Evidence continues to build regarding the growth and persistence of inequality in America. The Pew Research Group, one of the nation’s most trusted sources on social and demographic trends, has published a sobering report that illustrates the disparity of the economic recovery: not only were poor and middle-class people disproportionately affected by the recession, but they’ve since been disproportionately disadvantaged in the recovery (indeed, even among the wealthiest Americans, the super-rich outpaced the “average rich”). Continue reading
The US Census Bureau has released some recent data on the rate of poverty in America, and to no one surprise, the results are quite grim:
In total, more than 15% of the population lived in poverty in 2010, the highest percentage since 1993, according to the most recent data from the Census Bureau. To put that in perspective, that means more than 46 million people fell below the poverty line, defined as $22,314 for a family of four. If you factor in the income spent on expenses like medical costs, child care and mortgage payments, the number of Americans whose remaining income falls below the poverty line is closer to 50 million, or roughly 16% of the population.
As severe as this sounds, some regions in the U.S. are much worse off. In November, the census released a breakdown of the poverty rate in every county in the U.S. in 2010, which showed dozens of counties where more than a third of the population lives in poverty and a handful whose overall poverty rates were closer to 50%.
The majority of these countries are composed of minorities, namely African-Americans and Native Americans. Indeed, contrary to popular belief, the latter group is the most impoverished minority in the United States. Many Indian reservations have been described as having a rate of development equal to third world countries, including a lack of plumbing, sanitation infrastructure, or arable land.
But given the psychological and geographic distance that Native Americans have from the rest of the country — and the pervasive myths about them being non-taxpayers rolling in casino money — this is hardly acknowledged, let alone addressed. If close to 20% of the population being impoverished doesn’t seem to garner much political or public agitation, what more will it take?
The rise and intensity of socioeconomic inequality in the US seems to be getting more attention, and for good reason — as the following video shows, the problem is far worse and more consequential than most Americans realize.
For those concerned about the reliability of such claims, or looking for additional information, the sources are as follows:
Of course, you’re also free to read my long list of posts on the subject. As you can tell, it’s a topic close to my heart (though honestly, even I didn’t realized how much I’d written about it over the past year).
As always, please share your thoughts and concerns. Even if I don’t get around to responding, rest assured that I do read every comment I receive.
One of the worst things about poverty and inequality, besides the obvious suffering caused to the victim, is the wider consequence to society and human progress — the squandered talent, the unfulfilled dreams and ambitions, and untapped creative energy of millions of potential scientists, artists, public servants, and innovators.
When I think about the mass numbers of impoverished and marginalized people, both here and around the world, I ask myself: what could they be, were they given the chance to fulfill their dreams? How many visionaries are there among them? How many future inventions and innovations are being unrealized due to a lack of access to educational resources?
This recent musing was triggered by yet more research I encountered, courtesy of the New York Times, that makes it depressingly clear just how unequal and inefficient our educational system is at harness the brain power of the bulk of our population — not just the poor, but increasingly even the middle-class.
Most low-income students who have top test scores and grades do not even apply to the nation’s best colleges, according to a new analysis of every high school student who took the SAT in a recent year.
The pattern contributes to widening economic inequality and low levels of mobility in this country, economists say, because college graduates earn so much more on average than nongraduates do. Low-income students who excel in high school often do not graduate from the less selective colleges they attend.
Only 34 percent of high-achieving high school seniors in the bottom fourth of income distribution attended any one of the country’s 238 most selective colleges, according to the analysis, conducted by Caroline M. Hoxby of Stanford and Christopher Avery of Harvard, two longtime education researchers. Among top students in the highest income quartile, that figure was 78 percent.
The findings underscore that elite public and private colleges, despite a stated desire to recruit an economically diverse group of students, have largely failed to do so.
Instead, the majority of bright low- and mid-income students opt to go to local community colleges or four-year institutions, which wouldn’t be an issue if those schools were actually able (or willing) to provide a proper avenue to success.
Whatever the reasons, the choice frequently has major consequences. The colleges that most low-income students attend have fewer resources and lower graduation rates than selective colleges, and many students who attend a local college do not graduate. Those who do graduate can miss out on the career opportunities that top colleges offer.
