Income inequality is an inherent product of any capitalist system and isn’t necessarily bad. It’s generally accepted that a gap in earnings helps motivate people to work harder and innovate, but extreme inequality is often corrosive to society.
A paper released earlier this month by an economics professor at the University of California-Berkeley shows that from 2009 through 2012, the top 1 percent of people on the income distribution have seen their incomes almost completely recover, while the rest of the nation’s incomes have hardly even begun a recovery.
Recessions hurt everyone and many people, rich and poor alike. In fact, during the recession, the top 1 percent took 49 percent of the nation’s total loss in terms of income — tied as it is to the health of the economy and markets, income for the richest Americans does tend to be fairly volatile.
However, the recovery has been so lopsided to the advantage of the wealthiest Americans that it goes well beyond any reasonable justification.
The top 1 percent of earners has captured 95 percent of all income gains since 2009. Income at the very top grew by 31.4 percent while income for everyone else gained just 0.4 percent. This means that the top 1 percent saw its income grow 79 times faster than everyone else’s.
The enormous concentration of wealth and income in the hands of society’s wealthiest citizens that is occurring today has not been seen since the 1920s.
Part of what’s made the recent economic recovery so painful has been weak job growth. Four years after the recession officially ended, the unemployment rate is still 7.3 percent as of August.
Especially troubling is the seemingly stagnant pool of the long-term unemployed, numbering as many as 4.3 million people who make up 38 percent of the unemployed. Even worse is that 866,000 people who once qualified as unemployed have given up on finding work and this number remains about the same as it was a year ago.
The psychological effects of unemployment can have severe consequences on well-being and health, the American Psychological Association reports. The stress it induces can often lead to depression and other mental health problems both in the unemployed and in those around them including their families and even former co-workers who fear their jobs will also be cut.
The FBI’s Uniform Crime Report cites poor economic conditions including unemployment, poverty and low income as factors that contribute to greater criminal activity.
The negative societal consequences of stubbornly high unemployment and growing income inequality aside, these trends are unfairly pummeling lower and middle income workers and their families while simultaneously making the rich richer than they’ve been in decades.
By funneling such an overwhelming portion of money to the very top income brackets and leaving next to nothing for the middle and bottom in the aftermath of the worst economic crash since the Great Depression, the economy is putting a huge bind on the middle class.
Middle-wage jobs have barely recovered since the recession, and low-wage jobs have started becoming much more common according to a data brief by the National Employment Law Project.
While low-wage jobs are certainly better than no jobs, the recovery for far too many Americans has simply resembled stagnant conditions with little to no improvement. This level of inequality at a time of economic hardship is not sustainable.