Distribution of the Nation's Income, It's Out of Balance

 A dramatic shift in income distribution occurred between 1976 and 2023; the shift saw the lower-earning 90% of households losing 15.4% of the national income. They were earning 62.4% of all income in 1976, and earned 47% in 2023. The web page RealTime Inequality ( realtimeinequality.org ) produced by University of California Berkeley economists, shows this income distribution shift. Conversely, the top 10% were earning 37.7% and now earn 53.1%. It's ridiculous to think that 10% deserve so much of the national reward for work.We have in the U.S. a crisis of poverty and hardship, of people struggling to get through life without the resources they need. Approximately 42% endure hardship and/or poverty, and even 27% of the population went without some type of medical care in 2023  because they could not afford it. Some 52% of adults say the "Largest emergency expense" they could afford is $2,000. (See the ALICE report for the 42% of  U.S. households, and the Federal Reserve's report "Economic Well-Being" for the 27% and 52% numbers, pages 31 and 33.) The average income per household is $173,000 (the national income is $22.713 trillion shows the Fed's Flow of Funds, page 10, the number of households was 131 million in December, 2023), and the per capita income of every human after-paying-federal-taxes income is $62,257 (BEA.gov, Table 2.1, line 38), and the national income divided by all citizens is $67,598 ($22.713 trillion divided by 336 million). Therefore, the typical family of four should have an income of $270,392. The median 4 person household had an income of $124,600 in 2023. One would think . . . that a mere $2,000 would be in reach of every adult! But it is not. It's time to revamp our system and toss out our blind acceptance of the invisible hand, or whatever it is, and create a fairer society. That's the gist of this post and web blog. 

The 15.4% shift equals $3.556 trillion that once went to the lower 90% of households --- and that amounts to $30,393 per household for 117,000,000 households, all earning less than $200,000. (see Flow of Funds, page 10 for total national income amount).   

Imagine 117 million households with $30,000 more income each year. That would look like the U.S. economy in 1976. We did it then, we can do it now. The report from the RAND Corporation also shows such a dramatic shift, Trends in Income from 1975 to 2018. They show the median adult worker earning $26,000 in 1975 and $36,000 in 2018, but the counterfactual income would have been $57,000 had growth been shared equally. The worker at the middle income position saw his annual income grow by $10,000, from $26K to $36K, when it could have grown by $31,000, from $26K to $57K. Each middle or median worker would have $21,000 more income yearly. A two-worker family of course would have seen a gain of over $40,000, at the median income level. 

In the 34 years between 1973 and 2007, 58.7% of the nation's economic growth was captured by just 1% of the population. This begs repeating: Nearly 60% of growth went to 1 person, the other 99 persons shared 40%, over 34 years. Sixty parts went to one, and the other 40 parts were divided among the 99, giving 0.404 to the other 99. And 0.404 times 99 is 40. Does that seem fair? Am I wrong? Maybe the author of the study slipped up. Since 2007 the pattern mostly continues. This is the finding of "The New Gilded Age", published by the Economic Policy Institute, page 12. The benchmark figures for the total economy are these: during this 34 year period the "Real GDP per capita" grew by 93%, nearly doubling; the one percent saw their average income grow by 216%, more than tripling, the study reports. This is tremendous growth. 

In contrast, during the previous 28 years, 1945 to 1973, the lower-earning 99% captured 95.1% of the growth and saw their incomes increase by 100.1%, while the 1% captured only 4.9% of growth, and increased their incomes by 34%. The Fed's graph shows during 27 years (not 28) the "Real GDP per capita" grew by 88%; and add another year it grew by 94%. In 28 years, the earlier period, it grew the same amount as the next 34 years. 

It's difficult to imagine the distribution of growth being so crazy and unfair; and after 2007 the pattern continued. This income distribution shift should be called a "market failure", something went haywire. Only government intervention can reset the error. The word socialist crops-up in my mind at this point. Am I a socialist? Economics Without Greed is a slant I believe in. Almost a majority of the nation's households and families are experiencing a crisis of economic insecurity, it's time to seek solutions.  

            Wealth Inequality section     

My writing I recognize is tiring, over-burdened with numbers and details. I advise readers skim or quit. Try to grab one or two main ideas. Stop when you begin to sink. As the author I can only warn you. 

Very unequal sharing of income leads inevitably to extreme wealth inequality. Now, take a quick look at wealth inequality using the Fed's Distributional Accounts page. The top 10% own 67% of all private wealth, the next 40%, the 50th to 90th percentiles, own 30.8%, and the lower 50% own 2.5%. The RealTime Inequality reports the 1% and the next 9% own 74,7%, the middle 40% owns 25.3%, the bottom 50% own 0%. 

