Income and wealth inequality in the United States is substantially higher than those of almost any other developed nation, and they are on the rise, sparking an intensifying national debate. The 2008 global financial crisis, the slow and uneven recovery, and now the economic shock caused by the pandemic of a new coronavirus disease, COVID-19, have deepened these trends and challenged policymakers to respond.
Economists say the causes of worsening inequality are complex and include a failure to adapt to globalization and technological change, shifting tax policy, and long-standing racial and gender discrimination. The effects of inequality are similarly varied, and have been seen as exacerbating crises such as the COVID-19 pandemic and deepening societal divisions. This has fueled populist movements around the globe, including the rise in the United States of Bernie Sanders on the left and President Donald J. Trump on the right.
How unequal is the United States?
According to the nonpartisan Congressional Budget Office [PDF], income inequality in the United States has been rising for decades, with the incomes of the top echelon rapidly outpacing the rest of the population. The average household income (after taxes and government benefits, and adjusted for inflation) of the top 1 percent rose 226 percent from 1979 to 2016. Meanwhile, income for the rest of the top 20 percent grew 79 percent. The average income of the bottom 20 percent rose by 85 percent, while income for the majority of the population—in the middle of the income distribution—grew just 47 percent over the same period.
Furthermore, in 1965, a typical corporate CEO earned over twenty times more than a typical worker. By 2018, that ratio was 278:1, according to the Economic Policy Institute, a progressive think tank. Between 1978 and 2018, CEO compensation increased by more than 900 percent, while worker compensation increased by just 11.9 percent.
In 1965, a typical corporate CEO earned over twenty times more than a typical worker. By 2018, that ratio was 278:1.
The picture is much the same when looking at wealth—that is, total net worth rather than yearly income. From 1989 to 2016, the share of wealth in the United States held by the top 10 percent of Americans increased from 67 percent to 77 percent. The bottom 50 percent, roughly sixty-three million families, owned just 1 percent of total U.S. wealth in 2016.
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