An hour-long radio interview with economist Yanis Varoufakis restates the economic inequilibrium that is destroying global society. Click here for the interview at Letters and Politics, KPFA Radio, April 6, 2020. This problem is seriously "bad economics".
The following I wrote in February 2020:
Eleven year view of our Economy -- 2009 to 2020
Wealth grew by 103%,
GDP by 25.4%, and
Wage income by 7.7%.
Wealth increases by $60 Trillion, from $58 to $118 trillion.
GDP increases by $4 Trillion, from $15.2 to $19.2 trillion.
Federal spending in 2019 was $4.4 trillion.
Wage income for nonsupervisory workers grows by $0.4 Trillion.
Average annual wage income for 82% of workers went from $40,000 to $43,000.
(All dollars adjusted for inflation) From 2009 to 2020 for all above facts.
In 2010, Q3, the Federal Reserve's report Flow of Funds placed total "household net worth" at $48.268 trillion for the 2009, Q1 quarter, the deepest trough of wealth elimination as a result of the Great Recession. Wealth had decreased by 25% since 2007. Adjusting for inflation $48.268 trillion equals $58.263 trillion in early 2020. Now, March 12, 2020, total private household net worth is $118.368 trillion (page 2, Flow of Funds report) double the $58 trillion, after 10 years 9 months.
What's not to like if you are a millionaire?
40% of American households own a net 0.1% of total wealth, and 0.1% of $118.3 trillion, or about $118.3 billion, which about $1,200 per adult in savings, says the Credit Suisse report on Global Wealth, Databook, page 168. The average wealth per adult for all adults in now about $473,000. See the Credit Suisse databook or the Federal Reserve's Flow of Funds, page 2, for total household net worth. Nearly all the $60 trillion new wealth went to the top-most wealthy.
Weekly and yearly wage income for 80% of workers, who are non-supervisory workers, was higher in March, 1965, than in February 2020 (see here). In 55 years, 1965 to 2020, the per capita disposable income, in "chained 2012 dollars" says the BEA.gov at Table 2.1, tripled, grew by a factor of three, three times, from $14,716 to $45,789. Wages for 80% did not rise while the economy tripled.
24% of adults report to have less than $250 in cash or savings or checking accounts, 33% have less than $1,000, and 54% have less than $5,000, states the Financial Well-Being report from the Consumer Financial Protection Bureau, Sept. 2017, page 80.
If you can follow those numbers you have to conclude there is a major illness in the land.
It's more than a question of fairness, it's a question of a structural defect in our economy.
How is this possible? How does wealth "out-grow" the entire economy while the income of about 80% of workers' grows so slowly? This imbalance displays the economic illness that characterizes our U.S. economy. Wealth is mostly held by a small group -- 89.9% is held by 10% of society (see the second graph here). Or the top ten percent own 75.9% says the Credit Suisse report, which also reports that 27% of adults own less than $10,000 and 56% own less than $100,000 (page 169). The average for all adults, I calculate from Flow of Funds is $473,000.
Wealth now is 5 times greater than the annual GDP, a historical high. We have an excess of savings, and that excess is generated by a structural defect. As I relate below, about 40% of Americans are either poor or experience material hardship, albeit much of the society is enormously wealthy and prosperous. We might imagine all parts of the economy would grow together, more of less at the same rate. But, no, they don't; they grow at hugely different rates to the benefit of a small group. Wealth outpaced the other relevant metrics. Wages here refers to "average weekly earnings for production and nonsupervisory workers" according to the BLS. GDP comes from the BEA.gov web page, Table 1.1.6, "Real GDP".
The details are below. But this blog is titled "Economics Without Greed" for a good reason. Maybe I should title it "Out-of-Balance Economics", and save my subjective judgment implicit in the word greed. Is a leech greedy? Not really. It's unconscious of its effect on the host. Are we leeches or humans?
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In this main essay I disentangle different reports that show extreme inequality especially among the 82% of workers who are nonsupervisory workers, using reports from the Social Security Administration (SSA), the Bureau of Economic Analysis (BEA), the U.S. Census, the Joint Committee on Taxation (JCT). This posting has three major sections: 1) the SSA 2018 report on wage income -- this is about 90% of this posting. It's long (at least 2,000 words) and confusing, so be ready, beware, expect overwhelming numerical detail, expect to be confused and at times bored.
2) I comment briefly on an interview with Grace Blakeley, author of Stolen: How to Save the World from Financialization. 3) And at the end I comment about an article that says the world's richest 500 individuals increased their collective savings by $1.2 trillion in 2018.
We Need to Fix Inequality — December 2019
Four policies will reduce our society’s extreme inequality:
1) Raise the minimum wage to $15 an hour (with exceptions). (Read more here.)
