Since 1979, income growth has risen at a faster rate for the country’s richest 1% — while only modestly growing for the bottom 99%. In other words, the American inequality problem is very real.
According to the Economic Policy Institute, the top 1% of wage earners saw their incomes increase by more than 153% between 1979 and 2012. In the same period, the bottom 99% only saw wage growth of just over 17%.
A chart from Deutsche Bank Chief International Economist Torsten Slok puts this into perspective:
In 2013, the top 1% of families earned more than 25 times as much as the other 99% of households, according to an EPI study. Those figures increase to 40 times in the states of New York, Connecticut, and Wyoming.
The top 1% also captured 85% of post-recession income growth from 2009 to 2013, according to the report. In some states, they recovered 100% of those gains.
Inequality ‘shot up to 20% in the United States’
The 2018 World Inequality Report by World Inequality Lab shows that while wealth inequality is not unique to the United States, it is much worse compared to other Western nations. While inequality has grown globally, it has increased “rapidly” in the United States, and only “modestly” in Europe, the report says.
“While the top [one-percenters’] income share was close to 10% in both regions in 1980,” the report says, “it rose only slightly to 12% in 2016 in Western Europe, while it shot up to 20% in the United States.”
“Meanwhile, in the United States, the bottom [50-percenters’] income share decreased from more than 20% in 1980 to 13% in 2016.”
The report blames the income-inequality trajectory on “massive educational inequalities” and a tax system that “grew less progressive” despite a large uptick in executive compensation and top capital incomes.
So what can be done to fix the problem? Many point to wage growth and proportionate executive compensation as policies to reduce income inequality in the U.S.
According to EPI, “we need policies that return the economy to full employment, return bargaining power to U.S. workers, and reinstate the cultural taboo on allowing CEOs and financial-sector executives at the commanding heights of the private economy to appropriate more than their fair share of the nation’s expanding economic pie.”
Follow Kristin Myers on Twitter @kristinreports