Income inequality is increasingly acknowledged as a key economic issue for the world. The topic is a major theme at Davos this year. Economic inequality is also an increasingly common topic in U.S. politics.
A new study has found that economic mobility does not appear to have changed appreciably over the past thirty years, even as the wealth gap has grown enormously. The authors analyzed the probability that a child born into the poorest 20% of households would move into the top 20% of households as an adult. The numbers have not changed in three decades.
On the other hand, there is clearly a substantial accumulation of wealth at the top of the socioeconomic scale. The richest 1% of Americans now own 25% of all of the wealth in the U.S. The share of national income accruing to the richest 1% has doubled since 1980. In contrast, median household income has shown no gains, adjusted for inflation, since the late 1980’s and has dropped substantially from its previous peak in the late 1990’s.
One of the stories that seems to be dominating the news in recent months is the plight of low-paid workers in the service industry. Most recently, a story about Wal-Mart workers organizing a food drive for other employees so that they could have a Thanksgiving dinner has gotten a great deal of attention. This comes on the heels of a McDonald’s helpline advising employees on how to apply for food stamps and locate food pantries and other assistance for the poor. McDonald’s is not alone in this regard. It is estimated that public assistance for fast food workers costs U.S. taxpayers $7 Billion a year. This means that the U.S. government is essentially supporting this industry. Noted financial commentator Barry Ritholtz asks the obvious question: “Why are profitable, dividend-paying firms receiving taxpayer subsidies?” Continue reading →