The gap between the rich and the poor in America has ballooned over the last several decades.
In 2015, the top 1% of Americans made 26.3 times as much income as the bottom 99 percent — an increase from 2013, when they earned 25.3 times as much, according to a recent study released by the Economic Policy Institute, a left-leaning Washington, D.C. think tank.
A family needed an annual income of $421,926 to be part of the 1% nationally, the study said, but in some states the threshold was higher. The top 1% of Americans took home more than 22% of all income in 2015, the study found. That’s the highest share since a peak of 23.9% just before the Great Depression in 1928.
The fortunes of people like Bezos and those made on Wall Street, in Hollywood and Silicon Valley fuel much of wealth inequality in the U.S., but the issue affects most of the country, the report showed. The incomes of the top 1% grew faster than the bottom 99% in 43 states between 2009 and 2015. In nine states in the U.S., the top 1% represents more than half of all income growth.
Meanwhile, the median net worth of Americans currently hovers at $68,828 per household. One in five Americans say they have more credit-card debt than they do in emergency savings and less than 40% of Americans say they have enough savings to cover a $1,000 emergency room visit or car repair.
“Rising inequality affects virtually every part of the country, not just large urban areas or financial centers,” said Estelle Sommeiller, a socio-economist at the Institute for Research in Economic and Social Sciences in France and author on the study. “It’s a persistent problem throughout the country — in big cities and small towns, in all 50 states. While the economy continues to recover, policy makers should make it a top priority to grow the incomes of working people while reining in corporate profits.”
The EPI — a liberal nonprofit associated with the labor movement — recommends returning bargaining power to U.S. workers, increasing political participation by all citizens, and boosting public investments in child care, education, housing and health care. “Such policies will help prevent the wealthiest few from appropriating more than their fair share of the nation’s expanding economic pie,” Sommeiller said.
Such ideas have gained popularity as the 2018 midterm elections approach, with New York’s Alexa Ocasio-Cortez winning an upset victory in June’s Democratic primary in New York’s 14th congressional district running on a platform of Medicare for all and reining in Wall Street. She also supports the idea of a government program guaranteeing paid jobs for anybody who wants one. Critics say such policies are ill-conceived and will “bury us in debt.”
Another theory on the cause of the rising inequality: The decline of unions, according to a study released by the EPI in August 2017. Today, only 11% of American workers are covered by unions, which is a sharp contrast from the 1950s when a third of the U.S. workforce was unionized or in a job represented by a union. Union workers these days earn on average 13.2% more than non-unionized workers with similar education and experience in the same sector.
Get a daily roundup of the top reads in personal finance delivered to your inbox. Subscribe to MarketWatch’s free Personal Finance Daily newsletter. Sign up here.