2) Increase the Earned Income Tax Credit, double it. (Read more here.)
2) Increase the Earned Income Tax Credit, double it. (Read more here.)
3) Empower labor unions to negotiate to raise workers’ pay. (Read more here.)
4) Enact infrastructure improvements; this will create millions of high paying jobs. It will tighten the labor market allowing workers to bargain meaningfully. (Read more here.) And it will transition the energy sector to green renewables, much needed now that atmospheric CO2 concentration has risen to a high level not experienced in 3 million years when trees were growing at the South Pole.
As I've pointed out many times, 55 years ago the "average weekly earnings of production and nonsupervisory workers" were higher -- imagine that, higher incomes for 82% of workers --- in December, 1964, --- 1964 --- than in 2019. It's time for a raise, since 1964 the economy has nearly tripled in per capita productivity! I get tired of repeating this claim. There are 106.6 million production and nonsupervisory workers in private sector employment, the median income for these workers, the backbone of the labor force, was slightly higher in December 1964 than in December 2019, see the graph at BLS. That's 55 years ago. The Federal Reserve graphs at FRED show "Real Median Personal Income" since 1974 rising by 37%, and another graph shows the "Real Disposable Personal Income" rising by 136% since 1974. Understand the median is the middle of the group, the average deals with the entire group. The people in the middle income and below saw less than 1% per year growth, yet the "mean average" growth for all was over 3% per year. Since 1972 the richest 1% captured 58.7% of all growth says "The New Gilded Age" report for the Economic Policy Institute (page 4 pdf version). "The pattern in the distribution of income growth reversed itself from 1973 to 2007, with over half (58.7 percent) of all income growth concentrated in the hands of the top 1 percent of families." Personal income, (called "disposable", meaning after paying federal taxes) stands now at $50,413 per citizen, or $201,652 for every 4 person household, yet the median 4 person household income was half the average, $97,522 (US Census, hinc01) in 2019. And the median for all households is $63,189, even though the average for all households, pre-tax, is $141,000. Confusion arises when comparing the per capita, the workers', the households's and the taxpayers' income. Nonetheless, it's the major event of U.S. economics.
As I've pointed out many times, 55 years ago the "average weekly earnings of production and nonsupervisory workers" were higher -- imagine that, higher incomes for 82% of workers --- in December, 1964, --- 1964 --- than in 2019. It's time for a raise, since 1964 the economy has nearly tripled in per capita productivity! I get tired of repeating this claim. There are 106.6 million production and nonsupervisory workers in private sector employment, the median income for these workers, the backbone of the labor force, was slightly higher in December 1964 than in December 2019, see the graph at BLS. That's 55 years ago. The Federal Reserve graphs at FRED show "Real Median Personal Income" since 1974 rising by 37%, and another graph shows the "Real Disposable Personal Income" rising by 136% since 1974. Understand the median is the middle of the group, the average deals with the entire group. The people in the middle income and below saw less than 1% per year growth, yet the "mean average" growth for all was over 3% per year. Since 1972 the richest 1% captured 58.7% of all growth says "The New Gilded Age" report for the Economic Policy Institute (page 4 pdf version). "The pattern in the distribution of income growth reversed itself from 1973 to 2007, with over half (58.7 percent) of all income growth concentrated in the hands of the top 1 percent of families." Personal income, (called "disposable", meaning after paying federal taxes) stands now at $50,413 per citizen, or $201,652 for every 4 person household, yet the median 4 person household income was half the average, $97,522 (US Census, hinc01) in 2019. And the median for all households is $63,189, even though the average for all households, pre-tax, is $141,000. Confusion arises when comparing the per capita, the workers', the households's and the taxpayers' income. Nonetheless, it's the major event of U.S. economics.
Here is the snapshot which might convince you of the unhealthy status of the U.S. economy:
Income is $14,300 for 50%, and $493,000 for 7% -- This is way out of balance.
The average yearly wage income for 83 million workers (half of all 167 million workers) is $14,300.
In comparison, the yearly income of a minimum wage worker, full-time year-round, is $15,080. The average yearly income for half of all 175.8 million taxpayers, 88 million, is $22,878 (see the JCT table, above). The average for half of the U.S. households (64 million out of 128 million) is $32,301, see U.S. Census, Income and Poverty, 2018, page 35).
all these are the average incomes for the lower halves.
83 million workers = $14,300 --- SSA figures
88 million taxpayers = $22,878 --- JCT figures
63 million households = $32,301 ---- US Census figures
The following is a rather complex, number dense explanation of distribution imbalance:
Average post-tax income per capita for 327 million citizens, 2018 = $48,147 (see BEA.gov. Table 2.1) This is shown at the lower part of the table, the per capita disposable income in fixed 2012 dollars.
