Economic inequality and the decline of the middle class have advanced steadily and to an alarming degree since 1980, but most people don't grasp the extremity of the situation, including liberal activists that are best positioned to work on remedies. Scientific American even published an article which explores just how far off public comprehension is.
Economic Inequality and the Collapsing Middle Class
Fred Stoll, Nov. 23, 2019
Collapse of the Middle Class. Since 1980, the economic status of the middle class in the US has collapsed. The table below presents a few income and cost values for 2018 compared to 1980, all compensating for inflation to equivalent 2018 dollar value using the CPI [1].
Median household income has gone up by 23% to $63,200/year, which sounds good until you consider a few example cost increases:
- • Average per-capita healthcare costs have increased by 226% (to $10,500 per year)
- • The average house price has increased by 73% (to $316,000)
- • Average unfurnished apartment rent has increased by 69% (to $19,100/year)
- • Average in-state cost of public college including room and board has increased by 115% (to $17,200/year)
This situation is far from static; a plot of these cost and income parameters over time (figure below) reveals that costs continue to climb far faster proportionally than median income, so a bad situation continues to get worse year over year.
There are people behind these numbers. There are many millions of people who are living below the standard of living of their parents, who have taken on crushing college loan debt, who face financial stress on a daily basis, whose marriages and relationships fail under the stress, who have to work more than one job with little time to spend with their children, who suffer stress-related illness, who take refuge in drugs or alcohol, who contemplate or attempt suicide, who feel shame for their situation, who feel afraid.
Economic Inequality. Expanding the scope of consideration to economic inequality in the US, some other statistics stand out starkly:
- • The minimum wage (expressed in 2018 dollar value) averaged $10.10/hr from 1961 to 1981, but only $7.49/hr from 1985 to 2018
- • The average inflation-adjusted net worth of the 400 wealthiest people in the US (now over $7 billion each) has increased by a factor of 10 from 1982 to 2016 [7]
- • The percentage of total US wealth owned by the top 0.1% has increased from 10% in 1980 to about 25% today
- • The top tax rate was 70% in 1980 compared to 37% today
- • In 2018 dollars, the estate tax exemption is now $11 million compared to $0.5 million in 1980, and the top estate tax rate is 40% compared to 70% in 1980
- • Corporate CEOs are paid on average about 300 times the average pay of their employees, compared to about 30 times average employee pay in 1980.
Is This All Just Okay? Devotees of free market
philosophy might argue that the bottom 2/3 of our population has simply underperformed in this competitive world, and the top 10% are simply getting their just rewards. I say this is callous BS. Our markets have failed the lower income majority of our country, and government policy must step in to address the ever-growing imbalances and the economic distress of the bottom 2/3 of our population.
[1] https://inflationdata.com/Inflation/Consumer_Price_Index/HistoricalCPI.aspx?reloaded=true [2] https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-inequality.html [3] https://fred.stlouisfed.org/series/MSPNHSUS [4] https://www.statista.com/statistics/200223/median-apartment-rent-in-the-us-since-1980/ [5] https://www.thebalance.com/causes-of-rising-healthcare-costs-4064878 [6] https://nces.ed.gov/programs/digest/d07/tables/dt07_320.asp [7] https://inequality.org/facts/wealth-inequality
Contact me at: fcstoll99 at gmail dot com