              Belgium     

Wealth is also measured by the Credit Suisse Bank's Global Wealth report. The last edition of the Databook was published in 2023 for year 2022. It shows (page 140) that in Belgium the top 1% own 43.9% of all wealth. This 43.9% is the lowest percent-share among 38 major nations -- the most equal sharing of wealth. People at all levels own significant wealth in Belgium; the lower decile (10%) own a bigger percent-share than all other 37 nations. In the U.S. the top 10% own 75.9% (almost the same as the RealTime report); the U.S.'s wealthiest 10% owns (75.9 minus 43.9) 32.0% more than the Belgium 10%. In the U.S. that's equal to about a third of $150 trillion, or $50 trillion. Each household in the U.S. lower 90% would own about $427,000 more wealth if . . . . . . we could match the Belgium ratio. Is this a minor quibble? Maybe. What does it take to share wealth? Is it their beer, their water, their culture? Especially when billionaires can't even count the immense wealth they own, much less put it to productive use. Why not share the wealth? Answer that and you'll find yourself isolated.     

In the U.S. private household wealth has multiplied over the decades, since 1989. The above graph, Distributional Accounts, starts in 1989, the beginning year of the Fed's graphic. "Wealth" has grown from $20.88 trillion to $154 trillion in Q2 2024. It grew by a multiple of 7. How fast did the national income grow? It grew from $5.6 tr. to $25.7 tr, a multiple of 4.9. These figures are nominal, not "real" meaning "inflation adjusted". 
Therefore wealth is growing 51% faster than income. Wealth grows faster, much faster. 

Nationally, in 1989, the nominal national income was $5.6 trillion, and the total wealth was $20.88 trillion. The 1989 income to wealth ratio is 1 to 3.7 ratio. By 2024 wealth grew by 189%, nearly tripling. National income, reported by the Fed's Flow of Funds, is $23.232 trillion, and total wealth stands at $163.797 trillion (Flow of Funds, pages i and  10). The income to wealth ratio is 1 to 7.0. The income to wealth ratio of 2024 is almost double the ratio of 1989.   

The ratio between annual income and wealth is captured in this graph: 

 The question is "Do we have too much wealth?" Apparently the historical average, 1946 to 1996, was 520%. And we stand today at 784%, after hitting a high of 835%. We have 50% more wealth than the 50 year earlier average. Is that too much? Since most of it is held by 10%, it is too much.  

Are U.S. citizens saving more income, thereby increasing total wealth? Far from it. Excess wealth simply drives up the price of financial assets. That's the dynamic for wealth growing much faster than income. Has the net savings rate increased since 1996? The BEA shows this is not the case, Table 2.1, line 35. In fact the savings rate has decreased steadily since 1980, where the lower graph begins, at 10%, to today's rate of 5%. By savings less we see total wealth balloon? How is it possible?   

It's not that strange. When so much of the nation's surplus, call it profits, is received by a minority who cannot put it into productive enterprise, the result is an inflation of paper financial assets. The same thing happened in the 1920s leading into the Great Depression. This phenomenon is driving today's stock prices. The Dow Jones Index could crumble and only 10% of society would directly lose wealth. Of all corporate equities or stocks, 87% are owned by the top 10% of households, shows the Fed's Distributional Accounts. But indirectly a huge catastrophe would befall all workers and families as serious unemployment would ensue. 
It may be too much info, but here's the Distributional Accounts breakdown of who owns stocks (going to the web page shows details more clearly. The three bars to the left are the top 10%, the next to right is the 50 to 90 percentiles, most right is the lower 50%). 

Adjust the 1989 total wealth figure of $20.88 trillion for inflation, and total wealth in 1989 is $52.48 trillion in 2024 dollars. But in 2024 total wealth is shown at $151.68 trillion (or it's $163 trillion using the Flow of Funds figure, page 2), indicating that total wealth has almost tripled in value, from $54Tr to $151 Tr. (since 1989). "Real Disposable Income per Capita" rose by 81%, 1989 to 2024. In the same 35 year period "real" wealth grew by 201%, and per capita wealth grew by 120%. As best as I can determine, it's a difficult bit of arithmetic. But it may be accurate; wealth grew 50% faster than income (120% vs. 81%). I wrote that before. 

Using the more accurate figures from the Flow of Funds nominal wealth has tripled, by about 237%  --  since January, 2009. This is the low point for total wealth which decreased because of the Great Recession. Since January, 2009, adjusting for inflation it has risen by 125%. As a result of the housing-mortgage crisis, net wealth dropped to $48 trillion in January 2009 reports the Flow of Funds.   

