When Bootstraps Don’t Work.
Have you ever wondered what inequality costs the average American family?
That is, what price do we pay — in actual dollars and cents — for
tolerating an economy fixated on pumping our treasure to the top?
That question has no simple answer.
How much, for instance, should we value an added year of life? We
know — from hundreds of research studies over the years — that people
live longer, healthier lives in more equal nations.
We
also know
that more equal societies have lower levels of mental illness, higher
levels of trust, and fewer teenage pregnancies and homicides. Placing
dollar signs on quality-of-life indicators like these can get
complicated.
On the other hand, dollar signs do come easy when we're talking about income and wealth.
The Economic Policy Institute has gone through one exercise along
this line. How much income would middle-class Americans be making today,
EPI researchers asked, if the United States had the same distribution
of income now as our nation had back at the end of the 1970s?
The difference between now and then could hardly be starker. Since 1979, households in America's top 1 percent have
more than doubled their share of the nation's income, from 8 to nearly 20 percent.
What if this increase in inequality had never happened? What if
middle-class households were taking in the same share of the nation's
income they took in four decades ago?
EPI
focused its calculations
on 2007, the last year before the Great Recession. In that year, the
average middle-class income in the United States — that is, the average
for the middle 60 percent of American households — amounted to $76,443.
If America had been as equal in 2007 as it was in 1979, that average
income would have been $94,310. In other words, inequality is costing
the average American family about $18,000 a year.
But the global economy, some might argue, has changed fundamentally
over the past four decades. Simple comparisons of then vs. now, they
say, no longer tell us much.
For argument's sake, let's accept this rather dubious claim — and
make a different comparison. Let's contrast the wealth of ordinary
Americans today with the wealth of ordinary people in a more equal
country.
France makes for a good comparison. France and the United States, the Swiss bank Credit Suisse
reported last fall, have about the same total wealth per adult.
If you divide the wealth of the United States by our adult
population, that is, you end up with $347,845 per adult. If you do the
same for France, you end up with $317,292 per adult.
Total equality, of course, reigns in neither France nor the United
States. But if both nations divvied up their wealth on a totally equal
basis, the average American would have slightly more wealth than the
average person in France.
What do we actually see?
In France today, "median" adults — those with more wealth than the
poorest half of France's adult population but less wealth than the
richest half — have $140,638 in net worth to their name. In the United
States, by contrast, median adult wealth stands at a mere $53,352.
The bottom line? If the United States had as equal a distribution of
wealth as France, typical American adults today would have almost triple
their current net worth.
So how much does inequality cost America's middle class? More than we realize. Much more.