Average pre-tax income in current 2019 dollars per capita for 327 million citizens, 2018 = $53,443 (author's calculation)
With average household size of 2.5 people, then average household income = $133,607
The average for the lower half of households, $32,301, is a quarter of the average for all households.
Total income, 2018, $17.819 trillion (BEA, Table 2.1), divide by 327 million citizens = $54,492/citizen.
And using the total income figures from the JCT:
Total JCT income, 2018, $15,007 trillion, divide by 327 million citizens = $45,893/citizen
Using JCT data, then ($45,893 x 2.5) the average household income is $114,733, not $133,607 that I report using BEA total income numbers.
The JCT lower half's average (divide $114,733 by $32,301) is then 28% of the pre-tax average for all households, still very close to the one quarter I stated for the BEA average.
A simplified explanation Imagine 100 workers each earning $100 on average for a total income of $10,000. Half of them earn $25 a year for a total (50 x $25) of $1,250 or 12.5% of total income. That's our present condition.
The other half earn $8,750, and that averages to (divide by 50) $175. Half earn $25, the other earn $175, that is 7 times the earnings of the lower half. Our present condition, and not a healthy one. (The source of the "12.5% of all income" comes from this report, Table 1, by Piketty, Saez, and Zucman. Other reports show a higher share, such as this one from Edward Wolff, but they show household not per adult income.)
If those lower half averages were doubled they would still be only half of the average for all. The lower half average would be $50, the upper half average $150. A differential of 3, not 7. When the income share for the lower 90% dropped from 55% to 38%, it lost 17% of the total income. The blue graph at my old blog, copied from a Levy Economics Institute report by Olivier Giovannoni, shows this 17% drop. If the 90% (and the lower 50% with it) could today add back that lost 17% it would increase by 50% its present income (38 x 1.5 = 57). Still, this would only be a 50% increase, but the example with the 100 workers each earning an average of $100 would not be the $50 to $150 differential, it would increase the $25 average to $37.50 and decrease the $175 average to $162.50, the differential being 4.3, still much better than today's differential of 7 times. Ergo: half would earn 1, the other half 4.3.
Someday people in nations will pay much closer attention to ratios like this one. Very recently Ralph Nader on his Radio Hour interviewed Sam Pizzigati who promotes a "maximum wage" which in effect establishes a ratio of low to high incomes. The Swiss in 2013 voted on such an income ratio, but it lost by almost 2 to 1. It is a new, radical idea, but someday. The proposal was to limit top income to no more than 12 times the lowest income.
As I explained from the blue graph from the Olivier Giovannoni study I reported on in the essay of February, 2018 , some 17% of income share shifted away from the lower-earning 90% since 1980, and that is about ($17,819 x 17%) $3.029 trillion, and distributed to 113 million households would be an income increase of $26,800 per household (or $22,577 using the JCT total income figures). Add that to the lower 50% average, and it's income average becomes $59,101 ($32,301 plus $26,800). This would restore an income distribution of 1980, and a balance that is societally and economically healthier, more prosperous and efficient. If you scroll down to the green and yellow box and find a calculation I did from a report "What Should Your Pay Be?" from the Economic Policy Institute, you'll see other more capable scholars with PhDs after their names have had delirious fantasies like mine. Maybe the reader will be infected with the contagion?
There's a good, informative article about the Piketty, Saez, and Zucman report on distribution at the Chicago Booth Review, here.
I myself have difficulty reading this stuff. It is boring and prosaically dismal reading, but important none the less. So trudge on and open the mind to a truly prosperous nation replacing the crippled one we now have.
More about income inequality: The high-earning 7.1% of taxpayers, representing 12 million taxpayers, earn 38.9% of all income, their average income is $493,495 a year. (This is data from the Joint Committee on Taxation, Overview, March 2019, page 34) The differential between the half of workers earning $14,300 a year and the high earning 12 million or 7.1% of taxpayers is a gap of 34 times. About 39% ($493,000) goes to 7% (12,000,000), about 8% ($14,300) goes to 50% (83,000,000). There is room for improvement, and I think it's obvious.
Another report compares the income of the top 1% of U.S. adults with the lower 50% of adults, reporting that the income differential is 81 times ($16,200 versus $1.3 million), and that in 1980 the differential was 27 times. (from Distributional National Accounts, 2016, Washington Center for Equitable Growth) The incomes of the lower-earning half of U.S. adults increased by 1%, from $16,000 to $16,200. Statistically flat. Growth took a detour around half of U.S. citizens over a 34 year period. Growth was shared with 32% going to incomes 50 to 90 percentile levels, 32% going to 91 to 99% percentiles, and 36% going to the top 1%. The authors, at this article A Tale of Two Countries, state: This ratio of 1 to 81 is similar to the gap between the average income in the United States and the average income in the world’s poorest countries, among them the war-torn Democratic Republic of Congo, Central African Republic, and Burundi.
