Income Inequality

If we are headed for destruction, we better change course

Journalist/Commentator/Blogger Harvey Oberfeld provides excellent views about street disturbances currently troubling a number of poor British communities: UK Uprisings Now, France Last Year, Vancouver in June Not Just Thugs.

Harvey O. says:

…in some communities, an entire generation of young people in this, the richest civilization humanity has ever known, have grown up without jobs, and without prospects for EVER obtaining anything meaningful, whether they are in in Britain, Europe and North America.

…those at the bottom are now increasingly ticking bombs, just waiting for a spark to set them off.”

Oberfeld is correct. High inequality diminishes economic growth since the potential contributions of many citizens are untapped. Perhaps more importantly, today’s income trend lines portend civil unrest as disparities widen. It is axiomatic that income inequality undermines social cohesion. Even traditionally peaceful societies will splinter as the ranks of those feeling dispossessed grow.

According to The Canadian Centre for Policy Alternatives, Canada’s richest 1% took 32% of all growth in incomes in the fast growing decade, 1997 to 2007. During rapid economic growth of the 1950s and 60s, the richest 1% of Canadians took only 8% of all income growth.

The share of Canadian wealth held by the richest 1% has doubled since 1980. It was measured three decades ago at 19% but is now estimated at 35%, although detailed statistical analysis is scarce in this country. In 2005, Stats Canada last published the Survey on Financial Security, examining wealth distribution over time. Revelation of the disparities and difficulties described by such examinations are of no interest to right wing think tanks that serve interests of wealthy individuals and industries.

The American situation is even worse than the Canadian. According to The Atlantic, between 2002 and 2007, 65% of all income growth in the U.S. went to the richest 1%.  Professor William Domhoff of the University of California published a paper Wealth, Income and Power. He notes substantial ignorance regarding the division of wealth:

Some of the information may come as a surprise to many people. In fact, I know it will be a surprise and then some, because of a recent study (Norton & Ariely, 2010) showing that most Americans (high income or low income, female or male, young or old, Republican or Democrat) have no idea just how concentrated the wealth distribution actually is.

I calculated one mythical scenario to describe American wealth disparity. Suppose we had 100 people in a room representing the national population and we had $100 ‘wealth’ to hand out according to current distribution of net assets:

  • The one person representing the richest 1% would receive $33.80;
  • the next nine would each get $4.19 ($71.51 has gone to the top 10%);
  • 40 citizens would receive $0.65 and, with half the population still waiting, the undistributed balance is $2.50;
  • as their share of the $100 ‘wealth’ the bottom 50 get $.05 each.

That is reflected in this graph:

Categories: Income Inequality

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2 replies »

  1. I had a moment of clarity a dozen or so years ago. My wife and I were both school teachers, child out of the house, mortgage long since paid off and living in a low value real estate market. Reading about distribution of income in Canada via the Policy Alternatives' Monitor, it became evident that we were in the top decile, something of a shock as we have never featured ourselves as being wealthy. It occurred to me at the time that we needed to have a giant potlatch: everyone with as much wealth as my family, or more, would immediately cede 25% of net worth to a fund to be distributed proportionally among those progressively down the scale. Of course, such an idea is flighty, flawed, unworkable, but systemic redistribution, or, better yet, a system of social and economic relationships that eliminates large disparities in wealth and power must be the absolute goal of civilization. (End rant)


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