For Labor Day: Income Inequality Dampens Economic Growth for Rich and Poor Alike
In tribute to American workers, over half of whom earn less than $15 per hour but deserve so much more, we are reprinting our coverage on income equality. Where the minimum wage is $15 the local economy is boosted, reason alone to join the movement to rectify income equality.
The non-partisan Congressional Budget Office showed that after-tax average income ballooned 15.1% fro the top 1% of earners, but grew by less than 1% for the bottom 90% of earners. (TIME magazine, August 5, 2014)
Correcting income inequality is not just a social and economic justice issue. When we talk about income inequality we have to be careful to distinguish it from income equality. Angry right-wing pundits seize on the term, income equality, to scare people with images of anarchy and culture wars.
Rather we are talking about righting a wrong, income inequality, by demanding equal opportunity, especially educational opportunity.
The dollar ratio between managers and workers compensation has increased ten-fold in favor of a few upon the backs of the many (more than 2-:1, two decades ago, to over 200:1, today). That gap in earnings has more and more been based on a widening education gap, which in turn further fuels the economic decline of the middle class and those already in poverty.
How many private homes, yachts, planes, cars, and vacation can you buy, after all? The very rich tend to stockpile their money as just another expensive commodity they can look at in self-admiration, just like Scrooge McDuck.
The overall economy worsens daily, as 90% of us spend, are often forced to spend, most of our income, thereby seeding the economy, while the top 1-9% sits on their excess wealth, again, earned from the sweat of others. How many private homes, yachts, planes, cars, and vacation can you buy, after all?
There is a report out this week from Standard & Poor’s (S&P) that newly re-arms social and economic justice advocates. S&P is a respected Wall Street ratings entity that helps investors and top earners to become more wealthy through non-partisan presentations of financial facts and predictions. Now it has delivered a hard truth: unequal wealth distribution hurts the overall economy, actually creating recessions, inhibiting investments, and keeping us in harmful boom-and-bust scenarios.
The report cites the education gap as “a main reason for the growing income divide.”
With wages of a college graduate double that of a high school graduate, increasing educational attainment is an effective way to bring income inequality back to healthy levels.”
If we added another year of education to the American workforce from 2014 to 2019, in line with education levels increasing at the rate of educational achievement seen from 1960 to 1965, U.S. potential GDP would likely be $525 billion, or 2.4% higher in five years, than in the baseline. If education levels were increasing at the rate they were 15 years ago, the level of potential GDP would be 1%, or $185 billion higher in five years.
This education gap is a main reason for the growing income divide, and it affects both wages and net worth. From a wage perspective, occupations that typically require postsecondary education generally paid much higher median wages ($57,770 in 2012)–more than double those occupations that typically require a high school diploma or less ($27,670 in 2012).
But you first must have the opportunity to pay for higher education and that’s harder and harder to do as you go down the economic scale. If you care about social and economic justice or just care about a thriving economy or if you are a human capable of logical thinking, you know that major changes that increase access to a college education, without saddling people with decades of student debt, should be a matter of immediate importance.
Check back tomorrow for a starting list of wealthy and/or powerful people who already understand the problem, and can be tapped to help activists bring this movement further into the mainstream.
And, for those who like your info on video, here is Lawrence O’Donnell on MSNBC’s The Last Word, summing up many of S&P’s conclusions . . .