Our economy has separated into the high earners and low earners. The United Way charity reports in its ALICE report that 40% of U.S. adults face hardship or poverty. It also reports that 40% of workers earn $15 or less per hour, and 60% earn less than $20 an hour.
Two Ways to Look at the Lower-Earning Half About 30% (precisely 29.6%) of workers, or 50 million, work less than full-time year-round, states the Bureau of Labor Statistics. They work part-time and/or partial year. It's safe to assume they earn lower yearly incomes. That leaves 117 million who are FTYR, full-time year-round. (Add the 50mn (30%) with the 117mn (70%) to get total workers, 167 million workers.) The SSA wage income report indicates that 50 million workers (30%), earn less than $17,500 per year, their average yearly wage income is $7,588. Add 20% to this 30% and we encompass the lower-earning 50%, including the median earning worker with $32,838 annual wage income. This next 20% earns between $17,500 and $32,838 and their average is around $25,000 yearly. Of the lower half, some 83 million workers, 60% (about 50 million) earn $7,588 per year average, and 40% (about 33 million) earn $25,000 yearly. In combination the average for the lower half is $14,300. To repeat, the entire lower half, 50 million plus 33 million, or 83 million total, earn an average income of slightly below $14,300.
The Second Way to Divide the Lower Half A recent report from Brookings Institute, "Meet the Low Wage Workforce", claims "More than 53 million people—or 44% of all workers ages 18 to 64 in the United States—can be defined as “low-wage workers,” with median hourly earnings of $10.22." The Brookings report is complicated. But here they immediately eliminate 27 million (about 1/6th) at the very bottom of the income ladder, and then add 53 million (2/6ths), a total of 80 million, just about median which is 83 million. So 1/6th is eliminated, and 2/6ths are meticulously described. The lower 27 million they say are summer-time students, or housewives working the Christmas season, or family members in a family business, or disabled workers; they are irregular, not primarily workers, hence their incomes are very low. The SSA report shows that about 27 million workers earn less than $7,500 per year, their average is $2,550. Brookings drops out 1 in 6 workers, the lowest earning workers, and then focuses on the next 2 in 6 workers who they term "the low wage workforce", and their report divides that 2 of every 6 workers, roughly, into 9 sub-groups. Their hourly wage median is $10.22, and the yearly median for all 53 million is around $19,000, says the Brooking report, page 12. The average income for all 80 million is $15,166, not that far from the $14,300 I have calculated from the SSA report with 83 million.
This is almost identical to the SSA report. The SSA report shows that the median for the lower half, 83 million, (for 2018), is $13,750, --- but their average is about $14,300. The big idea? Half of all workers are earning very little.
$50,000.44 is the exact average annual wage income for all 167 million workers says the SSA report for 2018. The lower half earn about $14,300 for an average. The top half average would be 35,700 plus 50,000, or $85,700 average wage income. ($14,300 and $85,700 evenly balanced averages to and average of $50,000.44. The top 50% earns 6 times the lower 50%.) This SSA reports on wages only, and non-wage income amounts to 46% of total national income, most of capital income going to the upper 5% (see SWA Table 2.4). And wage income is just 54% of all income. It is depressing. I calculate that the wages of the lower-earning 60% amount to just 15% of the national income, and wages for 80% amount to 27.7%. I derive those numbers from the SWA Table 2.4, Income section. Just another sign that wages should be higher, somehow. If you return to my first blog you'll see the blue graph from Olivier Giovannoni showing the descent of the labor-share going to the lower-earning 90%, from 55% to 38%, a loss of 17% of all income, about $3 trillion that once, before 1980, went to workers in the lower-earning 90% cohort, about $20,000 per worker.
This $20,000 a year figure is a major statement I make at this blog. I'll reproduce the Economic Policy Institute's calculation of what incomes would be if they had grown at the same rate as productivity:
Earnings -- Would Be ---- wage income
percentile
$10,000 ---- $17,783 --- a gain of 78% 22
$20,000 ---- $32,547 of 63% 36
$30,000 ---- $46,339 of 54% 49
$40,000 ---- $60,939 of 52% 61
$50,000 ---- $73,337 of 47% 70
$60,000 ---- $84,920 of 42% 77
$70,000 ---- $93,781 of 34% 82
$80,000 ---- $102,374 of 28% 86
$90,000 ---- $109,393 of 22% 89
$100,000 --- $116.953 of 17% 91
$110,000 --- $125,025 of 14% 93
$120,000 --- $133,155 of 11% 94
The economy produces too much surplus or hoarded income. More evenly dispersed that income would raise the living conditions of a majority of Americans. Presently it is being utterly wasted. And the division between high income and low wages is monumental.
