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Published:December 5th, 2013 08:41 EST
Why Is Income Inequality in the US Widening, If Our Economy Is Actually Improving?

Why Is Income Inequality in the US Widening, If Our Economy Is Actually Improving?

By John G. Kays


Why is it that in 2013 the income gap between the rich and poor is still widening? A BBC article (US income inequality at record high) states that the income of the richest households in the US (top 1%) rose 19.6%, as opposed to the rest of the American population (the remaining 99%), which only rose 1% in 2012. This is the widest gap since 1927; you might recall, the stock market crashed catastrophically just two years later, in October of 1929. 


Our last great recession was in 2008, which I know you remember well, yet we notice the economy is getting much better now, in 2013. One would think the disparity of income between the haves and the have nots would be reduced in a better economy, yet this is not what the data (the tealeaves) is/are telling us (economists are looking at tax filings).


President Obama addressed this very issue in a speech, hosted by the Center for American Progress yesterday, where he pointed out some of these troubling statistics; one figure caught my eye - since Obama got out of high school in 1979, the American economy has doubled, yet the top 10% (the richest) have (possess) HALF of the nation`s income. (USA Today Obama: Income Inequality threatens American Dream). 


Another disconcerting item cited by the President, is that CEOs of corporations earn, on the average, 273 times what an average American worker earns (USA Today). In other words, the privileged few have all the power, possibly because they have most of the money. Okay, so it could be the other way around - this tiny cabal of individuals have most of the money, since they have the lions share of the power. Well, perhaps we should think of it as circular, rather than linear, if we were to draw this phenomenon into a Venn diagram.


That gets it right! It`s moving both ways, where they get more money, then their power increases, so they can then get even more money. In the meantime, the poor, hard worker on the other side of the tracks, such as a fast food worker (think McDonalds or Taco Bell) or a Wal-Mart sales agent (or whatever they call them these days) just gets poorer and poorer, and simultaneously, weaker and weaker, with no power at all, no car, has to move back in to his/her folks` home, can`t support his/her family, health goes downhill from a bad diet (he/she works at a fast food joint - Duh!!!), etc. etc.


Okay, my circular model works pretty good; so what`s the cause of these income disparities, and why doesn`t an improving economy tend to smooth out or equalize these gaps? Is a low minimum wage partially responsible? Would an increase in the minimum wage, to say $15 an hour, bring a partial fix to the gap? Is the American Dream gone? Is the US seen as less powerful around the globe, say, since the 1950s or the 1960s? Is our Democracy compromised by this severe economic disparity between the social classes?


Do we even have a three class social system anymore (upper class, middle class, and lower class)? Are we left with a two class system (upper class and lower class), only now? Is the middle class shrinking down to non-existence? Why is this so? Is there anything we can do to stop it? If blue collar workers and fast food workers (which is on an even lower social rung than blue collar) were earning quite a bit more money, wouldn`t they spend more to support their families, and thereby put stimulus back into the economy? 


 This stands to reason for me, if the owners don`t counter-balance this too severely by raising their prices. Inflation is our worse enemy (I`ve always heard)! A Capitalist System and a Democracy are not really one in the same; you could lay the two transparencies (one on another) onto an overhead projector, and the two wouldn`t lineup too nicely. Yet, this is our goal, to make them fit together.


http://www.nytimes.com/2013/12/05/business/15-wage-in-fast-food-stirs-debate-on-effects.html?hpw&rref=business&_r=0