INCOME INEQUALITY THREATENS SOCIAL STABILITY

One way or another, politicians running for elective office have been pointing out that economic inequality in this country is spiraling out of control, shrinking the middle class and endangering social stability. During the 2016 election, then candidate Donald Trump effectively used this condition by pointing out how globalization had killed industries in our industrial heartland, forged the closure of many businesses, and shifted thousands of jobs into skill sets workers were not prepared for. He promised to revitalize industries like steel and coal, which had traditionally been the livelihood for many now unemployed. Self proclaimed democratic socialist Bernie Sanders, never subtle, hammered on the "super rich" and large corporations suggesting that the country needed to dramatically reform the tax code and essentially redistribute some of the wealth. He and others pointed out that the wealth gap between the richest and the poorer families had more than doubled since 1989. And, during the most recent campaign, now President- Elect Joe Biden also ran on a platform of policy proposals designed to narrow this gap. Economic inequality is somewhat of a complex concept. It involves the distribution of income - the amount of money people are paid, and the distribution of wealth, the amount of wealth people own. On the one hand, the wealth gap, while growing steadily, is typically not considered to be easily actionable through government intervention. The richest one percent takes in about one third of the country's net worth. The catch phrase "the rich are getting richer, the poor get poorer," is not just a platitude. People who already hold wealth have the resources to invest or to leverage the accumulation of wealth, which creates new wealth, leading to what is called "wealth concentration." Income inequality, on the other hand, has become more of a political football. It refers to a significant disparity in the distribution of income between individuals, groups, populations, social classes, or even countries. Among the G-7 countries, composed of the world's largest developed countries, the U.S., the most prosperous country in the bloc, has the highest level of income inequality, and, by far, exhibits the worst poverty rate. Causes of steadily increasing inequality include a number of factors: the growth in technology, continued gender income differentiation, the decline of organized labor and the influence of globalization. Wages are a function of the market price of skills required for a job, which, in turn, is determined by supply and demand. Rapidly changing technologies demand specific skill sets many workers won't possess and which may be difficult to acquire by an aging, relatively uneducated labor force. Salaries for women in the U.S. are still only 77% of that of men. The share of workers represented by labor unions has dropped by half, to just over 10%, during the past four decades, shrinking the power to bargain for higher wages and benefits. Globalization has reduced global inequality between nations, but it has increased inequality within nation-states. Significant income inequality has consequences. A major downside is diminished economic growth. MIT professor David Autor argues that "dynamism," characterized by vigorous activity and progress, gives rise to "dynasticism." Kids of affluent parents, even of mediocre talent, go to the best schools and talented kids from less affluent families don't, which ultimately means our society will be less productive. Besides, people on the lower steps of the economic ladder may become discouraged as they experience diminished economic opportunity and mobility. Severe income and wealth inequality also tends to have a negative effect on the political influence of the disadvantaged. Moreover, regional income producing activities, be they industrial, agricultural or others, may create geographic segregation by income. When asked, 61% of Americans (78% Democrats and 41% of Republicans) believe that there is too much economic inequality in the U.S., but fewer than half call it a top priority Those who say there is too much inequality see merit in a variety of approaches: Ensure workers have the skills they need for today's jobs (65% of Democrats and 56% of Republicans); increase taxes on the wealthiest Americans (69% of Democrats and 36% of Republicans). (PEW Research, Jan. 9, 2020). More than half of those who believe there is too much inequality believe that the government needs to be instrumental in mitigating this condition and has the responsibility to provide all Americans with high quality K-12 education, adequate medical care, health insurance, adequate income at retirement and a decent standard of living. What is the point of living in the most prosperous country in the world when 50 million people are hungry and well over half a million have no roof over their heads. A considerable basket of policy objectives for our politicians to pursue. Kenneth Rogoff, professor of public policy and economics at Harvard University, cautions that: "there is no doubt that income inequality is the biggest threat to social stability around the world, whether it is in the United States, the European periphery, or China." ("In the long run we are all equally dead," The Economist, July 7, 2020.) Theo Wierdsma