Furthermore, one’s alma mater plays a major role in determining the likelihood of getting a job. Even a good-quality but lesser known school can’t match up to the prestige and edge offered by an institution with a household name. And because a disproportionate number of elite alumni are most likely to be employed in certain careers or organizations, there develops an entrenched bias in the system.
The article goes on to note that there may be more pressure placed upon elite schools to be more welcoming to non-wealthy/non-connected students. Unfortunately, I don’t see much likelihood of there being significant change without major legislation and/or social unrest.
Another concern about this unequal system is the impact it will have on the direction of our society — if the majority of our nation’s politicians, businessmen, scientists, and leaders are coming from the same small class of wealthy people, what impact will that have? The people that have the most influence in politics, economics, policymaking, and the like will reflect a very narrow and relatively cloistered minority of individuals, often coming from the same families generation after generation. I don’t think that will bode well for developing the sort of broad-based solutions and leadership this country desperately needs.
There is yet more evidence that our economy has become a zero-sum affair, where the growth of corporate profits (and by extension the coffers of the elites) come at the expense of average workers.
With the Dow Jones industrial average flirting with a record high, the split between American workers and the companies that employ them is widening and could worsen in the next few months as
That gulf helps explain why stock markets are thriving even as the economy is barely growing and unemployment remains stubbornly high.
With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers.
“So far in this recovery, corporations have captured an unusually high share of the income gains,” said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. “The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist.”
The result has been a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India.
These factors, along with the Federal Reserve’s efforts to keep interest rates ultralow and encourage investors to put more money into riskier assets, prompted traders to send the Dow past 14,000 to within 75 points of a record high last week.
While buoyant earnings are rewarded by investors and make American companies more competitive globally, they have not translated into additional jobs at home.
And why not? There is plenty of money to go around. Companies can well afford to hire new workers and pay their current ones better, and still have plenty of profits left over for their CEOs and shareholders.
As a percentage of national income, corporate profits stood at 14.2 percent in the third quarter of 2012, the largest share at any time since 1950, while the portion of income that went to employees was 61.7 percent, near its lowest point since 1966. In recent years, the shift has accelerated during the slow recovery that followed the financial crisis and ensuing recession of 2008 and 2009, said Dean Maki, chief United States economist at Barclays.
Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.
“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.
The problem is simple: corporations don’t want to to pay their workers better because their standards of sufficient wealthiness are getting ever higher. Business elites are finding their growing appetites for money ever more difficult to satiate. It used to be that making a million or so dollars was more than sufficient — but nowadays, it seems every executive wants tens of millions, if not hundreds of millions, and their shareholders and board members are no better.
When a handful of people want more and more money, the natural consequence is to make cuts (e.g. layoffs, benefits, hours) and withhold investment (e.g. raises and benefits). Otherwise, where else will all this money come from? Consider the following case in point:
“Right now, C.E.O.’s are saying, ‘I don’t really need to hire because of the productivity gains of the last few years,’ ” said Robert E. Moritz, chairman of the accounting giant PricewaterhouseCoopers.
At 218,300 employees, United Technologies’ work force is virtually unchanged from seven years ago, even though annual revenue soared to $57.7 billion in 2012 from $42.7 billion in 2005.
The relentless focus on maintaining margins continues, even though profit and revenue have never been higher; four days after the company’s shares soared past $90 to a record high last month, United Technologies confirmed it would eliminate an additional 3,000 workers this year, on top of 4,000 let go in 2012 as part a broader restructuring effort.
“There’s no doubt we will continue to drive productivity year after year,” Mr. Chenevert said. “Ultimately, we compete globally.”
And that last sentence denotes a bit part of the problem: even if a company’s executive or board wants to be ethical and pay their workers better, they’ll come under relentless pressure by investors and shareholders to provide a bigger return on investment. Competition is cutthroat and no-holds-barred, and this country’s particular hyper-individualism and dog-eat-dog mentality only makes it worse. There is no sense of social obligation — it’s all about the bottom line and how much one can make for themselves, regardless of the costs to others, the environment, or society as a whole.
Our culture and attitudes need to change. How to do so is a different story altogether.
It’s been calculated that the total number of humans that have ever lived was around 107 billion. By comparison, note that as of 2013, there are a little over 7 billion people alive right now, the highest amount of humans that has ever lived at one time.