Today, December 2019, the BEA.gov site, Personal Income, Table 2.1 shows a "disposable" per capita income -- meaning the income per citizen after paying federal taxes -- is $50,681 for all 325 million citizens. This is post-federal-tax income, and adding back the taxes the per capita pre-tax income is over $56,000. The household average pre-tax income is above $140,639 per household, but the household median income is $63,189. For 125 million households the average is $140,639, that is nearly 10 times the average wage income for the lower-earning 83 million, $14,300.
Even I have to slow down and think about what that means. Ten workers in the lower half earn the average for one household. That rates an !. Income is very low at the bottom. Is any economist reporting the $140,000 average household income? I think not. This shows how under-valued work is in our economy. Wage income can and should be raised somehow, I showed a few ways at the top. Perhaps rentier incomes must be analyzed and reduced -- patents, rents, land rents, intellectual property, along with taxation on dividends and interest incomes. This imbalance creates a surplus that is unused, wasted, it is more or less dumped into financial asset markets which boom adding nothing to the quality of life for most. And of course key expenses must be lowered: housing, healthcare, childcare, education.
While the stock market may be booming -- and that is not automatically a healthy sign, think of 1929 -- wage growth has stalled, and more and more jobs are low-wage low-hour jobs. The Jobs Quality Index reports that since 1990 some 32 million new private sector jobs were added to the economy, bringing the total to now 109 million such nonsupervisory jobs. But of the 32 million new jobs, 62.5%, or 20 million, are these low-wage low-hour jobs. Since 1990 only 37.5% are good paying jobs. Presently, the JQI report shows, 56% of jobs pay an average weekly income of $539 per week (yearly $28,028), while 44% pay an average weekly of $1,126 (yearly $58,552). The higher 44% earn more than double the lower 56% or 59 million. The low-income nonsupervisory share is now, February 2020, diving to the lows of 2010 to 2013. The Department of Labor projects new job growth will mostly be low wage occupations.
The reader may note that the JQI low-income average of $28,028 for 59 million workers is substantially higher than the Brookings study "Meet the Low-Wage Workforce". The Brookings paper found that $19,000 a year was the median for 57 million workers. And the SSA wage report showed that 52 million earn between $10,000 and $40,000, with the median at $25,000. This drops out about 34 million workers, 20% of workers, earning below $10,000 a year.
As I stated, wage income is just 56% of total national income. See the above link, SWA Table 2.4 Income section, and the Economic Policy Institute's web page.
A recent survey shows that 74% of workers live "paycheck to paycheck", respondents "said they would find it either somewhat or very difficult to meet their financial obligations."
Some 40% said it would be "very difficult" not to receive their pay, mostly bimonthly. And the Federal Reserve survey finds that 17% leave a portion of the monthly bills unpaid every month. A sign of household economic fragility and insecurity. "Even without an unexpected expense, 17 percent of adults expected to forgo payment on some of their bills in the month of the survey. Most frequently, this involves not paying, or making a partial payment on, a credit card bill (table 10)"
The Bureau of Labor Statistics reports that “average weekly earnings for production and nonsupervisory workers”, representing 82% of all workers, were higher in December 1964 than in December 2019, 55 years ago. During that 55 years the Bureau of Economic Analysis, BEA.gov (Table 2.1, Personal Income), reports that the per capita disposable income has tripled from $14,350 in 1964 to $44,455 in 2018, "real disposable per capita income" in 2012 chained dollars. As I said above, the actual 2019 dollar income per capita is $50,681. I repeat myself too often, but I think it important enough to repeat.
A dynamic similar to this, a booming stock market and slumping wage growth, resulted in the Great Depression. Marriner Eccles, the chairman of the Federal Reserve from 1935 to 1946 cited this dynamic as the cause of the Great Depression. The Wikipedia article provides this concise quote:
As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth ... to provide men with buying power. ... Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. ... The other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.
Joseph Stiglitz states "Trump should not get a pass on the economy" and details the reasons in a recent article.
Heather Boushey's new book Unbound, How Inequality Constricts Our Economy and What We Can Do About It, as the title clearly indicates, makes the case, and I think it's obvious, that a depressed income among the majority makes a depressed economy overall. From the Introduction: "Put together, the evidence shows that inequality doesn't just offend our sense of justice and it isn't merely a nuisance. . . . A rising tide can't lift all boats when some can't even get launched and others, pushed off course and deprived of navigation tools, founder on the rocks. Inequality constrict economic growth."
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I left the following paragraph as a comment at the Michael Roberts' blog on Feb. 4, 2020:
Growth bypasses the middle income level !!
Somewhere the economy is growing, but not for the incomes of middle level and below middle workers. Nothing shows this more clearly than the following.
