How Bad Is The Income Gap In America – A Few Facts About The 1%

Why are Occupy Wall Street protesters out there….they don’t even know what they are protesting about? That is what we are hearing over and over from Fox News and other conservative pundits on an hourly basis.

I can’t speak for them all but here are a few clues: How about protesting to object corporate control of government policies, which has led to unfair tax loopholes, job outsourcing, cuts to public programs and gross overcompensation of executive employees, a widening wealth disparity between the top 1 percent and the rest of the country. 

So what is the disparity? How is wealth distributed in the United States? When you hear your conservative, Tea Party relatives or friends talking down the OWS movement, here are a few fun facts you can mention. These were compiled by staff writer of Life’s Little Mysteries, Natalie Wolchover

FACT #1: The wealthiest 1 percent of households own 34.6 percent of all privately held wealth, and 42.7 percent of all financial wealth (total net worth minus the value of one’s home). 

According to the NYU economist Edward Wolff a 2010 report, the bottom 80 percent of the population holds just 15 percent of the total wealth and only 7 percent of the total financial wealth (as a large portion of their wealth is tied up in their homes). The bottom 40 percent of Americans — that’s 120 million people — hold just 0.3 percent of the wealth. 

FACT #2: The United States has more income and wealth inequality than most countries that have been studied, including India and China — countries that are traditionally viewed as having unequal distributions of wealth. 

The degree of income inequality in each country is assigned a “Gini coefficient” — a number that ranges from zero (if everyone in the country has the same income) to 1 (if one person in the country has all the income). According to data gathered by the Central Intelligence Agency for 2010, the United States has a Gini coefficient of 0.45, on par with such countries as Iran (0.44) and Mexico (0.48); this is higher than the Gini coefficients of 94 of the 134 countries that have been studied, including China (0.42) and India (0.37), and much higher than Canada, Australia and all of Europe. Sweden has the lowest Gini coefficient at 0.23.  

The United States’ Gini coefficient has been rising for decades; it was just 0.35 in the 1960s. 

FACT #3: Among the 299 companies listed in the S&P 500 Index, the average CEO’s compensation was $11.4 million in 2010, or 343 times more than the median pay ($33,190) of American workers. The ratio of CEO pay to median worker pay was just 42:1 in 1980, and is currently 25:1 in Europe. 

Bill Domhoff, a sociologist at UC Santa Cruz, claims the ballooning of chief executives’ salaries in recent years has resulted from the fact that, for the most part, they set their own wages. “If you wonder how such a large gap could develop, the proximate, or most immediate, factor involves the way in which CEOs now are able to rig things so that the board of directors, which they help select — and which includes some fellow CEOs on whose boards they sit — gives them the pay they want,” Domhoff wrote in a 2011 articleon his website. 

FACT #4: Between 1979 and 2005, the average after-tax income for the top 1 percent increased by 176 percent, compared with an increase of only 6 percent for the bottom 20 percent. Between 1990 and 2005, the purchasing power of the federal minimum wage actually declined by 9.3 percent when adjusted for inflation. 

This rapid widening in the income gap between the rich and poor was identified in a 2007 report by the Center on Budget and Policy Priorities. The report attributed the trend to tax policies that favor the wealthy. According to Domhoff, other contributing factors include the diminishing political clout of labor unions and decreased expenditure on social services. 

FACT #5: Most Americans have no idea that the wealth distribution is as concentrated as it is, but regardless of their gender, age, income level or party affiliation, they believe wealth should be much more evenly distributed than they think it is

In 2010, Michael Norton of Harvard Business School and behavioral economist Dan Ariely of Duke University surveyed 5,522 Americans about their views on the country’s wealth distribution. They found that most respondents (regardless of their genders, ages, income levels and party affiliations) guessed that the top 20 percent of Americans hold about 60 percent of the wealth (rather than the 85 percent that they actually hold). Survey respondents also guessed that the bottom 40 percent hold between 8 and 10 percent of the wealth in the U.S. (rather than the 0.3 percent that they actually hold).

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10 responses to “How Bad Is The Income Gap In America – A Few Facts About The 1%

  1. Third paragraph down, second line there is a typo, I believe the word ‘here’ should be spelled ‘hear’.

  2. We really need to avoid the party politics. It’s not Democrat or Republican. That’s why no one wants to label it. If you follow Fox’s brainwashing tactics, sure you’re going to believe it’s right against left. But it’s not. Fox is a corporation whose dependence on profit is frankly disgusting. They’re trying to infiltrate in such a way that the actual issue becomes obfuscated in party politics. All those “new” violent protestors are awful people being paid by the corporations to undermine the sentiment behind the movement. Corporations aren’t right or left. They’re either for money or for people. The Tea Party didn’t start sucking until the religious zealots and corporate shills decided to join in and ruin everything.

    • I agree with you in that both parties rely on corporations for funding their elections. We absolutely do need campaign finance reform especially in the wake of the Citizens United being upheld by Supreme Court. We are now seeing unlimited amounts of money going into our elections and we have no way to track where the money comes from.

      On the Fox issue, yes they are a corporation and just like any corporation their priority is making money for their shareholders, that’s it. However, with them those “brainwashing tactics” are creating real damage. I don’t think the Tea Party would have as hate-filled as it was if wasn’t for their slanting and/or completely making up news story. But that is a completely different issue.

      Finally, I agree that we need to make sure OWS does not get co-opted by any one group (like the Tea Party whose movement started out grassroots by quickly was taken over by Karl Rove, Koch bros, etc).

  3. Pingback: Bill Maher On The Wealth Gap In America | The Blue States

  4. Such facts will only cause the denier’s eyes to glaze over but they are very useful for someone who still isn’t convinced that FOX is what they claim: “Fair and Balanced”

    Nice work Angela.

    • Thank you, Larry! You know I am from Alabama and most of my family and a lot of friends are still there, and it is a constant battle against the conservative machine that controls the airwaves down there. It is not an exageration. It is very hard to find voices for the more progressive/liberal views.

  5. Angela – Before using terms like ‘wealth distribution’, take a whack at including homes and retirement accounts. You’d be surprised at what it does to the gini-coefficient. After all, if the goal is to compare apples to apples, restricting ‘wealth’ to taxable, investible assets will necessarily result in a sharp increase for those who have taxable financial assets versus those who don’t (and never really have). Wealth creation over the last 25 years is most profoundly reflected in rising real estate prices and workers’ 401k investments and not including those is one principal reason that this current administration is not getting any traction with the class warfare meme. We could also extend ‘wealth’ to include promised & committed retirement funds as well, yes, including social security, but certainly defined benefit pension plans.

  6. Someone once said that if the government confiscated all the wealth in the country and then redistributed it evenly to all adults, ten years later it would be unevenly distributed again. Pretty much in the hands of the same people who now have the wealth. Why is that?

    Don’t give me that right-wing answer that some people are just smarter and willing to work harder to build a life. Things are well regulated in the USA now but we could make it so that there is no advantage to being born smarter or more ambitious. If you are born with those advantages, the government could knock you down every time you start to pull ahead of the next fellow. If this type of program were successful, we could enjoy a state of bliss where no time is wasted thinking you might be smarter and more capable than another person.

    This is the kind of program we should demand that our elected officials put into place as soon as possible. This is the only way we can have a country where there is no 1% and 99%. We will only be happy when we are all 0%.

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