Did weekly earnings for 80% of workers who are nonsupervisory also triple or double? Look at the graph below. The high-wage point is 1973, and the low-wage point is 1996, and now, 2024, we are a little below the December 1971 level. Over 53 years and enormous growth, wages for 80% of workers are lower! Weekly earnings, I call them wages, fell dramatically from 1973 at their peak and reached their nadir in December, 1996. Since their nadir wages adjusted for inflation have risen by 24%. But, and it's a big persistent BUT, the "real disposable personal income"since January 1993 has risen by 69%. Wages rarely keep up with the growth rate of the economy. Not since 1946 to 1976 era. Since 1973 wages for the "nonsupervisory" 80% of workers have decreased by 4%. More accurately,   since 1973 -- a 51 year period -- wages have fallen by 4%, 

while wealth increased by 200% (tripled). And the GDP per capita increased by 157%, or a multiple of 2.57.      See GDP/capita here.   

Is something  WRONG????????????  

This is to say, economic growth detoured the middle class worker. Only the induction of wives into the working population kept household incomes at their 1980s level. The Washington Center for Equitable Growth publishes on this topic. From the Conclusion: "Simply, women’s participation in the workforce has made the key difference for middle-class families and more vulnerable families on the brink."
The graph below shows the collapse of "weekly earnings for production and nonsupervisory workers", meaning "employees"; they have fallen by 4% in the past 51 years. The reader should note the difference between the 1973 level, the 1979 and 1989 levels. The RAND Corporation study shows that wage income for men has dropped by 4% during the 43 years (1975 to 2018) of its study.  

What is happening overall? The GDP per person and the total personal income per person grows much faster than the middle family's income and faster than the average workers' incomes. That's the problem! 

And did median household income triple? This time we look from 1984 to 2023. The real (inflation adjusted) 1984 median household income is $58,280, while 

the "real" 2023 median household income grew to $80,610, a gain of 38%. (go to Fed's FRED web page, and adjust for inflation at the BLS page). 

Same period, 1984 to 2023,  

"Real disposable [after tax] personal income per capita" doubles, up 102%, between 1984 and 2023, increasing from $24,851 to 50,250. I call them benchmark indicators of growth.

And the total household net worth, or private wealth almost triples, up 189%, increasing from an inflation adjust $48,069 to $138.498 trillion. 

 

Compare the growth of 38% for middle families' incomes with the overall benchmark gains for the economy, the Real GDP/capita, up 100%. 

and Real Personal Income/capita, up 102%.

and real private wealth, up 189%.

You needn't tell me that I'm repeating myself: Many people were left out of prosperity growth. 

 

What could that mean? It means the economy serves only the wealthiest. 

The RealTime Inequality site shows income growth between 1976 and 2023 for four groups: the top 1%, the next 9%, the middle 40% between the 50th and 90th percentiles, and the lower-earning 50%. Note the extreme difference in growth. 

The Fed's Distributional Accounts page shows the ownership of corporate stock by population percentages. The top-owning 10% own 87.1% of all stock: 

And since Febuary 2009 stocks on the S&P 500 have increased by almost a factor of 8, from 700 to 5700. A factor of EIGHT. What was worth $1 million almost 15 years ago is now worth $8 million (or billion or trillion). For greater accuracy we should adjust for inflation the 2009 $1 million. It turns out that the $1 million in 2009 buys what $1.45 million buys in December, 2023. Therefore, the $1.45 million transformed into $8 million by sitting in the S&P 500 index. That's an increase by a multiple of 5.5 times or 450%.  --- stocks quintupled in value in 15 years. The real median household income increased by 18%, not 450%. 

When income inequality gets bad, the wealthy have no productive outlet for their increasing wealth; they deposit their over-sized income money into paper assets we call financial assets. The Federal Reserve calls them "nontangible assets". As more and more income pours into the value of paper assets, the total value of "nontangible assets" rises, but does nothing to increase the amount of "tangible" assets. The quality of life does not improve for the majority. GDP growth is a myth of prosperity. The ratio of total wealth to annual national income is close to a record high in Q1 2024 (Flow of Funds report, Table B.101, line 50, page 140). The Fed's FRED page shows the graph: 

From January 2009 to December 2023 the "Real Disposable [after-tax] income per capita" grows by 28%. The "Real Median Household Income" grows by 18%. And for 80% of workers the real "average weekly earnings for production and nonsupervisory workers", increase by 11%. The "Median usual weekly real income" for this 80% of workers increased by 8%.  And "real" total household net worth grows by 90%. Or using more exact data from the Flow of Funds, real wealth surges from $86 trillion to $155 trillion, a gain of 114%, from January 2009 to December 2023. A reader can rush through these numbers and forget them. I do it often. Wealth increases about 8 to 11 times faster than weekly earnings for 80% of workers in a 15 year period. What is happening to the U.S. economy?   

