Income inequality has given the rich a greater share of the economic spoils than middle- and low-income earners. That’s resulted in a very real impact on the incomes of middle- and low-income households, with the typical full-time American worker now earning $42,000 less than they would have if inequality hadn’t surged over the last four decades.
That’s according to a new analysis from researchers at Rand, the global policy think tank. Its researchers wanted to look at the dollars-and-cents impact on U.S. households from yawning income inequality, which has lifted the fortunes of the rich to that of Gilded Age levels.
Prior to the mid-1970s, Americans’ incomes, no matter their level, generally rose in step with overall economic growth. But that changed in the late 1970s, with the rich capturing the lion’s share of economic growth, while middle-class and lower-income workers eked out gains far below par.
In 2018, the typical full-time worker earned about $50,000 — but if that same worker had kept up with the economy’s expansion, they would have earned $92,000 annually, the Rand analysis found.
Only the top 5% of Americans have enjoyed earnings that approached or exceeded the nation’s economic growth. Meanwhile, the top 1% has come out far ahead, gaining a far greater share of economic growth than they did prior to the 1970s.
The typical person in the top 1% earned $1.4 million in 2018, but would have earned $630,000 –– less than half that amount –– were it not for benefitting from widening inequality, the analysis found.
“I hope that this provides a sense of the scale of the problem that rising inequality has been for the vast majority of Americans,” said Carter Price, one of the Rand researchers who co-authored the analysis with Kathryn Edwards.
The Rand report doesn’t specify the causes of growing inequality, however economists such as Emmanuel Saez and Gabriel Zucman of the University of California at Berkeley have posited that the inequality can be partly blamed on tax policies that favor the rich. Their 2019 book “The Triumph of Injustice” found that the 400 richest U.S. families now pay a lower overall tax rate than the middle class, the first time that’s happened in 100 years.
Widening income inequality has also been set against the backdrop of declining labor union membership and a wage premium for college-educated workers, with people who lack college diplomas suffering from weaker wage growth.
Between 1975 to 2018, the bottom 90% of earners lost out on $47 trillion in taxable income, the Rand analysis found.
