In polite circles, among our political and financial classes, this is known as “the free market at work.” No, it’s “wage repression,” and it’s been happening in our country since around 1980. I must invoke some statistics here, knowing that statistics can glaze the eyes; but if indeed it’s the mark of a truly educated person to be deeply moved by statistics, as I once read, surely this truly educated audience will be moved by the recent analysis of tax data by the economists Thomas Piketty and Emmanuel Saez. They found that from 1950 through 1980, the share of all income in America going to everyone but the rich increased from 64 percent to 65 percent. Because the nation’s economy was growing handsomely, the average income for 9 out of l0 Americans was growing, too – from $17,719 to $30,941. That’s a 75 percent increase in income in constant 2008 dollars.
But then it stopped. Since 1980 the economy has also continued to grow handsomely, but only a fraction at the top have benefitted. The line flattens for the bottom 90% of Americans. Average income went from that $30,941 in 1980 to $31,244 in 2008. Think about that: the average income of Americans increased just $303 dollars in 28 years.
That’s wage repression.
Why, yes it is, and an overwhelming majority of Americans, regardless of political leaning or income class, agree. From the LA Times, hardly a bastion of liberal values:
In our survey, Americans drastically underestimated the current gap between the very rich and the poor. The typical respondent believed that the top 20% of Americans owned 60% of the wealth, and the bottom 40% owned 10%. They knew, in other words, that wealth in the United States was not distributed equally, but were unaware of just how unequal that distribution was.
When we asked respondents to tell us what their ideal distribution of wealth was, things got even more interesting: Americans wanted the top 20% to own just over 30% of the wealth, and the bottom 40% to own about 25%. They still wanted the rich to be richer than the poor, but they wanted the disparity to be much less extreme.
But was there consensus among Americans about their ideal country? Importantly, the answer was an unequivocal "yes." While liberals and the poor favored slightly more equal distributions than conservatives and the wealthy, a large majority of every group we surveyed — from the poorest to the richest, from the most conservative to the most liberal — agreed that the current level of wealth inequality was too high and wanted a more equitable distribution of wealth. In fact, Americans reported wanting to live in a country that looks more like Sweden than the United States.
Of course, it's the "how" part of the equation where both groups scratch their heads:
So, if Americans say they want a country that is more equal than they believe it to be, and they believe that the country is more equal than it actually is, the question becomes how we lessen these disparities. Our survey didn't ask what measures people would be willing to support to address the wealth gap. But to achieve the ideal spelled out by those surveyed, about 50% of the total wealth in the United States would have to be taken from the top 20% and distributed to the remaining 80%.
Few people would argue for an immediate redistribution of 50% of the nation's wealth, and such a move would unquestionably create chaos. In addition, despite the fact that individual Americans give large amounts to charitable causes each year — in effect, a way of transferring wealth from the rich to the poor — the notion of government redistribution raises hackles among many constituencies.
Despite these reservations, our results suggest that policies that increase inequality — those that favor the wealthy, say, or that place a greater burden on the poor — are unlikely to reflect the desires of Americans from across the political and economic spectrum. Rather, they seem to favor policies that involve taking from the rich and giving to the poor.
Just as a reference point, here's the data they were polling about:
The gap between the wealthiest Americans and the poorest is bigger than at any time since the 1920s — just before the Depression. According to an analysis this year by Edward Wolff of New York University, the top 20% of wealthy individuals own about 85% of the wealth, while the bottom 40% own very near 0%. Many in that bottom 40% not only have no assets, they have negative net wealth.
There is a lesson here for the President and Democrats, and the rest of us. Start framing your tax cut message as something ALL Americans want. Point out that the wealth disparity curve looks like it did just before we were plunged into the Great Depression. Hammer home the idea that the stimulus bill saved us from the brink of it but if we don't start following through with some policies that actually help the poor and middle class climb out of their repression, we're heading back into an abyss.
It's time to say the corporate emperor has no clothes.