We have too much wealth, it produces nothing. It gives a small minority a sense of security. It distorts markets incentivizing production for expensive purchasers at the expense of lower-earning purchasers. The housing market is a case in point. Wealth sits idle indefinitely, wasted when it could be serving society, a definition of hoarding. I think of it as sociopathology, a sickness, a source of anxiety.

 
Today's ratio of national disposable income to wealth stands at 776%, and this is 49% higher than the historical level (1946 to 1996) of around 520%. 
The historical average of this ratio indicates that out of a total $160 trillion in “household net worth” we have about $45 trillion in excess private wealth. The appreciated value of financial assets is often converted into higher housing prices, and then the housing market only serves the wealthy. 

In 1979 the median sales price of a house was 3.6 times the average income of a nonsupervisory employee; and in 2023 the price was 7.0 times the annual income of this same nonsupervisory employee. "Average weekly earnings for production and nonsupervisory workers" -- Wages --  were higher in 1971 than in 2024, as the upper graph shows.  (https://data.bls.gov/timeseries/CES0500000031)

      Financial Fragility and Insecurity     

The United Way charity publishes the ALICE report each year, Asset Limited, Income Constrained, Employed. It shows that 42% of U.S. adults live with economic hardship or poverty, only 58% are above the hardship level. Other studies show this is roughly the condition of U.S. families. For example the survey from the Consumer Financial Protection Bureau, December 2023, page 13: "In January 2023, 37.8 percent of households had difficulty paying at least one bill or expense in the previous year." I could find more such reports easily. For instance, the Credit Suisse Databook for 2022 shows the lower 40% own only 0.1% of all U.S. wealth, which amounts to about $1,500 per adult. The top 10% own 75.9%, and that leaves 24% for the 40th to 90th percentile middle 50%. (page 140, Credit Suisse Databook. This Databook has been removed from the web, probably due to the merger of C.S. with UBS Bank.) In 2017 the Consumer Financial Protection Bureau published a Financial Well-Being report which shows, on page 80, that 54% of respondents have less than $5,000 in liquid savings, 33% have less than $1,000, and 24% have less than $250. And the "average" household savings is $1.2 million. A third of U.S. adults can't find $1,000 in cash!  

The Fed's 2024 report "Economic Well-Being of U.S. Households" shows, page 33, that 52% of American adults cannot afford more than a $2,000 emergency expense. And 37% can't find $400 in a 30 day period to pay an emergency expense. This is a nation with an average household income of $170,000, yet half the adults can't find $2,000 in a pinch. This shows the  ridiculous imbalance of income and wealth. 

Two key stats to remember is that the total national income divided by all households is $170,000 per household; and the average household "net worth" is $1.2 million. Yet the lower-earning 50% of households all earned less than $80,610 in 2023. (I use the figures from the Flow of Funds, page 10, $170,000, and the U.S. Census, 133 million.) $170,000 is average. The lower half is not doing well, and it's a crime rarely described as a crime. The RealTime Inequality site shows some details. Households' "Average Real Factor Income" for the lower 50% is $18,900; and their "Average Real Post-tax Income" is around $39,200 – it more than doubles when social benefit transfers are added. (Those figures are from RealTime Inequality.)  

The Congressional Budget Office published in September, 2024, the report "The Distribution of Household Income in 2021". The Appendix C shows the breakdown of pre-tax income. The average income for the lowest 20% of households was $22,500 in 2021; the highest quintile average was $418,100 -- 18 times higher than the lower 20%. The top 1% average is $3,126,400. The lower 20%  income is 0.7% of the higher 1%. How do you think I feel about that? Post-tax ratios are much different, fortunately.     

     A Ratio of Income Inequality    

I find the best mental picture is a ratio from lower 50% to middle 40% to upper 10%. I show the households' ratios using the RealTime data. 

                                                                                  50%  - 40%  - 10%

The ratio for households factor (or market) income is 1 to 6.2 to 33.9. 
The ratio for households post-tax income is                1. to 3.2 to 12.8. 

In dollar amounts for factor income it is        $18,900 to $117,900 to $640,800.
For post-tax income it is                                 $39,200 to $127,000 to $503,500.

Half of households receive $40K, the next 40% $130K, the last 10% $500K.
                                               $1   --------------    $3.25    -------   $12.5                          

I maintain this is a disaster, pure and simple. 

Taxation and social benefit programs make life liveable for the lower 50%. 

           Some Solutions        

We need policies to raise incomes and lower costs; that would entail support for the PRO Act and the RewardWork Act to reshape the architecture of the largest corporations. Other lesser improvements would be a much higher minimum wage for the 2,000 largest national corporations, a larger Earned Income Tax Credit, and a refundable (universal) Child Tax Credit. To further raise incomes we need a public employment program along the lines proposed by Philip Harvey to maintain a tight labor market which automatically raises wage levels. As I suggest in my previous blog post, we could also implement a national corporate charter for the largest 2,000 national companies and impose a mandatory employee bonus each year. These companies employ about a third of all workers.     

