National Consumers League

Gap between the richest and the rest a widening problem


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By Sally Greenberg, NCL Executive Director With the economy stagnant, unemployment continuing to hover near 10 percent, a depressing mid-term election a few weeks away, Americans are angry, frustrated, frightened about their economic future and looking for someone to blame. In terms of cause and effect, I think it’s impossible for economists – and the rest of us - to ignore any longer the staggering gap between the richest Americans and the rest of us. Columnist Robert Frank in the New York Times cites some sobering statistics. During the three decades after WWII, incomes rose in the United States at almost 3 percent a year for people at all income levels. America, Frank says, had an economically vibrant middle class. Roads and bridges were well maintained and people were optimistic. The contrast between today and 1976 is stark. The share of total income going to the top 1 percent of earners, which was 8.9 percent in 1976, rose to 23.5 percent by 2007, but during the same period, the average hourly wage declined by more than 7 percent. Frank says economists are reluctant to confront rising income inequality and they by and large refuse to take a position on whether the growing income inequality is a good or bad trend. Worker productivity has grown over the past two decades. Workers are now earning only 83 cents of every dollar they earned more than 35 years ago, while their productivity has increased a dramatic 80 percent. This is the central explanation for the explosion in corporate profits and the growing income gap in America. But the gains from that increased productivity have not gone to workers; they have been scooped up by management -- good manufacturing jobs, including union jobs with good benefits that provided a solid middle class income to working Americans, have disappeared. The percentage of private sector union jobs has shrunk to 7 percent. But, for reasons I don’t understand, outsize pay packages – including probably the most outrageous case - $1 billion in total compensation claimed by the former head of United Health Care – (who felt he was entitled to take those kind of profits from the health care system when we have 50 million Americans with no health insurance) haven’t generated all that much anger and outrage. The widening gap between the super rich in America and the amount of income they have taken out of the economy – at the expense of the vast majority of hard working Americans who struggle to make ends meet every day– may just be far more destructive than any of us understand.