New Study Confirms That the Top One Percent Isn’t Interested in Trickling Their Wealth Down to You
“I’m glad I have this umbrella—any minute now, all that wealth is going to rain down on my head!” (Image courtesy Witthaya Phonsawat at freedigitalphotos.net.)
We all know the rich are getting richer and inequality is on the rise. But John Kolmos just published a paper with The National Bureau of Economic Research which explains how large the disparities are:
[Between 1979-2011] the income of the middle class 2nd and 3rd quintiles increased at a rate of between 0.1% and 0.7% per annum, i.e., barely distinguishable from zero. Even that meager rate was achieved only through substantial transfer payments. In contrast, the income of the top 1% grew at an astronomical rate of between 3.4% and 3.9% per annum during the 32-year period, reaching an average annual value of $918,000, up from $281,000 in 1979 (in 2011 dollars).
The thing that a lot of people don’t understand—and that conservative commentators don’t want you to realize—is that those two numbers are related. This is not happening in a vacuum. The income of the middle class and the income of the top one percent are inextricably linked, and the choices we make as a society affect their relationship. If we decide to pass laws that favor the wealthy, money goes to the wealthy. If you pass minimum-wage laws and other policies that encourage middle-class growth, inequality will shrink.
Have you read Nick Hanauer’s American Prospect piece on the parasite economy yet? It’s one of the most compelling cases for a $15 minimum wage yet written, and it’s a damning indictment of low-wage employers. But it also explains where all that money has gone:
So why do parasite employers keep wages low? Because they can. And in recent decades, employers have relentlessly exploited this power imbalance, eroding labor’s share of the economy from an average of 50 percent of GDP between 1950 and 1980 to a ten-year-average of only 43 percent today, while profits’ share of GDP has risen by a similar amount. That’s about a trillion dollars a year that used to go to wages that now goes to profits. But that trillion dollars isn’t profit because it needs to be, or has to be, or should be. It’s profit because powerful people like me prefer it to be, and workers no longer have enough power to negotiate a fairer and more economically sensible split.
The one percent’s profits aren’t coming from nothing. And when you see enough figures like the one in the NBER report above, the basic arithmetic becomes pretty easy to follow.
None of this should be very surprising: you’re watching trickle down economics in action. This is exactly the economic system promised to us by the right since the late 1970s, the same system which George H.W. Bush ridiculed as “voodoo economics” until he joined Ronald Reagan on the presidential ticket and embraced the same system that he previously mocked. Conservative politicians promised that if you gave more money to the top one percent, that money would then trickle down to all Americans. Some four decades later, we’re still waiting for it to trickle down. It should be super-clear to everyone by now that the floods of wealth are never going to come on their own. It’s time to un-rig the system.