To lower prices we need Medicare for All. The recent Commonwealth Fund report shows, again, the failure of our healthcare system. We need a very large public housing program along the lines proposed by Bernie Sanders. We should expand the Child Tax Credit, and include a universal child care and pre-K learning program, and provide a cancelation of student debts. The list goes on. Mostly our minds are paralyzed by the idea we have not enough money to create these benefits -- But $170,000 is the average household income, and $1.2 million is the average savings -- we have the money. 

How high was the highest personal tax rate? The IRS has the data, and the BLS has the inflation adjustment calculator. The tax rate on the highest personal income -- 1948 incomes higher than $5.3 million in 2024 dollars, and in 1964 incomes above $4,000,000  -- the rate was 90% on income in excess of $4 or $5 million. There are 1 million tax payers with incomes above $1,000,000 shows the Joint Committee on Taxation, May, 2024. They earn 15.5% of all income; they are 0.6% of all taxpayers; their average income is $3.3 million; they pay an effective tax rate of 30.4% (on income above $600,000 they pay a rate of 37%). And their taxes equal 23% of all tax revenues. (page 38) 

That's a welter of numbers. Probably they avoid a lot of taxes through evasion and under-reporting. We could also raise the capital gains tax and the corporate tax. A wealth tax should be explored. Senator Elizabeth Warren has proposed a wealth tax on estates above $50 million. The Center for Budget and Policy also advocates for higher tax revenues. Out of 38 developed nations only 7 take in less in taxes (as a percentage of GDP) than the U.S. If the U.S. raised 42% more tax revenue we would equal the OECD average; 42% equals $1.8 trillion new tax revenues. We tax $4.3 trillion; we could tax $1.8 more bringing in a total of $6.1 trillion -- then we would be average among developed nations. In short, we can tax our way out of the national debt problem and the expanding need for social benefit programs. I wrote an essay about Trump's One Good Idea. "‘Personally this plan would cost me hundreds of millions of dollars, but in all honesty, it's worth it,’ Trump said." Personally, this plan would not cost me a penny, it's one of Trump's few good ideas. It's at my old blog. He proposed taxing wealth and paying off the national debt.   

But mostly we need higher wages for low-earning workers. The lower-earning 55% of U.S. full-time workers, 60 million workers, have an average income of $36,563/year (see the Job Quality Index). Boosting the pay of full-time nonsupervisory workers would also boost the incomes for 28 million part-time workers. Therefore, the target is to raise incomes for 88 million workers, or about 55% of all workers. 88 million workers is a majority of workers. 

          Social Security Report on Wages, 2022 and 2023    

Looking at the wage income report from the Social Security Administration for 2022, 54% of workers earned less than $45,000 in 2022, their average annual income was $20,226. (The RealTime Inequality page shows an average income of $25,200 for this 50%.) Living off just $20,226 or $25,200 per year  is very difficult, and socially it has an unhealthy effect on all of us. It may challenge the reader's comprehension but the total collective wage income earned by the lower-paid 54% of U.S. workers is $1.887 trillion, which is 18% of all wage income and 9% of the national income (see page 10). I am sure only geniuses can remember detailed facts like that -- suffice it to say, wage income for over half of all workers is very low -- the take home pay for half of all workers is just 9% of the total national income -- and should be raised. 

The SSA report for 2023 was released in late October, 2024. It shows the median worker earned $43,222, up from $40,847, an increase of $2,375 or 5.8%, or a real 2.4%. 

From Q4 2019 to Q4 2023, 4 years, the median worker's annual income increased by 1.4% per year. The real after-tax income per person increased by 2.1% per year. The GDP per person increased by 2.0% per year. The national income by 0.9% per year (Flow of Funds, Q4 2019 to Q4 2023) The weekly earnings of 80% workers (nonsupervisory) workers increased by 0.9% per year. 

The RealTime Inequality page, adjusted to the dates March 2019 to March 2023 shows for
             --- Real Growth, Factor Income, Working Age Adults age 20 to 64  --  
the lower 50% saw an income increase of $950 a year, 
the 50th to 90th percentiles saw a          $1,500 increase,
the top 90th to 99th saw an                    $11,000 increase,
and the top 1% an increase of           $230,000.     -------     very telling of our sick economy.   

         Wealth Supremacy, the book by Marjorie Kelly          

There are many, many ways to restore income balance. ----------   Marjorie Kelly latest book Wealth Supremacy takes on the imbalance of wealth. Her studies will lead to economic justice and a richer society for all. The first hyperlink above leads to an interview with Laura Flanders. 