The median per capita income versus the average per capita income -- I checked now at St. Louis FRED, the graphs. Since 1974 the median income, per capita, has increased by 37%, the average income, per capita, has increased by 134%. Growth? Looks like most of the growth bypassed the middle level income and went to the top. "Real Median Personal Income", and "Real Disposable Personal Income", two graphs at St. L FRED. Marriner Eccles, chief of Fed from 1935 to 1946 or so, wrote that a giant sucking machine sucked the consumer demand away from purchasers and gave the profits to the richest depriving them of customers. I'm paraphrasing. Growth in the period 1934 to 1941 was fairly high, at 9.4% per year 1934 - 1937 inclusive (see BEA.gov Table 1.1.1), so the New Deal worked, and mostly because of direct government job creation, in my opinion. It was sustained except for the 1937 period. It's sort of chicken and egg predicament, the causes seem so closely interrelated. Since year 2000 the average income has grown 5 times faster than the median, using the data from the above BLS report. Between 1974 and 2018 the average grew 3.5 times faster. Shared prosperity, anyone?
I should mention that at BEA.gov (Table2.1, Personal Income) it shows the per capita disposable income. For year 2019 Q4 it is $50,618 -- that's official. If 2.52 persons live in each household, the average, then the average household income is $141,000, and that's before paying federal taxes. Imagine, on average all households' pre-tax income is officially
$141,000. Tell the world.
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Growth bypasses the middle income level !!
Somewhere the economy is growing, but not for the incomes of middle level and below middle workers. Nothing shows this more clearly than the following.
The median per capita income versus the average per capita income -- I checked now at St. Louis FRED, the graphs. Since 1974 the median income, per capita, has increased by 37%, the average income, per capita, has increased by 134%. Growth? Looks like most of the growth bypassed the middle level income and went to the top. "Real Median Personal Income", and "Real Disposable Personal Income", two graphs at St. L FRED. Marriner Eccles, chief of Fed from 1935 to 1946 or so, wrote that a giant sucking machine sucked the consumer demand away from purchasers and gave the profits to the richest depriving them of customers. I'm paraphrasing. Growth in the period 1934 to 1941 was fairly high, at 9.4% per year 1934 - 1937 inclusive (see BEA.gov Table 1.1.1), so the New Deal worked, and mostly because of direct government job creation, in my opinion. It was sustained except for the 1937 period. It's sort of chicken and egg predicament, the causes seem so closely interrelated. Since year 2000 the average income has grown 5 times faster than the median, using the data from the above BLS report. Between 1974 and 2018 the average grew 3.5 times faster. Shared prosperity, anyone?
I should mention that at BEA.gov (Table2.1, Personal Income) it shows the per capita disposable income. For year 2019 Q4 it is $50,618 -- that's official. If 2.52 persons live in each household, the average, then the average household income is $141,000, and that's before paying federal taxes. Imagine, on average all households' pre-tax income is officially
$141,000. Tell the world.
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The Social Security Administration report on wage income for 2018 shows that 167 million workers submitted W-2 forms. Total wage income, $8.3 trillion, is only 56% of total national income, $15.0 trillion. The lower half of all U.S. workers, 83 million, earned in wages only 6.8% of the national income. This SSA report is exact to the last penny: $8,383,540,628,515.51 for total wage income. The average wage income was $50,000.44, not 0.43. nor 0.45, but 0.44. Precision.
The average wage incomes for each quarter of U.S. workers (about 40 million in each quarter) are: the first low-earning quarter earns $6,245 a year;
the second quarter earns $24,824;
the third quarter earns $48,125,
the last quarter earns $135,314.
It also breaks down to 3.4%, 12.6%, 24.1% and 60.0%, respectively, wage earnings only.
Again, the higher 50% earn 6 times the average of the lower 50%.
This is just wage income, the other 46% of income that goes mostly to the higher 50% is not included. The lower 50% of adults earns 12.5% of income, which means the top half earns 7 times more, 87.5%. See the crude income graph at my first blog, last essay. This is pre-tax income. The gap is 1 to 81 between the lower 50% and the top 1%.
It should be borne in mind that 70.4% of workers are full-time year-round workers.
the second quarter earns $24,824;
the third quarter earns $48,125,
the last quarter earns $135,314.
It also breaks down to 3.4%, 12.6%, 24.1% and 60.0%, respectively, wage earnings only.
Again, the higher 50% earn 6 times the average of the lower 50%.
This is just wage income, the other 46% of income that goes mostly to the higher 50% is not included. The lower 50% of adults earns 12.5% of income, which means the top half earns 7 times more, 87.5%. See the crude income graph at my first blog, last essay. This is pre-tax income. The gap is 1 to 81 between the lower 50% and the top 1%.
It should be borne in mind that 70.4% of workers are full-time year-round workers.