To get a grasp of how long it’s taken us to get here, consider that we only hit our first billion around the mid-19th century. So our population has increased seven-fold in a little over 150 years, owing to a convergence of advancements in agriculture, medicine, public health, and sanitation.
But most of these 7 billion people — like most humans that have ever lived at any time — are mired in poverty, disease, insecurity, and tyranny. The overwhelming majority of them will never know any other existence but one of struggle — and incredibly, this is a measure of progress, because for as long as this species has been around, anywhere from 80 to 90 percent of a given population was composed of serfs, peasants, and slaves — people without political or economic power, and thus without the subsequent comforts that such things bring.
It wasn’t even that long ago when only 1 to 5 percent of people in the most industrialized countries managed to obtain secondary education, and this remains the case in many poor countries today.
Therefore, those of us reading this status update represent an incredibly miniscule fraction of our species that is literate, relatively well-off, and most likely to live a long and comfortable life, comparatively-speaking. By a mere accident of birth, we’re exceptionally lucky and exceptionally rare. We know and enjoy things that most humans never had the chance to, and that the overwhelming majority of our species still remains without.
It’s sometimes difficult to grasp my level of privilege, and how fortunate I am, by mere random chance, to have this life. We’re only given one shot at existence, and mine just happened to emerge at the right time and place. I must never forget that. I must never squander the subsequent resources of my privilege. With this advantage, which I am no more deserving of than the billions of other people who live (or have lived) on this Earth, I must do my best to be good and just and beneficial to the world.
By combining Google Maps with Census Data about household income, one can see a very vivid picture of what inequality looks like from a satellite view. Click the title link to see some of the sample cities – if you don’t see your own check out Rich Blocks, Poor Blocks to find it.
Measuring the prosperity of entire nations is no easy feat. The amount of data and research required is vast, and there are always concerns about methodology, subjectivity, and even conflicts of interest. Luckily, many different organizations – ranging from think-tanks and institutes, to publications and and nonprofits – have taken up the task, therefore providing us with a rough aggregate to work with.
So while the results will likely always be contentious, they’re likely to be as close to accurate as we’ll ever come (though methods are being improved upon each year). Below are some of the most up-to-date and popular indexes that purport to measure overall prosperity:
Forbes, a prominent business magazine, published a report on the world’s best countries to do business in. Nations were measured in 11 different factors obtained from 9 different sources. The countries are as follows:
- New Zealand
- Hong Kong
- United Kingdom
The US places 12th, after Australia. This isn’t too bad, but it’s down from 10th place last year. Note how the majority of the countries at the top have such policies as high income taxation, subsidized education, and universal healthcare. The article details how some of them pull if off.
Meanwhile, the Legatum Institute, an international investment organization based in Dubai, has recently published its Prosperity Index for 2012, which is based on 89 different variables analysed across 141 nations around the world. Similar to the Forbes report, its source data includes Gallup World Poll, WTO, World Development Indicators, GDP, World Intellectual Property Organization, UN Human Development Report, World Bank, OECD, and World Values Survey. The 89 variables are grouped into 8 sub-indexes – such as education, health, and governance – which are averaged using equal weights. Their result was as follows:
- New Zealand
- The Netherlands
As in the previous list, the US didn’t do too badly, also ranking 12th place. But arguably, for a country of such tremendous capital, innovation, and technology, we could do better.
Finally, the World Economic Forum has released its Global Competitiveness Report for 2012 to 2013 (in case anyone is wondering, the start of each new year is when all these indexes tend to get published). According to the WEF, the report “assesses the ability of countries to provide high levels of prosperity to their citizens. This in turn depends on how productively a country uses available resources. Therefore, the Global Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity.”
The study is quite extensive, being made up of over 110 variables, of which two thirds come from the Executive Opinion Survey, and one third comes from publicly available sources such as the United Nations. The variables are organized into twelve pillars, with each pillar representing an area considered as an important determinant of competitiveness.
Because it seems to prefer dividing countries by quartiles, this list ranks the top 30 (courtesy of Wikipedia).
