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My Turn: Reversing inequality – Why it matters on Main Street

  • COLLINS



Wednesday, April 11, 2018

Editor’s Note: This is the first in a series of seven essays written by authors with local ties that will explore why inequalities in income, wealth and opportunity are bad for Franklin County and what the community can do about it.

The national conversation about inequality is stuck. While no one denies that we’re living in a period of extraordinary inequality, there is a rather polarized debate as to whether it matters and what to do about it.

This is not a right-left issue so much as an up and down matter. Economic inequality has been steadily growing for four decades, under Republican and Democratic presidents and Congresses. It is part of a global trend. But there are things we can do at the local and state level — and even in Franklin County.

There is now a mountain of research indicating that this concentration of wealth is bad for economic stability and health, democracy, civic cohesion and most every other facet of our lives.

Stagnant wages

You may have heard that wages for workers in the middle have gone up modestly in the last two years. This is good news. But the overall trend is that since the late 1970s, real wages for the bottom half of U.S. households have been stagnant or fallen. The fact that half of U.S. households have not shared in the productivity gains of the last 40 years explains a lot about our current political situation.

In the 2016 election, a lot of people voted to disrupt the status quo, rather than maintain it. Since the Great Recession of 2008, over 85 percent of income gains have gone to the top 1 percent of households, and most to the top one-tenth of 1 percent. CEOs of major U.S. firms earn 300 times more than typical workers in their companies, up from 20 to 1 in 1965.

Wealth inequality

The distribution of assets and wealth is even more unequal than income distribution. Median net worth for most U.S. households has stagnated or fallen. The share of wealth owned by the richest 1 percent of households has increased from 33.8 percent in 1983 to 40 percent in 2016. The share owned by the richest 20 percent rose from 81.3 percent to 90 percent over the same period.

Forbes 400 and the rest of us

At the very pinnacle of U.S. wealth is the Forbes 400, billionaires whose combined net worth totals $2.68 trillion. Together, this small group has more wealth than the bottom 64 percent of the U.S. population combined. The richest 269 have more wealth than the entire black population, over 14 million households. The net worth of the wealthiest three billionaires — Jeff Bezos, Bill Gates and Warren Buffett — is equal to the bottom half of the U.S. population combined.

An estimated 20 percent of families have zero savings or negative net worth — they owe more than they own. Through the lens of race, 30 percent of black households and 27 percent of Latino households have zero or negative wealth. They are disproportionately women, renters, and people without college degrees. The underwater ranks also include a large number of people who on the surface appear to be in the stable middle class. Health challenges are a major cause of savings depletion, both in medical bills and lost wages.

Financial planners advise families to set aside three months of living expenses in financial reserves to serve as a cushion, so a household with $2,000 a month in expenses should have $6,000 in liquidity. But 44 percent of households do not have enough funds to tide themselves over for three months, even if they lived at the poverty level, according to the Assets and Opportunity Scorecard.

These inequalities are reversible. In the decades after World War II, 1945 to 1975, we saw the rapid expansion of our nation’s middle class and a shrinking of the racial wealth divide. We accomplished this by taxing high incomes and inherited wealth and investing in debt-free public college, first-time homebuyer programs, and infrastructure that boosted the whole economy and created good jobs.

But since the late 1970s, we’ve been rapidly moving in the wrong direction. The good news is that an overwhelming percentage of U.S. and Massachusetts voters want to reduce these inequalities and address problems like runaway college debt and ensuring the wealthy pay their fair share of taxes.

This November, the voters of Massachusetts will have an opportunity to vote on ballot initiatives to lift the minimum wage, establish paid family and medical leave, and levy a modest tax on incomes over $1 million with revenue dedicated to public education and transportation infrastructure (think of the bridges of Franklin County). This is a step in the right direction to reversing several decades of inequality.

Tomorrow: Fighting inequality through unionization and collective action.

Chuck Collins is author of “Born on Third Base” and “Is Inequality In America Irreversible?” He is co-editor of Inequality.org and director of the Program on Inequality at the Institute for Policy Studies. He lived in Greenfield in the 1980s, and was the keynote speaker at the recent Unitarian Universalist Conference, “The Power of an Equitable Community” held at All Souls Church.