According to an article at the Wall Street Journal, the average income for the bottom 90% of families fell by over 10% from 2002 – 2012 while the average income for families in all the top income groups grew. The top 0.01% of families actually saw their average yearly income grow from a bit over $12 million to over $21 million over the same period. And that is adjusted for inflation and without including capital gains.
What was most interesting about the article was its discussion of the dangers of this trend and the costs of reversing it. In brief, the article noted that many financial analysts now worry that inequality has gotten big enough to threaten the future economic and political stability of the country. At the same time, it also pointed out that doing anything about it will likely threaten profits. As the article notes:
But if inequality has risen to a point in which investors need to be worried, any reversal might also hurt.
One reason U.S. corporate profit margins are at records is the share of revenue going to wages is so low. Another is companies are paying a smaller share of profits on taxes. An economy where income and wealth disparities are smaller might be healthier. It would also leave less money flowing to the bottom line, something that will grab fund managers’ attention.
Any bets how those in the financial community will evaluate future policy choices?
Martin Hart-Landsberg is a professor of economics at Lewis and Clark College. You can follow him at Reports from the Economic Front.
Comments 2
James McRitchie — December 6, 2013
Money is liberating. The top 1% don't think of themselves as Americans as much as they do citizens of the world. As long as capital flows freely and earns a healthy return, I don't think they care a great deal about the American middle-class being hollowed out. Because corporations have such a strong grip on elected officials, I don't expect much of a "revolution" until corporate governance becomes more democratic. Those who want change must work through every institution, especially through the most dominant institution, the corporation.
BroadBlogs — December 6, 2013
What James says is true. But I have to wonder about a few of things. First, how sustainable will revenue be in the long run when the market disappears. Second, I find it hard to imagine preferring to live in a walled compound with barb wire and broken glass and surrounded by squalor. Third, are these people completely free from the woes of political instability the current trend could create? You know, off with their heads, and all that.