The US Income Gap, or Chasm
AMID the rhetoric of "revolution" and plans for "renewing American civilization," Republicans in Congress have chosen to ignore the serious social and economic implications of America's growing income polarization.
As the House and Senate budget proposals attempt to redefine the role of government in society, they take us away from fulfilling government's responsibility to address a 20-year trend. Since the 1970s, the United States has undergone a staggering change in income distribution, with almost all the income growth flowing to the top 5 percent of wage earners. At the same time, the real incomes of most working American families have fallen or stagnated.
According to the Census Bureau, family income inequality is at the highest level ever recorded, and the income gulf between rich and poor is growing faster here than in any other industrialized nation. This surge in inequality exacerbates social problems and tears at the fabric of a democratic society.
In 1977, the total after-tax income of the bottom 40 percent was double that of the top 1 percent of all Americans. Twelve years later, the share of national income of the richest 1 percent had more than doubled - equaling that of the bottom 40 percent.
Concern about income inequality is not simply an appeal to "class warfare." The problem is not that the people at the top are getting ahead, the problem is that they are almost the only ones doing so. This is a profound change from the 1950s, '60s, and early '70s when Americans at all income levels shared the benefits of prosperity.
Yes, there are forces outside of government that help drive income inequality - increasing international competition has held down wages, and technological advances have left untrained workers behind. But the Republican-proposed tax breaks for the wealthiest Americans, combined with cuts in education, health care, child care, and transportation assistance will only escalate this problem. Ironically, as government attempts to move people from welfare to work increasing numbers of full-time workers need government assistance to afford basic necessities like food and shelter. Clearly, if people who work full time can't earn a livable wage, they will continue to call upon government to make up the difference.
A recent study by the Jobs Now Coalition in Minnesota found that despite the state's record low unemployment, Minnesotans seeking "livable-wage jobs" outnumbered job openings 6 to 1. Fewer than half of the state's jobs pay the $20,000 a year needed to cover basic necessities for a family of three. The study proposed solutions, including a higher minimum wage, a renewed focus on job training, and going slow on welfare reforms that involve benefit reductions. These are all ideas the new majority in Congress opposes.
The private sector should also have an interest in reversing this 20-year trend. It must decide, as Henry Ford did in the early part of this century, that workers are "assets" and not simply "costs." Ford knew that success for American businesses depended upon creating a wide base of American consumers for their products. Unfortunately, today's income inequality is slowly eroding that middle-class base upon which our economy - and our democracy - depends.
From the policymakers in Congress to the top levels of corporate America, we all must understand that it is in our common interest to deal with this problem and to ensure that every working American earns enough to afford basic necessities. Until that happens, income inequality will continue to restrain economic growth and thwart efforts to deal with social problems.