How Unequal Are We, Anyway? A Statistical Briefing Book, July, 2004
Source: Parade Magazine, “What People Earn,” March 14, 2004.

1. Incomes in the United States have been getting more unequal since the late 1970s.

Source: Center on Budget and Policy Priorities, “The New, Definitive CBO Data on Income and Tax Trends,” Sept. 23, 2003

By 2000, the top one percent of the population was getting a bigger share of after-tax income than the bottom 40 percent. In other words, 2.8 million Americans were out-earning 110 million. 

2. It wasn't always this way.

This pattern of steadily rising inequality is a sharp departure from the experience of our parents and grandparents.

Source: Analysis of U.S. Census Bureau data in Economic Policy Institute, The State of Working America 1994-95 (M.E. Sharpe: 1994) p. 37, and U.S. Census Bureau, Historical Income Tables, Table F-3.

Source: U.S. Census Bureau, Historical Income Tables, Table F-1.

 
Source: Edward N. Wolff, "Changes in Household Wealth in the 1980s and 1990s in the U.S.," Jerome Levy Economics Institute, May, 2004.

In 2001, according to NYU economist Edward Wolff, the richest five percent of American households controlled over 59 percent of the country’s wealth; the richest 20 percent held 83 percent of the wealth; the bottom 80 percent had 17 percent; and the bottom 40 percent just 0.3 percent.

Nearly 31 percent of black households and more than 13 percent of white households had zero or negative net worth.

Source: Economic Policy Institute, The State of Working America, 2002-03 (2003), Table 7.10.

* among the developed nations

When asked to explain the inequality surge, economists often point to globalization, new technology, and other deep impersonal forces. To the obvious followup question – why is there so much more inequality here than elsewhere – many respond by citing the clubby economic arrangements of Japan and the high taxes and generous safety-net programs of much of Western Europe. By protecting the weak and restraining the strong, other nations may have achieved more equality, it is said, but they have done so at the cost of slower growth and less material wellbeing for the society at large.

This line of argument commanded international respect in the 1990s, when America’s high-flying economy seemed to leave the rest of the world in the dust. Over the long haul, however, the global evidence for a link between high inequality and high growth is shaky, and the idea flies in the face of our own experience: The U.S. economy has never grown faster than it did from 1945 until 1970, when the postwar boom lifted countless millions into a middle class that was the envy of the world.

For most middle-to-low-income families, the economic gains of the past 25 years have been modest. Even so, they have been achieved, on average, with more combined hours of work.

Those who lament the rise in inequality are often dismissed as economically naïve. They are faulted for forgetting that this is a country where, in the words of one scornful commentator, “people simply do not remain in the same top and bottom income categories over time.”

In fact, many people do. The U.S. is not only more unequal than it was (and more unequal than other countries), but less economically mobile than many have assumed. Recent estimates of inter-generational mobility are sharply lower than the consensus of two decades ago. Some researchers see evidence that mobility itself has declined, because of a proliferation of dead-end jobs and a labor market sharply divided between those who possess, and those who lack, a four-year college degree. That all-important credential, in turn, appears to have become less accessible to the children of parents who are neither wealthy nor well-educated themselves.

The immigrant success story is another economic legend that may due for reexamination. The gulf between immigrant and native-born incomes is roughly three times wider today than it was a century ago, according to the Harvard University sociologist Christopher Jencks.

"If you come here as an adult,” Jencks’ economist colleague George J. Borjas explains, “it's very hard to get more education, which is the only way to get ahead today."

Source: Anthony B. Carnevale and Stephen J. Rose, Race/ethnicity and Selective College Admissions, in Richard D. Kahlenberg, ed., America’s Untapped Resource: Low-Income Students in Higher Education (Century Foundation, 2004)

America has “an economy that is slowly stratifying along class lines,” Aaron Bernstein wrote in Business Week. “Upward mobility is determined increasingly by a college degree that's attainable mostly by those whose parents already have money or education.”

7. Class Warfare? Not!

To speak with alarm about the gulf between rich and poor (or between rich and middle; or middle and upper-middle) is to invite the charge of fomenting “class warfare.” Indeed, the question of inequality has rarely stirred much passion in America except in periods of deep discontent, and it has usually been framed as a problem of “haves” and “have-nots” or (in recent years also) “have lesses.”

These laments arise out of feelings about justice, suffering, and mutual obligation that are as old as humanity, and deserve respect rather than scorn. It is only by making a religion of the “free market” that anyone could possibly construct a reasonable-seeming justification for American-style differences in earning-power between, say, a janitor and an investment banker. But the poor are not the only victims of inequality, and the damage is not to be measured solely in material terms.

In the U.S., perhaps more than in any other prosperous society, inequality reaches into dimensions of life where most people would prefer to believe that money does not rule. The service someone receives from our education and health-care systems, to mention two large cases in point, is profoundly dependent on money and class. The economic givens of early childhood are frighteningly good predictors, in fact, not only of access to health care and formal schooling, but of lifelong health and educational attainment.

Americans’ experience with the political process is also dramatically affected by their place on the socioeconomic ladder, and here, too, the influence runs both ways. Inequality shapes the system, and the system aggravates and perpetuates inequality.

These multi-dimensional effects and feedback loops are important for what they reveal about the nature, severity, and scope of economic inequality in America. In addition, they underscore the issue’s relevance to those focused on more policy-specific problems. Your first concern may be education, health, poverty, racial justice, the workplace, the environment, or the preservation of democratic government and a strong civil society. In all these realms, recent history has taught us that the fulfillment of broadly shared ideals is going to be immensely difficult in a world of highly concentrated wealth, income, and economic power.