Everything You Need to Know About Inequality

Jared Bernstein and I just published a comprehensive PowerPoint presentation on inequality in the United States (available for download here). This presentation is first and foremost intended as a resource. Part 1 of the presentation documents the increase in inequality over the past 35 years; the trend is evident from every major data set and income definition. Inequality deniers have fortunately become a rapidly-dwindling breed, but should you encounter one, Part 1 should help set the record straight.

Part 2 discusses why inequality matters. As we summarize on our slides, inequality “reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects.” We provide the mechanisms behind these reasons and evidence documenting them as well. The slide notes contain a more in-depth look at these issues, as they do throughout the presentation, for anyone interested.

Fortunately, increasing inequality is not inevitable; it is “a problem that better policies can directly address.” Part 3 of our presentation explores some of these policies, measures that can begin to address inequality’s causes and counter its effects. While our slides in this section are in no way exhaustive, they’re a good starting point for the type of comprehensive social justice agenda I’ve mentioned previously.

I believe the section on equality of opportunity (or lack thereof) in Part 2 is particularly relevant for education stakeholders, as it highlights the importance of this comprehensive agenda (as opposed to a narrower, education-only policy focus). Consider the following chart, the extended version of our featured graph from slide 26:

Source: Pew Economic Mobility Project

Source: Pew Economic Mobility Project

This chart uses data from the Pew Economic Mobility Project to compare adult economic outcomes for two different types of students: students who grow up in the bottom income quintile but manage to graduate college (“poor college grads”) and students who grow up in the top income quintile but don’t make it through college (“wealthy non-graduates”). Wealthy non-graduates (49%) are almost twice as likely as poor college graduates (27%) to end up in one of the top two income quintiles as adults.

As we discuss in our presentation, inequality presents a variety of education-specific obstacles for low-income students, and addressing these obstacles (and thus facilitating college completion) is an important part of our agenda. At the same time, the less favorable distribution for low-income college graduates shown above provides a critical reminder of the importance of a comprehensive social justice agenda. If we truly want to provide low-income students with opportunities equivalent to those of their higher-income peers, we need strategies that address the needs of low-income families, strategies that address some of the direct effects of growing up disadvantaged. That means we must get the economy back to full employment. It means we need a strengthened safety net, higher labor standards, and a reversal of the decline in unionization. It also means we need better-regulated markets and improved fiscal policy. A push for quality education can’t have its intended effect unless it’s part of this larger agenda.

Jared and I hope that this presentation, by documenting inequality’s rise and consequences, provides a compelling basis for these claims. While the historically high level of inequality represents a serious threat to fundamental American values – opportunity, democracy, and broadly shared prosperity – we believe we can combat this problem if we acknowledge it and work together on solutions.

5 Comments

Filed under Education, Poverty and the Justice System, US Political System

5 responses to “Everything You Need to Know About Inequality

  1. Very enlightening. Of course the policy makers will deny any of it is true and continue to push their agenda for the top 1%

  2. Awesome, Ben & Jared; thank you.

    Res ipsa loquitur: the facts speak for themselves, when we work to get them beyond the lying sacks-of-spin .01% “leaders” in government and corporate media. Connected to the lies of commission and omission that obfuscates reality is a key point to your Part 3 in hopes of policy reforms:

    NOTHING WILL BE DONE UNTIL “EMPEROR’S NEW CLOTHES” OBVIOUS CRIMES ARE RECOGNIZED, AND CRIMINAL LEADERS REMOVED FROM POWER.

    Sorry about the shout-out, AND I recommend your full consideration that the core (no, not “heart” in context of the looting .01%) of inequality is criminal fraud regarding what we use for money, how its interests are protected, and the lies the 99.99% are told. The facts require no belief, only to see with one’s own eyes, just like our naked emperor with zero covering when one looks to see for one’s self rather than listen to minions’ testimony.

    Documentation: http://www.washingtonsblog.com/2014/10/economics-revolution-david-degraw-30-minute-interview-01-voracious-looting.html

    more with solutions: http://www.washingtonsblog.com/2014/08/labor-day-2014-economic-solutions-already-full-employment-zero-public-deficits-debts.html

  3. ok, and an excerpt of data:

    According to the most recent Federal Reserve Flow of Funds report, US households currently have an all-time high $82 trillion in overall wealth. If that wealth were spread out evenly, every US household would now have $712k. However, as of the end of 2013, the median household only had $56k in wealth. From 2007 – 2013, overall wealth increased 26%, while the median household lost a shocking 43% of their wealth. If median wealth continues to decline at this rate, over 50% of US households will be bankrupt within the next decade.

    The fact that the majority of households are losing so much wealth in a time of record-breaking overall wealth demonstrates how systemically corrupt the economy has become. To begin to grasp the scale of corruption, let’s analyze how much wealth has been consolidated within the economic top 1% of the population.

    The latest comprehensive look at wealth distribution data reveals that the “ultra-rich” economic top 0.01% of US households now has an all-time high 11.1% of overall wealth. The next tier, the 99.9% – 99.99% has 10.4%, and the top 99% – 99.9% has 18.3%. In total, the top 1% now has an all-time high 39.8% of wealth.

    When we correlate wealth distribution percentages with the $82 trillion in overall wealth reported by the Federal Reserve, it reveals that the top .01% has a stunning $9.1 trillion in wealth. In total, the top 1% has a mind-blowing $32.6 trillion.

    To begin to comprehend wealth of this magnitude, one trillion is equal to 1000 billion. $32.6 trillion written out is $32,600,000,000,000.00.

    Having that much wealth consolidated within a mere 1% of the population, while a record number of people toil in poverty and debt, is a crime against humanity. For example, it would only cost 0.5% of the 1%’s wealth to eliminate poverty nationwide. Also consider that at least 40% of the 1%’s accounted for wealth is sitting idle. That’s an astonishing $13 trillion in wealth hoarded away, unused.

    Once you truly understand how much $32.6 trillion is, and realize how just a fraction of that wealth could dramatically evolve society for the benefit of all, the argument for significant systemic change is solid. However, as scandalous as these statistics are, they do not factor in trillions of dollars more in unaccounted for offshore wealth, which makes the overall situation sound significantly better than it actually is and hides the true depth of the crisis from popular consciousness. (We will analyze hidden wealth in section 4.)

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