Inequality: A Tale of Two One Percents, the High and the Low
By Ben Leet / Economics without Greed.
It is instructive to view the entire spectrum of wealth and income, between individuals and nations. About half of humanity live on less than $5 a day, according to the Pew Research Center. In the U.S. the average income per day per capita is $121, but half of the population have daily incomes below $60. The wealth disparities are much greater. It’s becoming quite obvious that our global and national societies experience extreme inequalities. On viewing the extremes the issue of moral unacceptability comes into focus along with the concern about social cohesion. Fairness is crucial to cohesion and well-being, we are moral beings. Extreme differences create a toxic atmosphere of distrust, and danger. I’ll try to explain conditions in the U.S. between the two extremes, the lower and upper one percents, and relate them to the medians and averages of wealth and income.
Wealth: $400,000 is approximately the average net worth of each adult citizen in the U.S.A. But “average” is very deceptive. Only about 12% of adults are “average” or above. The wealthiest 1% of households own 42.1% of all household net worth, states one report. The lower-saving half of households own only 1.1% of net worth, states another report. The difference in savings between a 1% household and a lower-half household is almost 2,000 times. The median adult owns $44,977, or 11% of the average, states the Credit Suisse Bank report, Global Wealth Report. The Federal Reserve’s report on household well-being says that 44% of adults surveyed cannot pay an emergency $400 expense within a 30 day period. No savings. Since 2009 total household net worth has increased by 71%, from a nominal $48.4 trillion to $94.8 trillion. In other words, since the financial sector self-destructed in 2008, throwing millions out of work and causing millions to lose their homes, the wealthiest have amassed 71% more in net worth. This economic model is now facing rejection from populations in the U.S. and in Europe.
Income: $90,000 is the average (again average) income per worker if we divide the national income with the number of workers in 2015. But only 56% of the yearly national income is derived from salary and wages. Workers of course earn “wage income”. The Social Security Administration report shows that the lower-earning half, or 80 million workers, had income below $30,000; their average income was under $13,000; and their collective wage income was less than 8% of total national income. But since workers are often married, and perhaps they receive pension income, Social Security and other incomes, collectively the lower 50% of tax filers receive 16% of all income, about a sixth of total income. The average annual income for 2.3 million adults in the top one percent is $1.3 million (and that doubles to $2.6 million in a married couple household). The yearly income for the lower 2.3 million adults: under $1,000 a year, $2 a day. One report shows that in the 35 years from 1980 to 2015, the income of the lower half of U.S. adults increased by 1%, and for the top 1% it has tripled, and the gap is 81 times. This is a profile of an economic model facing rejection.
A recent book, $2 a Day: Living on Almost Nothing in America, states, “the number of American families living on $2.00 per person, per day, has skyrocketed to one and a half million American households, including about three million children.” This is one percent of all households, the lower one percent. The authors published an article in Pathways, the magazine from Stanford University’s Center on Poverty and Inequality, and it states, “This figure shows that the number of households living on $2 or less in cash income per person per day in a given month increased from about 636,000 in 1996 to about 1.65 million in mid-2011 . . . In mid-2011 about 3.55 million children lived in extreme poverty in a given month.” The authors chose 1996 because it marks when “welfare as we know it” was dismantled. This resulted in creating perhaps 5 million citizens living in extreme poverty, cashless. The total in 2011 of 3.55 million extremely poor children is just under 5% of all children, one of every 20, a horrifying American distinction.
A line-up of the spectrum of daily incomes shows the enormous range our society has created.
The top one percent earn far more than other earners.
1% at the top — $3,561 per day per adult, ($1.3 million per year) and double
if a married couple
1% at the bottom — $2 a day, perhaps as high as $6 a day with children
BEA average income — $184 a day per adult, derived from BEA total income of $16.2 trillion
Median family income — $114 a day per adult in a typical four person family in 2015, $83,617
Median cost of living — $87 a day per adult in a four person family living in the median cost
U.S. location, Des Moines, Iowa, $31,755 annual income per adult
The median income is 31% above median expenses, a good sign.
Official Poverty level — $34 a day per adult in a four person household, under half the median
expenses. SPM records 15% of U.S. population in poverty.
140% of poverty — $47 a day per adult in a four person household, about 25% of the BEA
average adult income. In 2011 some 30% of
Americans lived below 140% of poverty. The author of the
Supplemental Poverty Measure, U.S. Census, stated that this was
insufficient to achieve a “safe and decent” standard of living.
We are not without solutions to inequality, but we are bereft of conversation, information and political will. We have abundant prosperity, it is time we shared it.
This essay is also published at Economics Without Greed, http://benL8.blogspot.com. View the source documentation for the facts mentioned.
(Author: Ben Leet —- reply to [email protected])