While the wealthiest Americans are outpacing many of their global peers, a New York Times analysis shows that across the lower- and middle-income tiers, citizens of other advanced countries have received considerably larger raises over the last three decades.That is the 2nd paragraph of this important article in today's New York Times whose title I have borrowed for this post.
And as the very next paragraph tells us
After-tax middle-class incomes in Canada — substantially behind in 2000 — now appear to be higher than in the United States. The poor in much of Europe earn more than poor Americans.The analysis is based on studies of 35 years worth of data.
We tend to look at median income data or mean data. The gaps in median are closing with other nations, and our mean data is distorted badly by the skewing of increased income towards those at the top of the income pyramid, while many Americans are actually seeing their income shrink.
As one key paragraph notes:
The struggles of the poor in the United States are even starker than those of the middle class. A family at the 20th percentile of the income distribution in this country makes significantly less money than a similar family in Canada, Sweden, Norway, Finland or the Netherlands. Thirty-five years ago, the reverse was true.
The study on which the article is based
counts after-tax cash income from salaries, interest and stock dividends, among other sources, as well as direct government benefits such as tax credits.We should of course remember that those at the top of our income pyramid often have a greater percentage of their earnings as after tax cash income - they are not responsible for payroll taxes on stock income, they have a lower tax rate on capital gains and carried interest, and even much of their salaries are not subject to social security taxes which the vast majority of Americans pay 5.65% on all of the salary whereas for the wealthy it can easily drop below 1% of salary.
We still have the world's highest per capita GDP, but that represents a distortion of what is happening, as the increases in income since the recovery began have increasingly flowed to an ever narrower segment of the American population while other Americans have either seen their incomes stagnant or in too many cases actually shrink in real dollars, this at the same time as the programs of the social safety net that should help cushion hard times are being limited, cut back, or even eliminated.
Pay is rising faster in Canada and several European nations than it is in the US.
The study focuses on three reasons.
The first is that educational attainment is rising more slowly in the US than in the rest of the industrialized world in the last three decades. Here I will note that time span, and remind readers that our current insane approach to educational policy at a national level begins at the same time as that decline, with the release of A Nation at Risk under the Reagan administration in 1983, continued with Goals 2000 during the administration of the first Bush while Bill Clinton was head of the National Governors Association, through No Child Left Behind, Race to the Top, and now Common Core and the accompanying tests. That we continue to double down on the kinds of policies that have created the problem is beyond belief except that it serves the agenda of those who want to shift the expenditures of public education in private hands and/or devalue public institutions of all kinds.
I will push fair use a bit to quote the relevant material on the other two:
A second factor is that companies in the United States economy distribute a smaller share of their bounty to the middle class and poor than similar companies elsewhere. Top executives make substantially more money in the United States than in other wealthy countries. The minimum wage is lower. Labor unions are weaker.As you look at the material in those two paragraphs, consider the following.
And because the total bounty produced by the American economy has not been growing substantially faster here in recent decades than in Canada or Western Europe, most American workers are left receiving meager raises.
We built the American middle class in the period largely in the 1950s, when
- the highest incremental personal tax rates exceeded 90%
- corporate taxes paid a substantial proportion of the total tax revenues of the federal government
- social security tax rates were less than half of what they currently are, and the cap on wages subject to them was at a lower percentage of average wages than is currently the case
- the capital gains tax rate exceeded 30%
- around 1/3 of private sector employment in the US was unionized.
So at a time when our average wages grow more slowly, we have changed tax and employment policies in a fashion which further punishes those not at the top, and we wonder why our economic inequality is growing?
Then consider the following comparisons of increases in median income since 2000
Meanwhile we unleash the economically powerful to further distort the political process. This after we have already seen Republicans consistently oppose programs that could make a difference, such as
- pay equity for women
- raising minimum wage
- raising taxes on passive income
- extending unemployment compensataion
- stimulating the economy (ARRA)
- exttending medical coverage (ACA, Medicaid)
while cutting aspects of the social safety net, such as nutrition assistance, unfortunately too often with weak Democrats joining in.
Things are bad for the middle class.
They are even worse for the poor, even as the number of poor is increasing.
Consider this material from the final two paragraphs:
the poor in the United States have trailed their counterparts in at least a few other countries since the early 1980s. With slow income growth since then, the American poor now clearly trail the poor in several other rich countries. At the 20th percentile — where someone is making less than four-fifths of the population — income in both the Netherlands and Canada was 15 percent higher than income in the United States in 2010.As we allow the political process to be distorted in a way that increases our economic inequity to ridiculous levels, we should remain aware that we are at increasing risk.
Given how much of the wealth and power comes from energy sources and those backing them, the only question may be which happens first, that the environment is permanently destroyed by anthroprogenic climate change, or America becomes so plutocratic/oligarchic that we lose the world's longest existing liberal democratic republic.
In either case, violence and disruption will not be far behind.
The question is whether we, the American people, are willing to take the actions necessary to prevent this from happening.
By contrast, Americans at the 95th percentile of the distribution — with $58,600 in after-tax per capita income, not including capital gains — still make 20 percent more than their counterparts in Canada, 26 percent more than those in Britain and 50 percent more than those in the Netherlands. For these well-off families, the United States still has easily the world’s most prosperous major economy.