Another source of income distribution is Table 2.4 at State of Working America. It shows that 54.3% of the national income is wage income, and 45.7% is capital income, interest, dividends, proprietary, pension, in-kind, and other income. Of the portion, 54.3%, earned by wage earners, about half, 50.2%, goes to the lower-earning 80%, and 49.8% goes to the higher earning 20%. Therefore, of total national income 27% is earned as wage income going to the lower-earning 80% of households.
Wealth or Savings
What about wealth or savings? The Federal Reserve's Flow of Funds, March 12, 2020, shows total household net worth of $118.368 trillion. Let's guess there are 250 million adults, then each is worth an average of $473,472. Household's average then is $924,750. That is getting up there. Previously I had written: The average net worth (wealth) of each adult is over $400,000, and the average for each household is over $800,000.
Divide $113 trillion by 128 million =
$882,812 average household net worth.)
It's time to white-out those numbers and write
$924,750 average household net worth.
Since 2009 the private household net worth has doubled, adjusting for inflation.
Eleven year view of our Economy
In 2010, Q3 the Flow of Funds placed net worth at $48.268 trillion, and adjusting for inflation that would be $58.263 trillion. Now total net worth is double that amount, after 10 years 9 months. Wealth grew by 103%,
GDP by 25.2%, and
wage income by 7.7%.
The wealth data comes from the Fed's Flow of Funds, Z.1, Table B101. GDP from the BEA.gov table 1.1.6, and the wage income from the BLS. Wealth, or household net worth hit bottom after the crash in 2009, Q1. Before the crash it was about $64 trillion, so it dropped 25% to $48 trillion.
Private savings grew by $60 trillion, from $58 to $118 over 11 years. (10.75 years)
The lower saving 40% of adults have a net zero in savings. The lower-saving half own 1.2% of savings, says the Credit Suisse Bank report on Global Wealth (see the 2019 Databook, page 156). When asked if they could pay a $400 emergency expense within 30 days, 39% of U.S. adults replied to the Federal Reserve interviewers (page 21) that “No” they could not. This again is severe inequality.
From the same household well-being report from about two years ago, a total of 25% of adults said they postponed or did without either of three things: dental care, filling a prescription, or seeing a medical specialist.
From Federal Reserve report, page 21: "Even without an unexpected expense, 17 percent of adults expected to forgo payment on some of their bills in the month of the survey. Most frequently, this involves not paying, or making a partial payment on, a credit card bill (table 10). Four in 10 of those who are not able to pay all their bills (7 percent of all adults) say that their rent, mortgage, or utility bills will be left at least partially unpaid. Another 12 percent of adults would be unable to pay their current month’s bills if they also had an unexpected $400 expense that they had to pay. Altogether, 3 in 10 adults are either unable to pay their bills or are one modest financial setback away from hardship, slightly less than in 2017 (33 percent)."
"ONE MODEST FINANCIAL SETBACK AWAY FROM HARDSHIP"
Up above I mentioned #4 on my list, working to enact a Global Green New Deal to avoid the horrible consequences of too much carbon dioxide in the atmosphere. This project fortunately coincides with the infrastructure project which will create millions of jobs. (I subscribe to the American Prospect magazine, and this past month they ran a full magazine of articles about the GND, the link takes you to just one.)
One of my favorite sources of news and info is inequality.org.
The United Way charity, in its ALICE report, claims that 40% of Americans endure hardship or poverty.
________________________________________________________________Wage Income among the top 22.4%, with incomes above $65,000,
from the SSA report on wages.
Breaking down the top 22.4% into four segments shows this:
Income range and percent average income percent of total wage income
$65K to $80,000 6.64% $72,166 9.6%
$80K to $100K 5.45% $87,616 9.7%
$100K to 145K 5.63% $118,558 13.3%
$145K to over $20 mn 4.67% $291,949 27.3%
$65K to over $20 mn 22.39% $135,314 60%
The top 22.4% earn 60% of wage income.
The top 5% do very well, perhaps too well. -- 27.3% --
The Joint Committee on Taxation says 7.1% of taxpayers earn 38.9% of all income.
the top one percent:
$300K plus 1.0% $658,277 13.1% of all wage income
Some 211 individuals earn over $50 million, with an average wage income of $95,740,557.22.
Down to the last 22 cents; that's precision. These 211 workers earn an hourly wage of over $47,000 an hour, that's $376,000 a day. ?? They must set their own wages, I guess.
