It's Been Another Decade Of Income Inequality In The U.S.
STEVE INSKEEP, HOST:
What brought about another decade of growing income inequality in the United States? The 2010s began and ended with pushes against inequality. The Occupy Wall Street movement made headlines back in 2011. And right now, Democratic presidential candidates are pushing ideas like a wealth tax. Even President Trump has made references to some of his supporters as forgotten Americans.
The longest economic expansion in U.S. history, which began in 2009, has finally brought up wages. Yet none of this changes the numbers noticed by David Wessel, director of The Hutchins Center at The Brookings Institution. David, welcome back.
DAVID WESSEL, BYLINE: Good morning.
INSKEEP: And happy New Year. What are you seeing in the numbers?
WESSEL: Well, most people's economic fortunes did improve during the 2010s as the economy slowly climbed out of this terrible Great Recession. But by almost any measure, the gap between the people at the very top and the rest of us continued to widen. There are a couple of economists at Berkeley - Emmanuel Saez and Gabriel Zucman - who've done a lot of work on this, and they say that the income before taxes of the top 1% is now a bigger share of the pie than at any time since the 1920s.
And even after you take account of federal taxes and means-tested government programs like Medicare, which take money from the top and give it to people at the bottom, the Congressional Budget Office says that the overall incomes of the bottom fifth of the population rose by 34% after adjusting for inflation during the decade. But the incomes of the top fifth rose by 58%, a lot more.
INSKEEP: Now, I'm thinking of that truism about a rising tide lifting all boats. The economy seems to be lifting all boats, but some people are way above the ocean in a private jet.
WESSEL: Yeah, you could say that. We know that not everybody did better during the 2010s, but we know that there were fewer people living in poverty, for instance. And we know that it was a terrific decade to be in the billionaire class.
INSKEEP: What has the stock market done, if anything, to income inequality over the last decade?
WESSEL: Well, the stock market had a terrific decade. The Standard and Poor's 500 was up nine of the past 10 years, and this year was particularly strong. And what that does is it tends to widen wealth inequality. Income is people's paycheck. Wealth is what they own - stocks, bonds and houses. And because the top 1% hold half of all the stock market wealth in the country, when the stock market goes up, that widens the gap between the wealthy and other people. The 130,000 households at the very top - that's the top one-tenth of 1%, the 50 million and up crowd - hold 15% of all the wealth in America, and there are a lot of Americans who have no wealth at all.
But one thing that's really important to most Americans is homeownership - the value of their home, not the stock markets, their major asset. And housing prices have been rising. That's good for people who own houses, not so good for people who want to buy them. But there is one striking disparity - 73% of non-Hispanic whites own their own homes but only 43% of blacks. And that gap has been widening. Homeownership rates are lower for black people who've graduated from college than they are for white people who are high school dropouts.
INSKEEP: What proposals, if any that are out there, would appear to address the root causes?
WESSEL: There are things like raising the minimum wage, strengthening unions, requiring Uber and Lyft and other gig employers to treat their employees differently, investing in education, nutrition, health care for low-income kids. Those all tend to reduce inequality before taxes.
And we could also - the government could do more to resist market forces by redistribution, raising taxes on the rich and increasing government benefits like the Earned Income Tax Credit for low-wage workers. That would reduce the inequality that is generated by the market.
INSKEEP: Is there any political consensus for redistributing wealth in any way? It's a thing that some Democrats favor but that a lot of Republicans don't.
WESSEL: No. I don't think there is a consensus. I think there's widespread acknowledgement that the distribution of income and wealth in America is unequal. What you often hear from people on the right is they want to focus on equality of opportunity rather than equality of outcomes. So they are interested in what can we do to give poor people a chance to build a business, go to school, make it into the middle class, and they worry less than the people on the left do about these data that we've been discussing that suggests that the inequality of outcomes has grown.
INSKEEP: David Wessel, always a pleasure talking with you.
WESSEL: Happy New Year, Steve.
INSKEEP: Happy New Year to you. He is director of The Hutchins Center at The Brookings Institution. Transcript provided by NPR, Copyright NPR.