It's the Inequality, Stupid!

Crossposted at DKos. Graphs there are in wider format.


Updated numbers and commentary from Emmanuel Saez (h/t Krugman) reminds us just how bad things are and have been for a while.  One might hope that the current economic crisis does not divert our attention from the longer term issues.  


I would argue that pretty much all of our problems and issues, be it health care, education, environment, collapsing public infrastructure, jobs, trade, taxes, and yes right-wing populism can be directly linked to income and wealth inequality.  And the fact that inequality has gotten MUCH MUCH worse ever since 1979-1980 (I suggest looking up who became president in the United States at that time):



 


On the one hand, it is not just a U.S. story. Income inequality has risen throughout the developed world, according the OECD.

On the other hand, it is much worse in U.S. then almost anywhere else.  Out of the 30 developed nations, the U.S. is the third worst in income inequality... trailing only Mexico and Turkey:


 


(but hey, we are tied with Portugal)


 


and while inquality is increasing throughout the developed world, the rate and amount of increase is even worse in the U.S.



 


So, yes, it is not just the U.S. or only policies in the U.S. It is global phenomenon, no doubt due in part to broad forces not unique to the United States... but in addition there are probably unique U.S. policies that make it even worse here.


 


In the U.S. at least that money grab that appears to be the top 10% in the first graph, is itself mostly due to the even more disproportionate extreme money grab by the top 1%:



 


and yes, the top 0.01% is disproportionately the driver of that!



We all like to blame Bush, and much of the blame does lie in policies during that reign of error. And as I pointed out, much of it goes back to Reagan and the beginning of the aggressive era of tax cuts for the wealthy, increase in total effective taxes on middle and working class, deregulation and non-enforcement of corporate America, gutting the labor movement, failure of minimum wage and wages in general to keep pace, the growth in the money-making money FIRE economy (FIRE - Finance, Insurance, Real Estate) as exemplified by securitization and Wall Street.


But it should be noted that most national Democrats, including of course the Clinton era, have been only slightly less bad:


The OECD's key findings:



Key Findings of Growing Unequal


Why is the gap between rich and poor growing?



  1. In most countries the gap is growing  because rich households have done significantly better than middle-class and poor households.


  1. Changes in the structure of the population and in the labour market over the past 20 years have contributed greatly to this rise in inequality.


  1. Wages have been improving for those people who were already well paid.


  1. Employment rates have been dropping among less-educated people.

And, there are more single-adult and single-family households.


Who is most affected?



  1. Statisticians and economists assess poverty in relation to average incomes.


  1. Typically, they take the poverty line to be equivalent to one-half of the median income in a given country.


  1. Since 1980, poverty among the elderly has fallen in OECD countries.

By contrast, poverty among young adults and families with children has increased.



  1. On average, one child out of every eight living in an OECD country in 2005 was living in poverty.

What does this mean for future generations?



  1. Social mobility is generally higher in countries where income inequalities are relatively low.


  1. In countries with high income inequalities, by contrast, mobility tends to be lower.


  1. Children living in countries where there is large gap between rich and poor are less likely to improve on the education and income attainments of their parents than children living in countries with low income inequality.

4. Countries like Denmark and Australia have higher social mobility, while the United States, United Kingdom and Italy have lower mobility.


What can be done?



  1. In some cases, government policies of taxation and redistribution of income have helped to counteract widening inequalities, but this cannot be their only response.  


  1. Governments must also improve their policies in other areas.


  1. Education policies should aim to equip people with the skills they need in today’s labour market.


  1. Active employment policies are needed to help unemployed people find work.


  1. Access to paid employment is key to reducing the risk of poverty, but getting a job does not necessarily mean you are in the clear. Growing Unequal? found that over half of all households in poverty have at least some income from work.


  1. Welfare-in-work policies can help hard-pressed working families to have a decent standard of living by supplementing their incomes.

Needless to say, the OECD does not directly take on other issues such as "free trade" versus fair trade that include workers rights and not just the rights of capital. There is a need to raise the floor with increased miniumum wage and wage enforcement and the earned income tax, and increased progressivity of taxes with more off the top and less of the bottom.


 


Some further, incomplete thoughts...


Health:


Countries that have less income inequality also have less health disparities. Income and wealth remain, within any given country, the best single predictor of health status and longevity.  As much as I believe in single payer (and you will find my record is pretty clear on that; to same nothing of my signature line), it is also the case that the main underlying cause for why the U.S. health statistics are much worse than the rest of the developed world has more to do with the higher percentage of Americans who live in poverty than in any other developed country.


Education:


Apparently we all want more Americans to go to college. And college is too expensive.  So one proposed solution is apparently to make many more second tier colleges that are less expensive. Hmmm...


At least from my perspective growing up and then returning to have a family in New York City, there is nothing wrong with our public school system that would not be fixed by having all the children of ALL Americans go to public school. Rich and middle class and working class and poor all going to the same school.  That the upper middle class and wealthy can opt out to private schools, means that there is no serious commitment by the powerful to really address the problems.  That the rich are ever richer, while the overwhelming majority have flat-lined, just lets this disparity buy itself over and over again.


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