Kelly objects to the imbalance of power that great wealth creates. As I've laid out above, we have an inordinate surplus of savings, which are resources wasted. Kelly says that in the 1950s total financial assets were approximately equal to the annual GDP, and today they are 5 times GDP -- this is excessive savings, sometimes referred to as hoarding. (Attempting to be accurate, I looked up the total value of financial assets, $122.516 trillion, and the total national income, $23.094 trillion. The financial assets' total is 5.3 times greater.) (See Fed's Flow of Funds, Tables B.101 and F.3) 

So what? Paper assets do not clothe, house or feed anyone. Financial assets simply scour the earth attempting to increase their value -- this condition activates and creates an extractive, parasitical  economy that Marjorie Kelly talks about. 

A final comparison of Ratios, Income to Wealth 
As you might suspect, I compared some ratios, this time the ratio between National Income and total private savings, years 1987 with 2024. I am trying to show that we have too much wealth today. I used the Federal Reserve graph pages here and here. 
Finding: in 1987 the ratio of income to private savings was 3.61.
               in 2024 the ratio was 5.51. 
If the national income to national savings ratio were equal to 1987's, then instead of having $151 trillion in savings we would have $99.365 trillion. About a third of savings, $51 trillion, would be converted back to income for the lower 90%. The federal budget is about $6.1 trillion in 2024. 

Now I'll look at the RealTime Inequality page and compare the 1987 income-to-wealth ratio with 2024 ratio. This is not rocket science, anyone can do 6th grade math on a calculator.
Conclusion: we have about $57 trillion more savings than needed. If we had the same ratio as 1987, national savings to national wealth, then instead of having $138.5 trillion savings we would have $81 trillion. RealTime reports $138 trillion total wealth, and the Fed reports $163 trillion; they do not always agree, but mostly agree. 

By chance today I went to the RAND Corporation report of 2021 about inequality of income since 1975 to 2018. From the first paragraph, this sentence: "Furthermore, over the 43-year period from 1975 to 2018, the population below the 90th percentile would have earned $47 trillion more had their incomes grown at the pace of overall per capita economic growth."

I find it interesting that the $47 trillion figure shows up, almost $51 or $57 trillion. 

Having excessive savings is a sign that the minority wealthy are super-wealthy, and a lot of resources are going to absolute waste; they will never manifest as a benefit to our citizens. "Tax waste, Tax wealth" makes a bumper sticker slogan; excess wealth is waste, tax it. ---------  I'm cutting things short, and short is confusing enough.    

__________________________________________________________

Here are a few factoids worth adding to one's economic data collection: 

First from "The New Gilded Age", published at Economic Policy Institute, authors Sommellier and Price, (page 12 of the pdf version):  

"The average inflation-adjusted income of the bottom 99 percent of families grew by 100.1
 percent between 1945 and 1973. Over the same period, the average income of the top 1
 percent of families grew by 34.3 percent. Faster income growth for the bottom 99 percent
 of families meant that the top 1 percent captured just 4.9 percent of all income growth over
 the period. (Data are shown in Appendix Table B7.)

 The pattern in the distribution of income growth reversed itself from 1973 to 2007 as the
 income of the bottom 99 percent of families grew much more slowly (by just 15.4 percent)
 compared with the top 1 percent, whose average income grew by 216.4 percent. As a
 result, over half (58.7 percent) of all income growth in this period landed in the hands of
 the top 1 percent of families. (Data are shown in Appendix Table B8.)

RAND Corporation report, "A New Approach to Measuring Income Inequality Over Recent Decades"          -----         Published Apr 29, 2021

"Furthermore, over the 43-year period from 1975 to 2018, the population below the 90th percentile would have earned $47 trillion more had their incomes grown at the pace of overall per capita economic growth."

"For workers at the 25th percentile of income, actual income in 1975 was $28,000 per year. Had income growth for this group matched the economic growth rate, their income would have risen to $61,000 by 2018, but it actually rose to only $33,000." Instead of rising by $33,000, doubling, it rose by $5,000. They are reporting on full-time year-round workers, at the 25th percentile. If they had included part-time workers, the 25th percentile earned around $13,000, not $33,000. (See SSA report on wage income for  year 2018.) 

Dollars and Sense Magazine, July 2024, John Miller --

"Higher stock prices especially benefit the richest 1%, who owned 49.4% of stock by value at the end of 2023, according to the Federal Reserve Board."   
And 93% of all stock is owned by 10% of households, states an article at Yahoo Finance.    