Take away: For both household income and wage income, the lower-earning 80% earn about 40% to 45% of all the income. The lower-earning 77.6% (130 million workers), earn less than $65,000 a year (averaging about $28,000 per year), earn 40% of all wage income, says the SSA report. And 80% of households -- not individual workers -- earn 44.5% of all (after-"imputed" taxes and after-transfer) income says the Tax Policy Center report at State of Working America. The top 20% earn 55.5%. Their average income is almost 5 times higher than the average for the lower 80%. --- Too many numbers? But what does it mostly say? --- Take away: 20% earn 4 times what 80% earn.
Let's say 80% earn $36,000, the next 20% earn $140,000, that is a four times difference, and the State of Working America, Table 2.4 shows that ratio.
From this blog, Political calculations:
The U.S. Census Income and Poverty report shows, page 32, that the median household income was $53,251 in 1973, and it has risen to $63,179 in 2018, a gain of $9,928 18.6% -- call it 20% in 45 years.
The BEA.gov Personal Income (Table 2.1) site shows per capita "disposable income" in chained 2012 dollars rising by 122%. Over a 45 year period, a 20% gain in median household income compared to a 122% gain in overall per capita income??? Inequality!!!
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I wrote this comment at the YouTube site where she is interviewed by The Real News:
:Blakeley is interviewed on radio show Behind the News, Nov. 7, 2019, with host Doug Henwood. Good interview. The neoliberal rationale is bankrupt, discredited, and still not solving society's problems. My take is that the economic surplus, or profit, is taken by a small 1% or 10%, while the rest get no growth and tighter budgets as prices rise, and as a result the surplus money is stored in financial assets own by the richest, essentially hoarded and wasted. Society never puts it to productive use. Today the ratio between U.S. GDP (annual output) to savings (wealth or household net worth) is at historical high, 1 to 5, or GDP of $21 trillion, wealth at $113 trillion (says Fed's Flow of Funds report, page 2). Wealth has doubled in the U.S. over the past ten years, because all this unused wealth has inflated values of financial assets, owned by the richest, obviously. Not a healthy system. We need a wealth tax, and a total system of democratic take-over of the economy, which Blakeley outlines in her last chapter, and she speaks about on the radio interview. She for instance speaks of a "People's Asset Manager" elected by pension holders to manage their pension assets, to direct the funds into corporations that demonstrate best behavior such as raising wages, supporting unions, democratizing corporate boards, adding employee ownership plans and employee buyouts. Average household pre-tax income is around $141,000 to $120,000 (depending) while half earn less than $63,000; and average wealth per household is over $800,000 while 40% can't pay a $400 emergency expense in 30 days."
Hear Grace here:
Nov. 7, 2019, Behind the News, Henwood
And listen to the next 30 minutes, an invaluable interview with Emmanuel Saez, U.C. Berkeley professor, and author of many earth-shaking studies on inequality of income and wealth, and lead economist for the site Washington Center for Equitable Growth. This center promotes a new government report in this article, "The Measuring Real Income Growth Act would add a distributional component to the National Income and Product Accounts, breaking out income growth into deciles of income and allowing us policymakers and the American people see who prospers when the U.S. economy grows. The bill was previously endorsed by 11 economic nonprofit organizations, including Equitable Growth.
The text of the letter and a link to the letter with all signatories listed are below.
We the undersigned economists and other social scientists are writing in support of the Measuring Real Income Growth Act of 2019. This act would direct the U.S. Bureau of Economic Analysis to report on growth in income for each decile of income earners."
_________________________________________________________________How Does Wealth Grow So Fast? Here's my answer.
I've reported that U.S. household net worth has doubled since 2009, from $48 trillion to over $113 trillion, as reported at the Fed's Flow of Funds report, page 2.
An article at Common Dreams reported that the 500 richest were each further enriched by $2.4 billion annual income that comes to $6.6 million a day, $274,000 an hour !!
Five hundred individuals increase their savings by
$1.2 trillion in 2018.
That number means nothing, so I break it down: it shows each one of the 500 billionaires increased his wealth by $2.4 billion in 365 days, $200,000,000 a month, $46,000,000 a week, or $6.6 million per day, or $274,000 per hour, $4,566 per minute, by $76 a second! Wow! What can one say? In Angola, Africa, the median adult lifetime savings (half have lower) is $1,370; so in 18 seconds each of the 500 add more to their savings than an adult in Angola owns after a lifetime of savings. In 8 minutes they make more than half of American households earn (on average) in a year. In 15 minutes, even while sleeping, they make more than the $65,905 of the median lifetime savings per adult in the U.S. Day after day, $6.6 million. How do I know that? See Credit Suisse Databook, 2019, page 117. I'm not sure why that means anything at all, but it strikes me as strange, sort of dark and disturbing. Most humans are endowed with a mature sense of empathy, with an inkling of common sense that binds all humanity together. Extremes of inequality are grotesque. Did it take you a minute to read this? It's value not invaluable, not worth $4,566 either.
All these damn numbers about dollars. Why do we put up with it?
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