Monday, December 5, 2011

Mind The Gap, Part 2

The gap between the rich and poor increasing isn't just a problem in the US, but it's getting worse worldwide as well as we get the latest Gini coefficient numbers from the OECD.

The gap between rich and poor is widening across most developed economies as skilled workers reap more rewards and top executives and bankers benefit from a global job market, the Organization for Economic Cooperation and Development said.

The average income of the richest tenth of the population is now about nine times that of the poorest tenth, the Paris- based OECD said today in a report. The gap has increased about 10 percent since the mid 1980s.

Mexico, the U.S., Israel and the U.K. are among the countries with the biggest divide between rich and poor, while Denmark, Norway, Belgium and the Czech Republic are among those with the smallest gap. The earnings multiple is 14-to-1 in the U.S. and Israel, compared with about 10-to-1 in the U.K., Italy and Japan and 6-to-1 in Germany and Denmark.

“The social contract is starting to unravel in many countries,” OECD Secretary-General Angel Gurria said in a statement. “This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that the greater inequality fosters greater social mobility.”

The OECD used a “Gini coefficient,” or standard measure of income inequality that ranges from zero to one. At zero an entire population would have identical incomes, while at one all income would go to one person. The coefficient stands at about 0.316 today, up 10 percent since the mid-1980s.

The Gini coefficient numbers for the US itself are pretty grim according to the OECD: in 1985 that number was 0.34, as of 2008 it's up to about 0.38. The more detailed US data is just depressing.

Key findings:
  • The wealthiest Americans have collected the bulk of the past three decades’ income gains. The share of national income of the richest 1% more than doubled between 1980 and 2008: from 8% to 18% [Table 9.1]. The richest 1% now makes an average US$1.3 million of after-tax income (compared to US$17,700 for the poorest 20% of US citizens). During the same time, the top marginal income tax rate dropped from 70% in 1981 to 35% in 2010.
  • The rising incomes of executives and finance professionals account for much of the rising share of top income recipients. Moreover, people who achieve such a high income status tend to stay there: only 25% drop out of the richest 1% in the US, compared to some 40% in Australia and Norway, for instance. 
  • The main reason for widening inequality in the US is the widening wage gap. The gap between the richest and poorest 10% of full-time workers has increased by almost one third, more than in most other OECD countries.

    So that's what 30 years of Republican economic policies have brought us. Clinton tried to fix it, balanced the budget and even cut spending. Then Bush 43 wrecked it all to hell.  As a result we have one of the most unequal economies in the world.

    The "rising tide lifts all boats" theory of the Bush 43 years may have been the biggest scam in economic history.  It didn't lift "all boats".  80% of the entire country's income gains went to the TOP ONE PERCENT in that time period, and that's because we cut taxes in half on them.

    We've been rewarding the "job creators" for three decades now, and especially the last decade.  The result?  A near second Great Depression as we went back to the inequality levels of the Gilded Age of the 1920's.  That's what Republican policies have wrought so far. Now they want us to cut spending on social programs and lower taxes on the rich and on corporations even more, quite literally they want to increase our income inequality by a massive factor.  This will be "good" for the country.

    It's ridiculous.  No thinking American should buy this snake oil, because we have empirical proof it doesn't work. And yet, here we are.

    Mind the gap, lads.

    No comments:

    Related Posts with Thumbnails