The S&P 500 average increased by 7.9 times between Feb. 2009 and July 2024 -- an index fund of $100,000 is now worth nearly $800,000 -- nearly an 8 fold increase in 15 years. Adjusting for inflation the S&P 500 "real" average increased by a multiple of 5.3 times or by 430%; $100,000 invested in 2009 is now $530,000. Have wages increased for nonsupervisory workers, 80% of all workers? Yes, by a multiple of  1.11, or by 11%. -- compare 11% with 430%. 
This is not the picture of fairness. 

Total household "real" net worth between March 2009 and June 2024, 15+ years, doubled plus, it  increased by a multiple of 2.2 or by 122%, inflation adjusted. In other words, it doubled plus. (Federal Reserve Flow of Funds, Table B.101, March 2009 and March 2024). 
The rich get richer, the not-rich watch prices for everything climb higher and higher. 

A major cause of recent inflation, out of many, is corporate price gouging. In four years the share of the national income going to corporate profits doubles; the share increases from 6.0% to 11.5%. The Fed's Flow of Funds report, page 10, shows the share of national income going to pre-tax profits for "domestic nonfinancial" corporations was 6.0% in 2019 and 11.5% in Q1 2024 (see the Flow of Funds, page 10, for both 2009 and 2014). 
One has to analyze this. How do profits double while inflation increases by 22%? During inflation a corporation has to pay more for its inputs and its labor. How then does this increase of expenses allow for a doubling of profit? Price gouging is a simple answer. The writings of Servas Storm and Isabella Weber with Evan Wasner analyze this free-market defying process. 

Do I need to say again, "The system is broken."?  

Is There a Solution?

          Mandatory Bonuses to Employees     

1. Issue national corporate charters to the largest corporations with more than 5,000 employees.
2. Mandate annual bonuses to all employees earning less than $70,000/year. 

The largest U.S. corporations have allocated 96% of their profits to shareholders (owners) through stock buybacks and dividend outlays over the ten year period 2012 to 2021, and even since 2003 shows the research of William Lazonick. Wages for 80% of all workers have not grown since 1969. The Bureau of Labor Statistics shows wages for 80% of workers are no higher since 55 years ago, while the "Real" (inflation adjusted) per capita income has grown by 181%, nearly tripling. The result is stifling inequality, 41% of Americans are either poor or struggling with expenses. RealTime Inequality documents an income shift of 15.4% of total national income (from 37.7% to 53.1%) going in favor of the top-earning 10%. (See my previous posting.) Restoring the income distribution profile of 1976 would add between $27,000 to $30,000 to 90% of all households and families, all who earn less than $200,000 per year. 

The big picture: income for all triples, but for 80% of workers income stays flat; 41% of Americans live in poverty or hardship. If we had the income distribution of 1976, then 90% of households (all with annual incomes below $200,000) would all have about $30,000 more income, and poverty would be eliminated. About $3.4 trillion of income would be shifted back to the lower 90% of households. Get the big picture. 

Another proof of the egregious maldistribution is the case of wealth. RealTime Inequality (dot org) also shows the track of wealth growth from 1976 to the present. The top 14,300 tax-payers (0.01%) in 2023 own an average of $578 million; the lower-saving half, 108,000,000 tax-payers, own an average of $9,000. Over 47 years, from 1976 to 2023, the top group saw their total savings grow from $30 million to $578 million (average), by a multiple of 19 times. The lower earning half, 50%, grew their savings by 3 times, and the group between 50% and 90% also grew their savings by 3 times. The lower 50% gained $6,500 more wealth, the top 0.01% group gained $548,000,000. I say the economy is broken. The total national income, $22.713 trillion (see here page 10) divided evenly among 133 million U.S. households comes to an average household income of $170,000 -- yet half have incomes below $80,000; the lower half average is below $40,000. This badly performing system causes a lot of pain that could be fixed with radical reform that is very possible.  

The economy has egregious maldistribution. In the face of this, what can we do? Labor union power is one solution; I look for the PRO Act, the Reward Work Act, Sectoral Bargaining, and Full Employment to restore widespread prosperity to American society that has been lost since the 1970s. I have to remind myself of other methods: the creation of cooperative enterprises, the advancement of profit sharing in large corporations, and increasing the Earned Income Tax Credit and the national  minimum wage (see below). I have The New Systems Reader on the shelf for tomorrow's reading list. Maybe that covers all the bases. But the mandatory yearly bonus at large corporations is also a viable instrument for raising family incomes.The economy belongs to the people, to us, the community, to all workers and families, if we will demand our ownership.      

