By Claire Kokoska
Wealth inequality in America has been steadily rising since the early 1970s. According to economists Emmanuel Saez and Gabriel Zucman, the wealthiest 0.1 percent of American families now hold more wealth than the poorest half, and the wealthiest 1 percent hold more wealth than the bottom 90 percent.
To clarify, I will be focusing on wealth inequality rather than income inequality, though both are extremely troubling. While wealth is a measure of one’s liabilities (debts, unpaid loans, etc.) subtracted from one’s assets (home, car, business, etc.), income is a measure of one’s earnings from labor or capital over a certain period of time, typically one year. Over time, huge disparities in wealth are far more detrimental than income inequality, and the effects are more enduring.
The Great Recession severely aggravated that wealth gap. From 2007 to 2013, middle-income families have lost 39 percent of their wealth ($158,400 to $96,500) while lower-income families have lost an appalling 48 percent of their wealth ($18,000 to $9,300).
Throughout the recovery, all three categories of economic stature lost some of their wealth, but upper-income families have regained a good deal of their wealth. Though upper-income families’ wealth initially declined 17 percent ($718,000 to $595,300) from 2007 to 2010, it recovered slightly over the next three years, making their total loss only 10.9 percent. In comparison, the atrocious loss of wealth within the middle and lower-income families has proven catastrophic.
In 2013, 21 percent of families fell into the upper-income category, while 46 percent were classified as middle-income and the remaining 33 percent were classified as lower-income. The average upper-income family’s wealth remained at $639,400, which is roughly seven times more than the average middle-income family’s wealth, at $96,500. And the median net worth of upper-income families is 70 times greater than the average net worth of lower-income families.
While upper-income families have essentially doubled their wealth since 1983, middle- income family wealth has been kicked back to mid-1990s levels, and lower-income families are worse off than they were in the late 1970s.
Great Recession or no, clearly there is a serious issue with the distribution of wealth recuperation. How can the lowest earners have lost nearly half of their meager wealth while the upper income has already regained 36 percent of their losses? That is absolute insanity. In addition to the dismal figures, wealth inequality has doubled. The highest earners now have more than 68 times the wealth as the lowest earners, a jump from 40 times in 2007 before the market crashed.
In addition to the Great Recession, other contributors to the increasing wealth inequality include the climbing costs of housing, healthcare and college tuition, paired with a higher prevalence of predatory lending. Further, the more systemic causes of rising wealth disparity involve a poor commitment to quality education, enormous spikes in executive compensation, less progressive tax policy, shipping of manufacturing jobs overseas, crack-down on unionization, stagnant real wages, outsourcing of both blue- and white-collar jobs and an inability for most Americans to save for their futures.
One might ask, what is harmful about wealth inequality? Not only does wealth disparity destroy intergenerational socioeconomic mobility — the poor stay poor — but it also causes lasting damage to those with the least wealth.
Wealth disparity allows those at the top to collect wealth over several generations, while those who began at the bottom can only scrimp and hope to have enough to fulfill their basic needs. Wealth inequality ravages those at the bottom. Economic insecurity is directly correlated with depression, alcoholism, obesity, smoking, drug use, gambling and minor criminality.
Given that most Americans have lost a sizable portion of the wealth that gave them some semblance of financial security, is it not in the best interest of the entire populace to diminish the current levels of wealth inequality?