Saturday, 28 November 2015

The Symptoms Of Wealth Inequality Are Visible In All Parts Of American Society- The American Inequality Series #4



The (Not) Working Class: Homelessness
Over 22,000 children live on the streets of New York- a stunning statistic, the highest since the times of the Great Depression. The problems don’t end outside the walls of the Big Apple- the 22,000 children in NYC form part of 1.2 million across the United States. 
Homelessness is one of the major signs of extreme poverty, caused by the dropping economic standing of the poorest in society. 
The problems of homelessness go further than the obvious- of course we don't want to see people forced to live on the streets- but it can have further implications on society as a whole, often causing both societal and economic problems such as drug abuse and crime.
Homelessness certainly matters- the speed an effects of its growth provide real threat to American society, particularly those edging closer to losing their homes. It is a prominent sign visible to all of the growing level of economic inequality present in the US.

The Middle Class: Wage stagnation
The causes of wage stagnation go further than just the recent economic crash- wages of most Americans have actually stagnated for the last few decades. 

This stagnancy in the face of a boost in productivity, and general economic growth (averaging 3.27% since 1947) in previous decades is surprising; had wages kept up with economic growth since 1970, the median household income would be around $92,000. In 2012, the US Census Bureau reported the median household income to be just $51,371.

Increase in productivity has also failed to lift average wages- between 1979 and 2012 the median worker’s productivity has risen 74.5%; yet their wages have only gone up by 5%. 
Of course, technology has also played a role in this productivity boom.  Computers have revolutionised word processing, the internet communication and so on- so one could perhaps expect it to bring a drop in working hours, resulting in more leisure time. But according to Erik Rauch of MIT, “if productivity means anything at all, a worker today should be able to earn the same standard of living as a 1950 worker in only 11 hours per week”
An 11-hour working week is unheard of today- suggesting today’s workers are working harder, producing more than their 1950s counterparts by far- yet their compensation is not proportionately higher.

The minimum wage has also been stagnant. 5 states are yet to even establish a minimum wage. Currently the highest minimum wage is available in Washington, at $9.32, set at the turn of 2014, but according to a 2012 study by the Centre for Economic and Policy research, even this is too low. The study, setting inflation and productivity as benchmarks, concluded that if the minimum wage had kept pace with productivity and inflation increases since the year minimum wages peaked, 1968, the figure would have reached $21.72 per hour- over double that of the highest in the USA. 

It seems apparent that wages for the general population has failed to keep pace with economic growth and productivity- so where has the extra capital created by a growing economy gone? Fig.1 shows clearly; the top 1% has benefited disproportionately, enjoying an increase in salary of over 240% between 1979 and 2009.

The Upper Class: The 1%
While the wages of most of the population stagnated during the economically relatively non-turbulent years, the resistance of the incomes of the wealthiest could be observed just in the recent economic crash. The average CEO salary dipped in 2008, but it was back up on its feet by 2010- back to 243 times the wage of the average worker.

Questions have been raised over these huge salaries- mainly the question over whether they really deserve it. Under a true meritocracy, people would be paid according to a mixture of their effort, production and influence- so do CEOs really work 243 times harder than an average worker, or produce 243 times as much? Many would argue that CEOs have it easier than the worker- enjoying the power to delegate work more than doing it- but perhaps the CEOs themselves would argue the salary is more a reward for the hard work they have done to get to that position, rather than their current activities alone.


The ‘1%’ of wealthiest Americans have become the faces, to many Americans, of the problem of wealth inequality that is present. After all- how can the USA, a country with the most billionaires in the world (515, far ahead of second-placed China with just 157) have at the same time one in seven people living in poverty?
Mohammad Lone Editor