Income and Wealth Inequality

Ninety-Nine to One

Since the mid-Twentieth Century, there has been an increasing national trend toward inequality of wealth and income. 

This translates into diminished opportunity and well-being for the great majority. 

Chuck Collins is co-founder of Wealth for the Common Good, a network of business leaders, high-income households and partners working together to promote shared prosperity and fair taxation. 

According to Collins: 

The richest 1 percent now owns over 36 percent of all the wealth in the United States. That’s more than the net worth of the bottom 95 percent combined. This 1 percent has pocketed almost all of the wealth gains of the last decade.

In 2010, the 1 percent earned 21 percent of all income, up from only 8 percent in mid-1970s. The 400 wealthiest individuals on the Forbes 400 list have more wealth than the bottom 150 million Americans. 

These trends among the 1 percent are bad for the rest of us. Concentrated wealth translates into political clout — the power to use campaign contributions to rent politicians and tilt the rules of the economy in their favor.

Racial Disparities

People of color have, and continue, to experience a disproportionate gap in income and wealth. 

Organizations such as United for a Fair Economy (UFE) emphasize the historic and current barriers to “wealth and wealth-building strategies among communities struggling to attain greater economic equality.” 

Each year UFE releases a report on the “state of the dream,” in honor of Dr. Martin Luther King, Jr., that “examines the state of racial inequality in America as it relates to contemporary political issues, such as foreclosure, the austerity agenda, and unemployment.”

The Spirit Level

Recently, the discussion of income (and wealth) inequality has been significantly broadened by new research that indicates that the effects of inequality accrue to everyone in an unequal society, not just the most disadvantaged. 

The Spirit Level: Why Greater Equality Makes Societies Stronger by Richard Wilkinson and Kate Pickett provides evidence on each of eleven different health and social problems: physical health, mental health, drug abuse, education, imprisonment, obesity, social mobility, trust and community life, violence, teenage births, and child well-being, finding “outcomes are very substantially worse in more unequal societies”1 for all eleven of them. 

The Spirit Level confirms that many of the most pressing health and social problems are worse in more unequal societies – often much worse. Societies with bigger income differences between rich and poor seem to suffer more of a very wide range of health and social problems. 

The harmful effects of inequality have been found for many different health indicators, including age-specific death rates, infant mortality, life expectancy, and illness. More recently the authors have found the same pattern applying to most of the social problems which, within countries, tend to be concentrated in the most deprived areas and become more common further down the social ladder: mental illness, drug abuse, teenage births, obesity, the proportion of the population in prison, educational performance of school children, levels of trust and strength of community life, and social mobility. These problems are all much more common in more unequal societies. 

But the finding which truly sets apart this research is that inequality affects the vast majority of the population – not just the poorest. Viewing the prevalence of these problems, the author’s found that some are two or three times as common in more unequal societies, but others are as much as ten times as common. This means that all levels of society are suffering from these problems more in the more unequal societies. 

The more equal societies tend to do well on each of the different outcomes, and the more unequal societies tend to be the ones which do badly. “Because inequality affects so many different outcomes, if you know that a society does badly – for instance – on health, it is likely that it also does badly on a wide range of social problems: it probably has high levels of violence, high teen birth rates, a high prison population, lower levels of trust, more obesity, and a bigger drug problem. It looks as if societies with large income inequalities become socially dysfunctional.”

Equality Not Growth

The Spirit Level makes an argument which many in an affluent society understand instinctively. “Further economic growth will not improve our health or well-being. For a better quality of life we need greater income equality.” 

We are at a turning point in human history. For centuries the best way of improving the quality of life has been to raise material living standards. But we have now come to the end of what economic growth can do for developed countries. Measures of well-being or of happiness no longer rise with economic growth. Even though health goes on improving in rich countries, that improvement is no longer related to economic growth. We also know that rates of depression and anxiety have risen over the last fifty years or so. 

Not only has economic growth in the rich countries ceased to bring the social benefits it once brought (and continues to bring in poorer countries), but it now threatens the planet. We are therefore the first generation to have to find new ways of improving the real quality of life. The evidence suggests that we need to shift our attention away from increasing material wealth, to the social environment and the quality of social relations in our societies. 

For rich countries to get even richer makes little or no difference to the prevalence of health and social problems, but the social problems which beset many rich societies are much more common in more unequal societies. Societies with smaller income differences between rich and poor are more cohesive: community life is stronger, levels of trust are higher and there is less violence. The vast majority of the population seem to benefit from greater equality. 

It is sometimes said that societies have to choose between greater equality and economic growth. If that were true, people in the rich countries have clearly reached a point where the rational choice would be equality: if our aim is to improve the quality of life while avoiding further damage to the planet, greater equality can do both whereas economic growth can do neither. However, the balance of evidence from studies of the actual performance of different countries does not suggest that greater equality is bad for economic growth. More cohesive societies are regarded as providing an environment in which business can operate more efficiently and there are at least as many empirical studies which suggest that more equal societies have better economic performance as ones which suggest the reverse. But as this issue remains controversial, it is probably safe to assume that there is no overwhelmingly powerful relation between equality and growth either way. 

This new research implies that “reducing inequality is no longer something which depends on the well-off adopting more altruistic attitudes to those in relative poverty: instead a more equal society benefits the vast majority of the population. A wider recognition of the way we all suffer the costs of inequality will lead to a growing desire for a more equal society. 

Our primary task is therefore to gain a widespread understanding of the way inequality makes societies socially dysfunctional – right across the board.”