Monday, April 4, 2011

The Growing Wealth Gap

Huck/Konopacki Labor Cartoons
A new study by the Economic Policy Institute (EPI) found that the wealthiest 5% of American households held 63.5% of the nation’s wealth in 2009. Wealth is a measurement of net worth, or assets minus liabilities. For most of us, it is primarily a measure of our income, savings and the value of our homes minus what we still owe on our mortgages. For the wealthy, it also includes stocks, bonds, rental properties, vacation homes, boats, art, antiques, and their businesses.

Huck/Konopacki Labor Cartoons
One reason why the wealth gap has grown is that foreclosures and falling house prices have destroyed the net worth of millions of American households. The bursting of the housing bubble has caused $6 trillion in lost wealth so far, and an additional $2 trillion is still expected. Working and middle class homeowners saw large chunks of their wealth evaporate overnight.

However, the larger and less well known cause of the growing wealth gap is that U.S. productivity grew by 62.5% between 1989 and 2010, while wages only grew by 12%. Thus, the overwhelming bulk of that increased productivity went toward increased profits for business owners. We are working harder and making the rich wealthier than ever, yet our wages and living standards have remained stagnant.

Wage stagnation over the past 10 years was most prominent among high school graduates, according to the EPI report, whose wages grew by only 4.8% in the private sector and 2.6% in the public sector (compared to 19.4% for college educated workers in the private sector and 9.5% in the public sector). Furthermore, wages have been stagnating for a long time. Productivity has increased by 80% since 1979, while the hourly wage of the median worker only grew by 10.1%.

Contrary to the rants of politicians and the media, public sector workers have not been ripping off private sector workers. College educated private sector workers saw their wages increase twice as much as college educated public sector workers. College educated workers in general are not ripping off high school graduates, either. They are qualified and hired for completely different types of work. If we want to talk about ripping people off, the data clearly show that it is the wealthy who are ripping off the rest of us. 

No comments:

Post a Comment