The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

7 possibilities for addressing income inequality in the US

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As inequality increases, more questions than answers?

Here are the facts:

Income inequality in the US continues to worsen. While earners at the very top claim greater shares of the country’s income distribution, shares among the rest are shrinking.

A recent analysis by Pulitzer Prize-winning journalist David Cay Johnston suggests incomes for the bottom 90% only grew by $59 between 1966 and 2011 (inflation adjusted). Over the same period, average incomes for the top 10% rose by $116,071. The top 1% saw their share grow by $628,817. And the top 1% of the 1%? They saw their share grow by $18,362,740.

Here’s a visual courtesy of Johnston: If a $59 boost is equivalent to an inch, then the incomes of the top 10% grew by 168 FEET! The top 1% grew by 884 feet, and the cream of the crop – the top 1% of the 1% – saw an increase of 4.9 miles (that’s 310,464 feet). I attempted to plot these distances on the graph below. However, it’s largely unreadable because the cream of the crop dwarfs even the 1% as a whole. (If you look close though, you can sort of see the other distributions.)

 

And this trend is becoming worse.

Despite the fifth year of post-financial crisis recovery, inequality is growing. The first two months of 2013 saw median incomes drop by 1.1%, to $51,404, moving it 5.6% below where it was in June 2009 (from $54,437 at the start of the recovery). Since 2000, Americans have seen the median income drop nearly 9%.

At the other side of the income spectrum, a different story has unfolded. Since 2009, while the bottom 90% saw their incomes shrink, the top 10% of earners took a whopping 149% of the post-recovery growth! How is that possible, you ask? Because the incomes of the bottom 90% shrank. The top 1% captured 81% of the gains, of which more than half went to the top 1/10 of the 1%, and 39% of the gains to the top 1% of the 1%.

“Ponder that last fact for a moment,” says Johnston. “The top 1 percent of the top 1 percent, those making at least $7.97 million in 2011, enjoyed 39 percent of all the income gains in America. In a nation of 158.4 million households, just 15,837 of them received 39 cents out of every dollar of increased income.”

We’ve got more questions than answers.

The dangers of growing income inequality are now widely recognized. Yet, there’s little dialogue regarding how to reverse the tide, especially in the US.

At issue is a fundamental question:

How do we recast the American economy so that it generates broad-based growth, as opposed to merely great growth at the very top, and flat (or even regressive) growth for everyone else?

Oxfam is still trying to identify the best policy solutions to help curb inequality in the US, and we’re interested what our allies, adversaries, and the blogosphere have to say about the following possibilities:

1)      Target the wealthy. Make corporations and rich people pay their fair share.

2)      Gain greater access to social services for the very poor.

3)      Strengthen organized labor.

4)      Raise the minimum wage.

5)      Improve education.

6)      Clean up America’s legislative and regulatory bodies, which are too corrupted by wealth.

7)      Focus on creating more incentives for an environment of inclusive growth.

I offer these to stimulate thinking, not as a be-all-end-all list. So what’s missing? Which of these or other policy responses may prove best to reverse the US’s growing inequality? We want to hear from you!

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  1.  avatarMichele

    As an over 50 female American who was not given the opportunity to reach my full potential, the time has come to consider putting real teeth into the Federal law which states that it is illegal to discriminate based on age. I have visited many 50+ job web sites, and all I could find were jobs for people who were engineers, CEOs, and other high-ranking specialized occupations. What about those of us who are not in those categories? We need jobs too! We also need to remind employers that minimum wage jobs are for people who are just starting out in the workforce, and that people such as myself who have many years in the workforce need jobs with salaries reflecting our experience and education. Where I live, a person earning minimum wage would have to work 141 hours a week to be able to afford an average apartment. The number one cause of homelessness is poverty. As for social services, dental and medical care for the poor is low quality. I went to a dentist to get a broken tooth fixed, and it was a pull or drill operation. The dentist was kind enough to smooth the rough edges of the break, but couldn’t pull it nor fill it. I’m wearing glasses I got for free, but the prescription is off, making reading difficult. Trying to get ahold of people to get things fixed is an obscene joke. My brother is an Army veteran, and all they do for his teeth is pull them–no drilling, filling or anything. I lost an uncle to colon cancer because the VA doctors told him he had “anemia”; By the time cancer was diagnosed, it was stage 4. Medical care for those who served our country is deplorable. I think politicians should be paid $1 a year, with pay raises voted on by the public. Small wonder voter turnout has been so low in recent years–people know elected officials are corrupt and never do what they promise to do, so why bother voting.

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  2.  avatarLVTfan

    Might I humbly suggest that those who want to correct the primary underlying problem look into the analysis and ideas of Henry George (b. 1839, Philadelphia; d. 1897). You might start with some of his speeches, perhaps “The Crime of Poverty” or “Thou Shalt Not Steal” and then his book of essays, entitled Social Problems, and then his landmark bestseller (with sales 2nd only to the Bible in the 1880-1900 period) “Progress and Poverty.” All are online; as is a modern abridgment of P&P by Bob Drake. Links at wealthandwant.com.

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