On this eve of an election year, there’s a topic I’d like to bring to everyone’s attention. We’re going to hear a lot of argument in the coming months about what is the best way to fix the economy. More than that; we’re going to hear arguments about what does or does not need fixing.
One slogan I’ve heard recently in the political circuit is “equality of opportunity; not equality of outcome.” This is a very real attitude in some circles that a) we do have equal opportunity in this country for people of all socioeconomic classes, and b) therefore, if someone is poor or in need, it is their fault and not society’s responsibility.
This slogan will come to more prominence in the coming months. This attitude will be used by those politicians who find it useful for their own interests. The argument will be made that, here in America, we really don’t have a problem of inequality; it’s just that people will always want free stuff, and they’ll never be satisfied.
So how valid are the complaints of inequality, really? Let’s take a look at a few facts.
There are lots of ways to measure equality of opportunity in the United States. You can measure the distribution of financial wealth, or the distribution of household income (two very different things, in fact). You can look at social mobility, which is the percentage of people who die in the same socioeconomic bracket to which they’re born. You can look at the ratio between the highest- and lowest-paid employee in your average company.
To get some idea of how successful (or not) our own system is at creating equal opportunity, it’s especially useful to compare America’s stats to those of other countries.
Let’s start with wealth distribution. “Wealth” in this case, encompasses many forms, including cash in the bank, stock market holdings, and property value. And the statistic is rather staggering; the top 1% of U.S. citizens control about 1/3 of the country’s wealth. The top 5% control over half of it. The “bottom 80%” control barely more than 1/10 of the country’s total wealth. I probably don’t need to tell you that’s a problem.
More disturbing still, the percentage of total wealth controlled by the “bottom 80%” of U.S. citizens has actually been shrinking since the 1970s. In 1983; the 80% controlled nearly 20% of the U.S.’s total economy. We’ve lost 1/3 of the influence we had then. And this loss has been drastically accelerated by the recent economic crash. Since 2007, it’s estimated that about 15% of the influence formerly held by the bottom 80% has transferred into the hands of the top 20%. (Image at right from the Economic Mobility Report.)
This means that that dreaded spectre of wealth redistribution has, in fact, been in the U.S. since the 1980s. But it hasn’t been taking from the rich and giving to the poor; it’s been doing the opposite. We’ve seen a bottom-to-top redistribution of economic influence, consistent and consistently accelerating for the past three decades.
A good part of this is, of course, due to income losses. Everybody has suffered since 2007, but the poor and middle-class have had greater losses than the rich. The average household in the top 20% has lost 16% of their income since 2007; the average household in the bottom 80% has lost 25% of theirs. That’s the equivalent to 1 in 4 members of the bottom 80% losing their entire salary and not recovering it, while 1 in 6 of the economic upper class lost theirs. To put it another way, your chance of losing the equivalent of your job in this economic crash was 50% greater if you were already middle- or lower-income.
Even more sobering than the 80%/20% divide is the divide within the top 20%. The top 1% control nearly half of the wealth within that income bracket. And within the top 1%, the top 0.5% control vastly more wealth than the bottom half of the top 1%. The disparity is so great that the richest 400 people in the U.S. control more wealth than the entire “bottom 50%” of our population.
How do we stack up against other countries in terms of class disparity? Among members of the Organization for Economic Cooperation and Development (which includes almost all “Western” nations as well as Japan, Mexico, Brazil, India, and China), our wages are fairer than those of…Brazil, China, and Mexico. Everybody else has better income inequality than us. In the U.S., an average company’s top-paid executive earns over 400 times more than its average worker. In most countries, the figure is far less.
Note the graph at right, from the CIA World Factbook 2009. It shows income inequality using the “Gini coefficient.” Note that we’re purple. Note who else is purple; several South American countries, including Venezuela, several African countries, and China. Now, note who’s doing better than us, and by how much.
There are those who still argue that this does not mean unequal opportunity. After all, the history books are rife with stories of successful who built themselves up from a poor upbringing through hard work. America is the land that first made this possible by rejecting the idea of aristocracy and the hard classism of Victorian Europe. So anyone who works hard enough in the U.S. should be able to better their situation, right?
Wrong. While it’s usually possible to find a way to get through school and/or get into a career, it’s drastically easy to do so if you already have money. If you can afford expensive tutoring to help you get into a top tier college; if you don’t have to work to support yourself while in school; if your potential employer sees good grades, a good college, sees you as coming from a background of wealth and success.
In today’s environment, all of these factors are profoundly influential. If top-tier colleges will only take students with top-tier high school grades and college entry test scores, the competition starts quite early on. Lower-income high school teens are already effectively competing with upper-income teens for their future careers. If lucrative employers will only take the top students from colleges and universities, it’s exasperated. It doesn’t take rocket science to figure out that a student whose tuition is fully paid-for is likely to get better grades than one who’s working half-time or more to pay the bills.
So how does America rank in terms of “social mobility,” or the percentage of people born to one economic class who end up in another?
Not great. We do a little better here than on overall income inequality; Britain and Italy have lower social mobility than us. But much of continental Europe and Scandinavia do better than us; some drastically so. In the U.S., for example, someone born to a high-or low-earning family is three times more likely to stay in their parents’ income bracket than someone born to the same earning bracket in Denmark. In Denmark, the children of rich families have a 17% chance of achieving high financial success in their own careers; in America, that figure is 47%. (Graph below from of Guns and Bullets via OWS Charts.)
And all this isn’t just about daily standards of living. It’s not about everybody getting to have an iPhone and a TV. It’s about power: social power, political power, career power, power to decide the course this nation will take in the future. It’s no coincidence that half of Americans’ Congressmen are millionaires; you almost have to be wealthy to run for office successfully.
You have to have disposable income in order to make campaign donations. And the wealthy do; Goldman Sachs donated over $1 million to presidental campaigns in 2008. Those donations allow your candidate of choice to create and distributre propaganda. They allow your candidate to reach into the homes of people who might not be terribly interested in politics and convince them of why they should get their vote. The fact that candidates spend more money are far more likely to win elections is a well-documented fact in the U.S..
It’s also well-documented in other countries. In fact, income inequality figures closely mirror the statistics for “democratic effectiveness,” or how much of a say the average citizen gets in his country’s policies and actions. On this measure, the U.S. ranks 19th among world governments; almost all of Europe and Scandinavia (as well as Uruguay–more power to you, little South American dude) have more democratic elections than us, reflected by stats like voter participation and the influence of foreign governments in elections. We’re dangerously close to being considered a “flawed democracy.”
I’ll leave it up to the reader to decide what this means for our upcoming elections. I don’t know myself what the best way to achieve sustainable job creation. But to me, it says one thing loud and clear: there is a problem with inequality of opportunity in this country. Wealth is being redistributed–from the bottom to the top. There are some seemingly obvious ways to remedy this, like by lowering executive pay from its current outrageous levels and using that money to fund more jobs.
The bottom line is, this is not the best system we could have; other countries have done far better. And no matter what any candidate tells you, the hard statistics say that our situation is getting worse.
For more disturbing facts and figures with relevance to the upcoming elections, visit the website of the Economic Policy Briefing Institute, or the Occupy Wall Street Chart-Sharing Tumblr. I cannot vouch for the accuracy of every single user-made graph presented through this Tumblr, but many of them are from major publications.