Income inequality: How much of a problem?
As stock prices rise and wages stagnate, AOC says that’s ‘inequality in a nutshell’
U.S. Rep. Alexandria Ocasio-Cortez speaks at the Women’s March in New York City last year. (Flickr/Dimitri Rodriguez)
By Ted Cox
Voters agree that income inequality is a problem, but when it comes to actually taking action it tends to fall behind other issues like health care, guns, and climate change.
That’s according to a Pew Research Center poll released this month, which found that “about 6-in-10 U.S. adults say there’s too much economic inequality in the country these days, and among that group most say addressing it requires significant changes to the country’s economic system.”
Perhaps it’s that sticking point about it requiring “significant changes,” but when it comes to voters identifying top priorities for the federal government it tends to fall behind those other pressing issues. The poll of about 7,000 U.S. adults taken last fall found that, when asked which issues “should be a top priority for the federal government,” 72 percent said making health care more affordable, 65 percent said confronting terrorism, 58 percent said reducing gun violence, and 49 percent said addressing climate change.
Some 42 percent identified reducing income inequality as a top priority, narrowly placing ahead of reducing illegal immigration at 39 percent.
Yet health care and income inequality are issues every U.S. citizen deals with every day, unlike gun violence and terrorism, which are largely confined to segments of the population and flashpoints — albeit in life-altering and for some very intransigent ways. Climate change, meanwhile, is something everyone will have to acknowledge if they haven’t already.
Perhaps it’s that everyday acceptance that de-emphasizes income inequality, so that it’s a shock when someone points out how prevalent it really is. Just last week, when the Dow Jones Industrial Average on the New York Stock Exchange set a record by climbing above 29,000, U.S. Rep. Alexandria Ocasio-Cortez tweeted: “The Dow soars, wages don’t. Inequality in a nutshell.”
“Ocasio-Cortez has a point,” wrote Business Insider in response, and it went on to cite a series of damning statistics.
In overall wealth, the bottom quarter of the U.S. populace sees just 2 percent even owning a single stock. In the next quarter, up to the halfway mark, just 6 percent own stocks. Of the upper middle quarter, 50 percent through 74.9 percent in wealth, 13 percent own stocks (still just about 1-in-8), and from the 75th to the 90th percentile 25 percent own stocks (still just 1-in-4). By contrast, of the top 10 percent of households in U.S. wealth, more than half, 51 percent, own stocks.
And they own a lot of them. That top 10 percent averages $200,000 in stock holdings. The remaining people in the top quarter average $28,000 in stock holdings, and the remaining people after that in the top half own just $7,000 in stocks on average. The bottom two quarters own $3,300 in stocks and almost half that, $1,700, in the bottom quarter.
So President Trump might like to tout the record stock prices, but understand: half of all U.S. households average about $2,500 in stock holdings, and the bottom half of that group owns considerably less than that in the rare occurrence (1-in-50) that someone owns any stocks at all.
What about retirement accounts, you say? “Although having a retirement account is far more common for households at the bottom of the wealth distribution,” Business Insider acknowledges, “less than half of Americans in the bottom half said they had an IRA, 401(k), or similar account.”
Of the bottom quarter of U.S. households in wealth, just 19 percent have a retirement account, less than 1-in-5. Of the next quarter up to the halfway point, 43 percent have a retirement account — still less than half.
Consider what that means. The bottom half of U.S. households are avidly encouraged by the government to have retirement accounts, including setting those accounts aside tax-free, but far less than half actually do. Why? Because they don’t have the room in their family budgets to set any money aside in their paychecks for a retirement account.
So the top 10 percent are more likely to have their wealth invested in stocks, and when they need to cash those stocks in they pay lower tax rates than income taxes in capital-gains taxes. As for those people who actually do have retirement accounts, if they need to draw on them they pay hefty penalties — on top of previously uncollected income taxes.
That’s income inequality with the nutshell cracked open and laid out for all to see.
Even so, that’s all just money. Let’s look at income inequality from another perspective, one that almost everyone acknowledges is a pressing issue: health care.
The New York Times did a story just this week on a new study from The Journals of Gerontology. It pointed out that “life expectancy at birth has been decreasing in the United States and leveling off in the United Kingdom.” But it also found some people, men and women, were living longer, healthier lives in old age after 50, with one key determining factor: wealth.
For U.S. citizens, the study set three wealth levels: average overall holdings of $29,000, $180,000, and $980,000. Then it looked not just at life expectancy, but vitality: years living without disabilities brought on by old age or chronic disease. Finally, it looked at determining factors.
What it found, according to the Times, was that for all determining factors “everything paled in comparison with wealth. In both countries, wealthy women tended to live 33 disability-free years after age 50 — eight to nine more than poor women, the study found. Wealthy men tended to live 31 disability-free years after 50 — eight to nine more than poor men.”
Understand, we’re not talking money here, but time — years, in fact several years, of being able to move about independently and enjoy life.
According to the Times, the paper determined that “additional study is required to understand why wealth in particular is such a strong indicator of how long someone lives unimpaired,” but co-author Paola Zaninotto, a professor of epidemiology and public health at University College London, said it was most likely a function of “having access to funds when you have ill health.”
Two things need to be emphasized here. One is that the findings were very similar for the United States and Great Britain, even though Britain has its National Health Service and the United States, of course, does not. Remember, however, that older Americans are more likely to have access to Medicare or Medicaid, leveling the playing field between the British and U.S. health systems.
But there was no leveling the playing field in either country between rich and poor.
“More wealth means it’s easier to get to your appointments and access additional services that would not be available to people with less,” said Dr. Corinna Loeckenhoff, director of the Healthy Aging Laboratory at Cornell University, in commenting on the study. Additionally, she pointed out, poverty has been linked to higher stress levels, which has implications for health, especially in chronic disease.
“Inequalities in healthy life expectancy exist in both countries and are of similar magnitude,” the study concluded. “In both countries, efforts in reducing health inequalities should target people from disadvantaged socioeconomic groups.”
In other words, health care is an income-inequality issue.