- Switzerland 5.72 (—)
- Singapore 5.67 (—)
- Finland 5.55 (+1)
- Sweden 5.53 (-1)
- Netherlands 5.50 (+2)
- Germany 5.48 (—)
- United States 5.47 (-2)
- United Kingdom 5.45 (+2)
- Hong Kong 5.41 (+2)
- Japan 5.40 (-1)
- Qatar 5.38 (+3)
- Denmark 5.29 (-4)
- Taiwan 5.28 (—)
- Canada 5.27 (-2)
- Norway 5.27 (+1)
- Austria 5.22 (+3)
- Belgium 5.21 (-2)
- Saudi Arabia 5.19 (+1)
- South Korea 5.12 (+5)
- Australia 5.12 (—)
- France 5.11 (-3)
- Luxembourg 5.09 (+1)
- New Zealand 5.09 (+2)
- United Arab Emirates 5.07 (+3)
- Malaysia 5.06 (−4)
- Israel 5.02 (-4)
- Ireland 4.91 (+2)
- Brunei 4.87 (—)
- China 4.83 (-3)
- Iceland 4.74 (—)
In this case, the US seems to fare much better than in the other reports, and even China – which is usually a slouch in such indexes – does relatively well. Meanwhile, countries like New Zealand, Australia, and Norway – which had all topped the prior indexes – rank relatively low. Take that as you will.
Finally, there is much-cited Human Development Index, undertaken by the United Nations Development Programme. The HDI is composite statistic of life expectancy, education, and income indices that ranks countries into four tiers of human development. Unfortunately, the 2012 report isn’t available yet, but rather than wait on that, I’ll share 2011 for now. It also works through quartiles, so here are the top 47 out of nearly 200 countries (again, courtesy of Wikipedia):
Now, take into account that the standard HDI doesn’t factor in inequality, and the fact that many people in a given country don’t have access to the resources present. Here’s what happens when HDI is adjusted for inequality. The loss in percentage points due to inequality are also noted.
|45||Bosnia and Herzegovina||0.649||0.733||11.6||7|
|46||Trinidad and Tobago||0.644||0.760||15.3||-2|
Pretty interesting stuff, eh?
This exemplary human being has given away over $9,000 he’s collected through panhandling to a fellow homeless mother and child. When many better off people can’t be bothered with giving the less fortunate the time of day, a man who is scarcely getting by still find the means and the love to give to others. This is a very inspiring story. I especially like the news anchors statement towards the end.
Hat tip to my friend Ray for sharing this with me.
The data in question can be seen here. I understand that the Economic Policy Institute (EPI) is considered a left-leaning think tank, but regardless of its slant, I’ve yet to see this data disputed. From what I’ve read, the raw data pretty much confirms what most people are observing anecdotally: that our once widely-perceived meritocratic and classless society is becoming socioeconomically stratified like never before. Even the tax-heavy social democracies we regard as anti-business and “socialist” offer greater opportunities for upward mobility (as I discussed in a previous post).
A HuffPo piece that cites the article adds further detail (emphasis mine):
Income inequality between CEOs and workers has consequently exploded, with CEOs last year earning 209.4 times more than workers, compared to just 26.5 times more in 1978 — meaning CEOs are taking home a larger percentage of company gains.
That trend comes despite workers nearly doubling their productivity during the same time period, when compensation barely rose. Worker productivity spiked 93 percent between 1978 and 2011 on a per-hour basis, and 85 percent on a per-person basis, according to the Federal Reserve Bank of St. Louis.
Meanwhile, workers saw their inflation-adjusted wages fall in recent years as corporations postponed giving raises while adding to their record corporate profits.
Certainly, there are many reasons why our economy is faltering, but it seems that a major factor is the increasingly greedy and predatory nature of America’s business culture. Profits for most companies are at record highs, yet so too is unemployment.America has one of the lowest minimum wages in the developed world, while also having the highest proportion of its workforce employed in low-wage jobs, yet still many businesses – often the most profitable ones – continue to cut benefits, freeze wages, and work their employees harder. Companies are no longer investing in their workers.
These same self-entitled business elites crow for small government and the free-market; but in essence, they’re undermining their own ideology. If they want low taxes and less state involvement in the economy, then they must step up their social responsibility. If people got paid better, they wouldn’t need to rack up private debt or fall back on government programs to get buy. East Asian countries can get away with low taxes and low public spending partly because their communitarian societies, for the most part, take care of each other. It’s not a perfect arrangement, obviously, but it’s something to consider.
Whatever the case may be, this arrangement cannot lot. As history has shown time and again, a society cannot sustain such vast inequities – and the social dysfunctions that emerge as a result – for very long.