By Dr. John J. Hidore
Wealth in the Hands of a Few
February 8, 2014–There are several ominous trends taking place in the United States today. These trends are causing social, economic, and environmental problems. The major one is the rapid growth of the population. Another is the rapid transfer of wealth upwards into the hands of a few. The concentration of more and more wealth in the hands of a few has been going on for a long time. It began, in earnest, with the advent of the industrial revolution and has continued with one major exception. There was a brief period following WWII when the income gap in the United States dropped to the lowest it had been in many years. This reduction was, in part, due to the growing strength of worker’s unions, which negotiated higher wages. It was also due to the introduction of the minimum wage and other policies. In 1973, the share of the nation’s income earned by the top one percent dropped to its lowest level in recent centuries–to less than 8%. Today, the gap in income and wealth between the rich and the majority of people, is growing faster than at any time in our history. In 2013 the wealth of the top one percent was greater than the combined wealth of the bottom 95 percent. In other words, out of every 100 people there is one that owns as much 95 of the others combined.
The Backward Economic Trend of the Middle Class
The poor and the middle class are losing ground in sharing the wealth in the U.S. Over 1/3 of the workforce earns less than $10 an hour and they work longer hours than they did in 1973. In 2013 the bottom 90% of families had an average income of $31, 244. The median family income was near $50,000. In real income or buying power, the average family is far poorer than they were in 1980. If family income had kept up with the economic growth, the median income should be about $92,000, or nearly double what it was in 1980. The bottom 90% of families has been able to accumulate very little in wealth. They must spend nearly all of their income on food, clothing, and shelter.
While the majority of our families have been losing ground, the wealthy have made huge gains in recent decades. In 2013, each household in the top 5% had a net worth of over $1.9 million. Each household in the top 1% had a net worth of over $6.8 million. Four of America’s richest families are Wal-Mart heirs. In spite of the recent recession, their joint wealth is $17 billion. Of the total household wealth in the United States, 74% is held by the top 10% of the population. The top 1% of the population has over a third of the total wealth in the United States. About 125,000 families control almost all of America’s wealth.
Rapid Growth in Income for the Wealthy
The Economic Policy Institute reported that before the economic collapse between 2000 and 2007, nearly all of the income growth went to the richest 10% of our population. In 2004, some 240,000 tax returns had adjusted gross income of over one million dollars. By 2007, Forbes reported 946 billionaires. At the same time, more families are living below the poverty level than ever before.
The wealthiest families are also experiencing the most rapid growth in income. In 2012, the incomes of the top one percent increased nearly 20%. The remaining 99% of the families saw an increase of one percent. The top one percent, of the richest one percent, are experiencing even more rapid growth.
Factors Contributing to the Concentration of Wealth in the U.S.
A number of factors are propelling this concentration of wealth in the hands of a few. The wealthy have huge estate tax breaks, which can save thousands of dollars, and it allows them to keep and pass wealth on to their heirs. These same people have benefited the most from the rise in the value of the stock market and real estate. Much of their income is taxed at the lowest rate, which is less than the rate most of the middle class pay.
Another factor in the increasing disparity in wealth is increasing corporate profits. Labor costs money and affects employer profits. Therefore, corporate America has been eliminating jobs as rapidly as possible. Many jobs have been sent overseas where wages are less than in the United States. Jobs have been going overseas for the past 40 years, but have been going most rapidly in recent decades. A second factor in reducing labor costs has been the rapid increase in technology that eliminates human labor. Albert Einstein is quoted as having stated, “The economic depression, especially in America, seems to be caused mainly by technological advances that decreased the need for human labor and, thereby, cause a decline in consumer purchasing power.” Today computers and robots are rapidly replacing human labor.
The Decline in the Middle Class
The gap in the employment rate and income has also been increasing in recent years. The rate of unemployment for the lowest income class is now over 20%. Among those families now making over $150,000 a year, the unemployment rate is 3.2%. Thus the lower income families have an unemployment rate nearly seven times greater than the upper middle class. Those households where family incomes are between $20,000 and $150,000 are rapidly being moved downward in employment opportunities. This pushes the lowest income group into unemployment. The net result is the decline of the middle class and an increase in the number of unemployed.
Unless there are changes in the policies which have created the economic decline of the middle class, unrest in the population will continue to increase.