Causes Of Income Inequality In United States Discussions 1. What are the causes of the income inequality trajectory in the U.S.? 2. What health and health

Causes Of Income Inequality In United States Discussions 1. What are the causes of the income inequality trajectory in the U.S.?

2. What health and health related issues are affected by inequality? (see Powerpoint lecture).

3. Comment on Thomas Picketty’s research findings. (see Powerpoint lecture).

4. What most surprised you about Nick Hanauer’s perspective on the threats posed in the future by wealth/wage inequality in the U.S.?

5. After listening to the NPR program on HUD, how did the panelists describe the relationship between affordable housing and jobs?

Reference Links to help you complete the assignment:

http://www.pewresearch.org/fact-tank/2018/09/06/th…

https://the1a.org/audio/#/shows/2017-08-30/zillion…

https://the1a.org/shows/2017-08-24/keeping-house-a…

https://www.vox.com/2018/7/29/17627134/income-ineq… Unemployment continues to go down and
median income continues to go up in 2018.
Unemployment peaked in 2010 during the Great recession but
started to go down in 2015 and has continued that trend.
(The Center on Budget and Policy Priorities,
https://www.cbpp.org/research/economy/chart-book-the-legacy-of-the-greatrecession)
• The U.S. Labor department reported that the unemployment
rate has fallen to 3.8 percent, its lowest level since early 2000.
(The N.Y. Times 6/1/2018).
• In September 2017 the U.S. Census Bureau reported that real
median household income was $59,039 in 2016, exceeding
any previous year.
Is all the economic news good?
In a thought provoking article “The Birth of a New Aristocracy”,
by Matthew Stewart published in the June 2018 edition of The
Atlantic magazine, the news is not so good.
Matthew Stewart presents empirical evidence that what he
describes as the “meritocratic class” has consolidated wealth
and the passing of privilege along to their offspring at the
expense of other people’s children.
Who are the meritocratic class?
• Surprisingly Stewart is not talking about the .01% of the wealthiest
among us. He describes this class of Americans as the 9.9% of which
he is one.
• “As of 2016 it took $1.2million in net worth to make it into the 9.9%;
$2.4 million to reach the group’s median; and $10 million to get into
the top 9% (pgs. 51).
The meritocratic class are mostly, but not entirely white.
According to Pew Research:
• African Americans represent 1.1% of the top 10th of
households in wealth;
• Hispanics 2.4%;
• and all other minorities including Asians and multi-racial
individuals 8.8% – even though those groups together
account for 35% of the total U.S. population
• Stewart goes further to discuss “The Great Gatsby Curve”,
presented by economist Alan Krueger after he reviewed
international upward mobility (improvement in socioeconomic class) data. Krueger found that rising immobility
(stagnation in a lower class) and rising inequality were
associated.
• Across countries, the lower the upward mobility the higher
the income inequality .
The Great Gatsby Curve
Italy, The United Kingdom, and the U.S. share the distinction of
having the most income inequality and the least upward social
mobility.
In his book, The Great Divide, Nobel Prize Recipient economist Joseph
Stiglitz (2015) presented the following conclusions of his research on
the wage/wealth divide. According to Stiglitz some of the causes of
that divide include:
• Disproportionate compensation for U.S. CEOs (corporate executive
officers) when compared to CEOs in other advanced societies.
• Deregulation policies dating back to the 1980’s
• U.S corporations moving company operations outside of the U.S.
• Corporations ignoring regulations initiated with the 2010 legislation
(e.g. “Dodd-Frank” legislation).
• Too big to fail concept (relative to “big banks”) ignored by DoddFrank.
Inequality in the 21st century
French Economist, Thomas Picketty’s 2014 best seller, Capital in the
21st Century, is an empirical study of inequality.
He examined available longitudinal data ( going back to the 19th
century) for five Western societies:
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U.S.
Japan
Germany
France
Great Britain
Some of Picketty’s major findings:
• The greatest cause of inequality has historically been and continues
to be inherited wealth.
• The wars of the 21st century (WWI and WWII) were the greatest
contributors to the redistribution of wealth and reduced
concentration of capital (wealth). Capital concentration in western
societies had reached its highest levels prior to 1914 –the onset of
WWI.
• Today inequalities of wealth are close to regaining or even
surpassing historical highs.
Myth of increasing economic growth
Despite the belief that growth of the economy (GNP) can offset these
inequalities – one example often provided is increased “job growth” –
Picketty used historical economic data to find that …
• Economic growth only attained levels high enough to offset
inequality in the aftermath of two world wars.
• Economic growth will not increase to that level again and will likely
not reach 3%.
• It should be noted that in the Fall of 2018 the GNP was reported at
3.5% in the 3rd quarter by the Bureau of Economic Analysis, U.S.
Department of Commerce The question now becomes can this rate
of growth be continued? www.bea.gov, last retrieved 11/16/18
Modern Redistribution of Wealth
Picketty offers possible remedies for the increasing concentration of
wealth.
“Modern (wealth) redistribution does not consist in transferring
income from the rich to the poor, at least not in an explicit way. It
consists rather in financing public services and replacement incomes
that are more or less equal for everyone especially in the areas of
health, education, and pensions” (p. 477.)
( Health, education and pensions are tax supported. Picketty is equating social
security in the U.S. with “pensions” which are more the norm in the EU
countries.)
Remedies
• *Progressive global tax on capital — not a progressive income tax,
but a tax on wealth.
• Short of that a regional or continental tax.
*This would lower the influence of foreign/off shore tax shelters.
The Myth of Meritocracy
Why shouldn’t those who “work harder” using their own talent
(“merit”) increasingly “earn” more wealth?
Picketty’s research suggests that “intergenerational wealth” — wealth
passed down from one generation to the next — belies the notion that
wealth is necessarily “hard earned” or based on individual
talent/merit.
The ability for generations in families to hang on to and multiply
considerable wealth has been increased since WWII.
Health and Income Inequality
• According to research conducted by the Urban Institute:
• “People with Lower Incomes report poorer health and have a
higher risk of disease. Poor adults are almost five times as
likely to report being in fair or poor health as adults with
family incomes at or above 400 percent of the federal poverty
level, or FPL, (in 2014, the FPL was $23,850 for a family of
four).
Wilkinson & Pickett (2007) reported evidence suggesting that
inequality was also associated with:
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rates of obesity, teenage birth, mental illness
homicide, low levels of trust, low social capital
hostility, racism, children’s poor educational performance
imprisonment
drug overdose mortality, and low social mobility.
• The death rate among low-educated middle-age whites in the U.S.
increased in the first decade and ½ of the 21st century. Ours was the
only advanced country to have experienced this increase.
• Princeton University economists Anne Case and Angus Deaton refer
to the driver of this trend as “deaths by despair – suicides, alcohol
and drug related deaths.
https://www.brookings.edu/bpea-articles/mortality-and-morbidity-inthe-21st-century/
The Current Tax Bill
According to the Joint Committee on Taxation and the non-partisan
Congressional Budget Office, tax cuts included in the 2017 Tax Bill are
much smaller and shorter lived for the middle class.
The cuts will increase rather than decrease social and economic
inequality. By 2027, people making $40,000 to $50,000 a year will pay
a combined $5.3 billion more in taxes while the group earning $1
million or more would get a $5.8 billion cut
This has the potential to increase the wealth wage gap and
inequity in the U.S. rather than decreasing it.

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