The reality of inequality

Children, it has long been recognized, are a special group. They do not choose their parents, let alone the broader conditions into which they are born. They do not have the same abilities as adults to protect or care for themselves. That is why the League of Nations approved the Geneva Declaration on the Rights of the Child in 1924, and why the international community adopted the Convention on the Rights of the Child in 1989. The United States of has not even ratified the Convention on the Rights of the Child.

Though an average American childhood may not be the worst in the world, the disparity between the country's wealth and the condition of its children is unparalleled. About 14.5 per cent of the American population as a whole is poor, but 19.9 per cent of children — some 15 million individuals — live in poverty. For some groups, the situation is much worse: more than 38 per cent of black children, and 30 per cent of Hispanic children, are poor.

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Among developed countries, only Romania has a higher rate of child poverty. The US rate is two-thirds higher than that in the United Kingdom, and up to four times the rate in the Nordic countries. The growing concentration of wealth — and a significant reduction in taxes on it — has meant less money to spend on investments for the public good, like education and the protection of children, (and some in the US Congress want to cut food stamps — on which some 23 million American households depend, threatening the poorest children with hunger.) As a result, America's children have become worse off.

When American schoolchildren open history books and read about the Civil Rights Movement and Martin Luther King, they are taught of a time when the US was divided between black and white, where “coloureds” had to sit on separate seats in buses, drink from special water fountains and were banned from attending schools with white folks. And they are taught of a civil rights march on to the National Mall in Washington, where King spoke of having a dream where black and white would stand together as equals.

According to a Pew Research Center analysis of data from the Federal Reserve's Survey of Consumer Finances, the wealth of white households was eight times that of black households in 2010, but 13 times more in 2013. The median wealth of white households was nine times that of Hispanic households in 2010, but 10 times more in 2013.The data suggests that while the overall net worth of American families remained steady during the economic recovery, the results between white, black and Hispanic households have not been equal.

The size of the gap between white and black household wealth is at its highest point since 1989. At the time, white households made 17 times the wealth of their black counterparts, while the gap between white and Hispanic households -- 14 times more for whites -- is at a level not seen since 2001. Between 2010 and 2013, the median wealth of non-Hispanic black households went down over 33 percent, from $16,600 in 2010 to $11,000 in 2013, and in the same time frame the median wealth of Hispanic households went from $16,000 to $13,700, or a drop of over 14 percent.

Meanwhile, the median wealth of non-Hispanic white households in that period increased over 2 percent, from $138,600 to $141,900. Pew notes there are several factors responsible for the gap. Financial assets such as stocks -- which are more likely to be owned by white households -- have had a healthier and faster recovery of value over housing. As well, minority households showed a higher decrease of assets such as home ownership, thus putting white households in a better position for financial recovery.

Income inequality is correlated with inequalities in health, access to education, and exposure to environmental hazards, all of which burden children more than other segments of the population. Indeed, nearly one in five poor American children are diagnosed with asthma, a rate 60 per cent higher than non-poor children. Learning disabilities occur almost twice as frequently among children in households earning less than $35,000 a year than they do in households earning more than $100,000. Inevitably, in countries where children have inadequate nutrition, insufficient access to health care and education, and higher exposure to environmental hazards, the children of the poor will have far different life prospects from those of the rich.

At America's most elite universities, for example, only around nine per cent of students come from the bottom half of the population, while 74 per cent come from the top quarter. In America, more is spent on the education of rich students than on the education of the poor. American states like California spend about as much on prisons as on higher education — and sometimes more.

Since the late 1970s, wages for the bottom 90 percent of American workers have lagged far behind economy-wide productivity growth (a commonly accepted benchmark for wage growth). The bottom 70 percent of wages have actually been essentially stagnant. Strikingly, this lack of wage growth explains essentially the entire rise in income inequality over the past generation of American life highlighted by Thomas Piketty. This dismal wage growth is not just a sad but inevitable outcome of an efficient economy. Instead, it’s the result of a bundle of intentional policy decisions that were made precisely to shift economic power away from low- and middle-wage workers and towards corporate owners and managers.  Wages for 70 percent of 4-year college graduates have been flat since 2000, and even most STEM occupations (science, technology, engineering and math) have seen anemic wage growth over the past decade.

Frozen wages at the middle and lower ends of the pay scale are nothing new, of course. They are the key reason for the growing inequality that has beset the United States and some other Western economies since the late 1970s. Textbook economics suggests that wages should closely match productivity. Indeed, in the postwar period (1947-1973) both rose together by an average of 2 to 3 percent per year. Then, starting about 1979, while U.S. productivity surged ahead, wages at the middle and lower levels flattened or, at the low end, declined in relative terms. Labor productivity rose by 93 percent between 1979 and 2012, while wages and benefits crept up by just 38 percent — with nearly all of the gains going to rising health insurance costs rather than to improved living standards. All told, wages declined about 1 percent per year relative to productivity during those 33 years, while compensation for those in the top 1 percent rose an astonishing 153 percent.

From 2009 to 2012 (that’s the most recent data), some 95 percent of new income has gone to the top 1 percent; the Walton family (owners of Walmart) have as much wealth as the bottom 42 percent of the country’s people combined; and “income mobility” now describes how the rich get richer while the poor ... actually get poorer.  The credibility of those who argue that employers “can’t afford” to raise pay — McDonald’s paid its C.E.O. $9.5 million last year — is nil.

Workers’ rights of association and collective bargaining has been severely restricted. Rules regarding who is eligible for overtime pay have been allowed to atrophy—including a salary threshold test that has not even been updated for inflation for decades at a time. Restoring these overtime protections would provide extra time or money to millions of workers. Extending basic labor standards and protections to undocumented immigrant workers would boost their own bargaining power, as well as erode employers’ ability to leverage the low wages of the undocumented to extract wage concessions from other workers. While Piketty called for an ambitious global wealth tax, we don’t need wait for the day when that’s possible to make real progress in fighting inequality. Opportunities to boost low- and middle-wage workers’ economic power, and hence their wages, are all around us, all the time.  Taken in isolation, they’re small, but enact enough of them together and they’d make a real difference. 

It's pretty much beyond dispute that capitalist society will have disparity between the richest and the poorest. It's also beyond dispute that we are approaching a social consensus that wealth and income inequality today now threatens to seriously damage the social fabric. The working poor may look like the more advantaged -- they have jobs, houses, cars, etc. But the truth is that they live on the margins of financial disaster. Because they look like the advantaged, the latter assume that the working poor are just like them in all relevant respects -- except for hard work. Superficial similarity allows the rich and powerful to assume their success is simply a result of working harder because in their minds it's clear that the poor could be just like them; they're just lazier or failed to develop the same skills. Because the disadvantaged look like us, despite very real differences, we conclude that their disadvantage is their own fault. We believe that the disadvantaged would succeed, just like us, if only they would work harder. We conclude, in effect, that they have freely chosen not to succeed. The reality is different. The working poor are not like the advantaged wealthy, superficial similarities aside.