets owned by a family (typically the family home, savings in a bank, etc.) set against outstanding debt (e.g., home loan, student loan, car loan, etc.).
In 1983, the overall wealth of a US family was sitting at $82,900. Thirty years later, it was $87,800 – it had barely moved. In other words, after 30 years of neoliberalism, Americans were no richer than 30 years before. The promises of neoliberalism were a lie. Americans did not get richer. There was no trickle-down effect, and most definitely, there were no "all boats rising". Instead, wealth was redistributed towards the already rich. Neoliberalism shifted wealth upwards – the rich got richer. And they did so not only in the USA.
The richest are getting rich faster. Again, if one looks at the roughly last three decades (1983-2016), the overall share of wealth (income, stock, shares, homes, etc.) going to US upper-income families increased from 60% to 79%. Simultaneously, middle-income people's share of the wealth was cut nearly in half. It fell from 32% to just 17%. Worse still, lower-income families had just 4% of the overall wealth in the year 2016. The poor were down from 7%.
Again, when looking at how the overall wealth in the USA is distributed, the picture is even worse than just comparing wages and incomes. In other words, the poor are made poorer on a rapid scale while a massive amount of wealth is transported upward to the already wealthy.
The outcome of all of this is that the wealth gap between America's most affluent and destitute families has more than doubled between 1989 and 2016. Moreover, income inequality in the USA has increased since 1980 – the starting date of Ronald Reagan's neoliberal crusade. Today, inequality in the USA is more significant than in comparative countries, as the aforementioned Gini index shows.
Surprisingly, 85% of upper-income Americans think that "some amount of inequality is acceptable". Simultaneously, low-income workers are more likely to say that reducing inequality should be a top priority for the federal government.
Finally, 72% of Democrats say, "poor people have hard lives because government benefits don't go far enough to help them live decently." In the meantime, 74% of Republicans say, "poor people today have it easy because they can get government benefits without doing anything in return".
Interestingly, Democrats (91%) and even a solid majority of Republicans (65%) who say, "there is too much economic inequality" also say that "the government should raise taxes on the wealthy to address inequality". In other words, while Democrats and Republicans differ on what causes inequality, they appear to agree that taxing the rich and corporations is a viable way to fight inequality.
Thomas Klikauer teaches at the Sydney Graduate School of Management at Western Sydney University, Australia. He has over 600 publications including a book on the AfD.
Nadine Campbell teaches in the School of Business at Western Sydney University and is the managing director for Abydos Academy.
This article from Australian contributors uses British spellings.
Follow BuzzFlash on @twitter
Continue the conversation at the BuzzFlash Nation group on Facebook
Contact BuzzFlash @ BuzzFlash@BuzzFlash.com
No paywall or advertisements here! Keep BuzzFlash independent and free from the influence of corporate interests – make a donation now.