{"id":169158,"date":"2020-09-28T12:00:23","date_gmt":"2020-09-28T11:00:23","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=169158"},"modified":"2025-01-10T15:09:05","modified_gmt":"2025-01-10T15:09:05","slug":"study-inequality-robs-2-5-trillion-from-u-s-workers-each-year","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2020\/09\/study-inequality-robs-2-5-trillion-from-u-s-workers-each-year\/","title":{"rendered":"Study: Inequality Robs $2.5 Trillion from U.S. Workers Each Year"},"content":{"rendered":"
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A better world would be possible. Photo: Spencer Platt\/Getty Images<\/p><\/div>\n

14 Sep 2020 – <\/em>Every few months, some group of socially conscious number crunchers will remind <\/a>Americans that a tiny elite is binge-eating the nation\u2019s economic pie while the rest of us plebeians fight over table scraps. Journalists will then aggregate eye-popping statistics<\/a> and edifying charts, progressives will share these over social media, adorned with red-faced (and\/or guillotine) emoji \u2014 and the moral arc of history will carry on bending toward neofeudalism<\/a>.<\/p>\n

So, in the present moment of booming stock markets and child hunger<\/a>, you might be feeling too inured to America\u2019s grotesque levels of inequality to summon much interest in yet another report testifying to the one percent\u2019s total victory in the 50 Years Class War<\/a>.<\/p>\n

But a new study<\/a> from the Rand Corporation, in partnership with the Fair Work Center<\/a>, illustrates the impact of a half-century of upward redistribution in bracingly concrete terms: If income had been distributed as evenly over the past five decades as it was in 1975, the median full-time worker in the U.S. would enjoy annual earnings of roughly $92,000 a year. As is, that worker makes just $50,000.<\/p>\n

It\u2019s no secret that wage and productivity growth began decoupling in the 1970s. Charts like this one from the Economic Policy Institute <\/a>have been ubiquitous in progressive economic policy debates since the Great Recession:<\/p>\n

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Chart: Economic Policy Institute<\/a><\/span><\/div>\n<\/div>\n

But RAND\u2019s innovative methodology \u2014 which involved constructing a new metric for inequality that compares income growth to GDP, and then using that metric to gauge changes in the income distribution across every U.S. business cycle since 1975 \u2014 allowed it to translate the abstractions of macro-level income shares into something much more tangible. Between the mid-1970s and 2018, per capita GDP growth in the U.S. increased by 118 percent. Had income growth on every rung of America\u2019s class ladder kept pace with those gains, annual earnings at the bottom would be nearly twice as high as they are now. Meanwhile, the bottom 90 percent of U.S. earners would collectively take home $2.5 trillion more in income each year.<\/p>\n

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Graphic: RAND Education and Labor<\/span><\/div>\n
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The 1970s were a pivotal decade. Graphic: RAND Education and Labor<\/span><\/div>\n<\/div>\n

There are a few significant limitations to RAND\u2019s data. Chief among these is that the study only measures taxable income, which does not capture any potential increase in non-monetary forms of compensation, such as health-care benefits. There is no question that such perks make up a larger share of labor\u2019s compensation today than they did in 1975. That may say more about runaway rent-seeking <\/a>in America\u2019s health-care system than it does about worker\u2019s true income gains. But a perfect<\/em> apples-to-apples comparison would take note of the value of benefits.<\/p>\n

Separately, it seems likely that had America\u2019s income distribution held constant since 1975, inflation would have been much higher in recent decades \u2014 and thus, \u201c2018 dollars\u201d in the counterfactual universe would be worth less than they are in our own. The reason for this is simple: Rich people have a lower propensity to consume each additional dollar of income than working people do. Thus, if you concentrate income gains among the rich, the bulk of those dollars will be invested; which is to say, they will be used to bid up the prices of stocks and real-estate. If you concentrate income gains among workers, meanwhile, the bulk of those gains will be spent on goods and services, thereby bidding up consumer prices.<\/p>\n

This is a crucial part of the inequality story in the United States. Under Paul Volcker\u2019s leadership, the Federal Reserve consciously sought <\/a>to overcome the high inflation of the late 1970s by breaking the bargaining power of U.S. workers, and reducing labor\u2019s share of income. Thanks to the Reagan revolution, among other things, the central bank accomplished this objective too well. Now, instead of contending with inflationary pressures, the Fed must make increasingly audacious interventions in capital markets to ward off the perennial threat of consumer price deflation<\/em><\/a> \u2014 even as asset prices rise to evermore spectacular highs.<\/p>\n

Nevertheless, RAND\u2019s projections remain a useful approximation. Although the income distribution it posits would probably<\/em> be one more vulnerable to inflation, it would also probably be more conducive to economic growth. In 2014, OECD economists estimated that increases in income inequality had reduced U.S. GDP growth by as much as 8 percentage points<\/a> over the preceding two decades.<\/p>\n

Further, if we acknowledge that economic power is easily translated into the political variety, it seems likely that in RAND\u2019s counterfactual universe, ordinary Americans would enjoy more generous social benefits and workplace protections than they do in our dimension.\u00a0Thus, even if we stipulate that a more equitable income distribution would mean a weaker dollar in 2018, it\u2019s possible that RAND\u2019s counterfactual underestimates<\/em> what the real value of the median workers\u2019 annual income would have been under such a distribution.<\/p>\n

Regardless, the paper makes the radical regressivism of the contemporary U.S. political economy plain to see. Progressives often mock nostalgic invocations of some bygone golden era in American life, noting that the postwar period was less than \u201cgreat\u201d for Black Americans in the Jim Crow South, or women trying to make a place for themselves in the professions. And this allergy to white male-centric nostalgia has much to recommend it. But it is also the case that the first three decades after the Second World War witnessed a degree of shared prosperity that was never seen before or since. And if the income distribution of 1975 had been maintained over the ensuing decades, according to RAND\u2019s methodology, wages for most Black workers would be nearly twice as high as they are now.<\/p>\n

Actually-existing America has a lot of problems, many of which cannot be reduced to questions of economics or class power. But it is hard not to suspect that most of our nation\u2019s troubles would be less<\/em> severe, if America\u2019s working-class had an extra $2.5 trillion to spend each year.<\/p>\n

Go to Original – nymag.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

14 Sep 2020 – Every few months, some group of socially conscious number crunchers will remind Americans that a tiny elite is binge-eating the nation\u2019s economic pie while the rest of us plebeians fight over table scraps. Journalists will then aggregate eye-popping statistics and edifying charts, progressives will share these over social media, adorned with red-faced (and\/or guillotine) emoji \u2014 and the moral arc of history will carry on bending toward neofeudalism.<\/p>\n","protected":false},"author":4,"featured_media":169162,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[65],"tags":[867,232,610,1624,2059,996,1213,70],"class_list":["post-169158","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-anglo-america","tag-anglo-america","tag-capitalism","tag-inequality","tag-mafia","tag-organized-crime","tag-poverty","tag-super-rich","tag-usa"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/169158","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=169158"}],"version-history":[{"count":1,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/169158\/revisions"}],"predecessor-version":[{"id":284777,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/169158\/revisions\/284777"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media\/169162"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=169158"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=169158"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=169158"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}