The largest corporations would be required to pay a yearly bonus out of total pre-tax profits. There are more than 2,000 giant corporations in the U.S. who employ more than 5,000 workers; their average number of employees is over 20,000. More than 40 million workers comprise this group, over a quarter of all workers in the U.S. (see Lazonick, p. 6). To cite another essay, Lazonick states that over 10 years, 2012 - 2021, the largest 474  corporations "funneled $5.7 trillion into the stock market as buybacks, equal to 55% of their combined net income, and paid $4.2 trillion to shareholders as dividends, another 41% of net income."  Simplified, 96% of their net income was dispersed, about $9.9 trillion over ten years. Pre-tax profits for all "nonfinancial corporations" in Q4 2021 amounted to $1.981 trillion. Roughly half of those profits went to the largest 500 corporations. (See Fed's Flow of Funds, page 10) Christian Weller supplies this graph for a clear understanding: 

If half that $9.9 trillion went to around 40 million workers, about 40% of full-time employees, each would receive approximately $12,000 more income each year. These firms would be required to register with a national corporate registry and pay a portion of profits, up to 50%, to workers earning below 150% of the median annual worker income. As the median annual worker's income in 2022 was $40,847, 150% is $61,270. In 2022 around two thirds of workers (108 million) earned less than $60,000. Why isn't the median household income (around $80,000) closer or even equal to the average ($170,000)? Our condition is the reverse of democracy. We could also mandate a minimum wage for workers at these giant companies at about $22 per hour, indexed to inflation. Such a wage hike has been proposed in New York state. The hike would raise incomes by $3,307 for 32% of New York workers. This plan I present is called a prototype, not a finished plan, but the reader gets the general idea. As I show below, these "domestic nonfinacial corporations" have doubled their pre-tax profits in the last four years. 

The chart above comes from BEA.gov, Table 6.16.D, nonfinancial corporation pre-tax profits rising from $1,332 billion in Q4 2019 to $2,694 billion in Q4 2023, 4 years, a gain of 102.2%. Adjusting for inflation it's a gain of 69.4%. Inflation increased by 19.4%. Profits increased 3 times faster than inflation. "Profit Inflation Is Real" is the title of Servaas Storm's essay. There are many others in agreement.(here and here) 

Mandatory employee bonuses is my quick solution to the gross malfunction and inequality plaguing the U.S. economy. What follows is a lengthened comment I left at an article by William Lazonick, "The Scourge of Corporate Financialization". The target is to raise the incomes of lowest paid workers. I suggest the reader go to RealTime Inequality, adjust the graphs for "factor income" and "working age adults". There you'll see the average annual income for the lower 50% is $25,200. The average for the top 10% is 18 times higher, $448K. This is harmful for the economy and society. This low-earning half desperately needs a raise, and the nation can easily afford to make it happen. The minimum wage hike to $22 an hour would be major, and the bonus would bring their incomes more in line with their contribution. The magazine In These Times has an article on this topic, several by Colleen Boyle. Walmart also has received critical reporting on its emphasis on low-pay but very high profits going to shareholders. I estimate that each Walmart employee in the U.S. generates over $62,000 in profits, but the half of all Walmart workers received annually less than $27,136 states this report, page 13. 

For fuller details see the paragraph almost at the bottom of this essay with this heading:
William Lazonick's Research on Corporate Profits and Greed      

Walmart had a CEO to worker pay ratio of 931 to 1, and each of their workers could have had a $6,600 pay increase if the retailer, instead of buying back stock, had delivered a raise to each worker, who earned at the median $27,136 per year, or $15.96 per hour. A worker in Louisville, Kentucky, with a wife and 2 children pays $1,052 per month rent. If he is the median paid Walmart worker, his income is $2,261/month. After paying rent, he or she might have $1,200 for all other expenses. The Economic Policy Institute estimates this 4 person family in Louisville needs $7,756/month ($93,072/year) to afford a moderate life style, not $2,260/month. This four person family needs $93,072/year. (The average household income in the U.S. is $170,000/year.) Two workers at a lousy paying corporation would still find themselves about $3,000 per month short (or about $36,000/year more, which is about $17.00 more per hour) "in order to attain a modest yet adequate standard of living." Or, to make it clearer, 2 workers earning $27,136/year, with a combined income of $54,272, still need about $40,000 more per year. And still their income would be $77,000 less than the average household income for all, $170,000. It's rather bleak, isn't it? -- See the Economic Policy Institute's Family Budget Calculator.   

Lousy Pay Is Endemic in Large Corporations  

The study Executive Excess shows the lousy pay from the 100 most-lousy paying large corporations in the S&P 500. Its #1 finding: 

1. The CEO-worker pay gap at the Low-Wage 100 averaged 603 to 1 in 2022

The lousiest paying large corporations pay workers as little as they can. Their executives make 603 times their middle paid workers, states the reporting from Executive Excess. From page 5: "Last year, median worker pay at these Low-Wage 100 companies averaged $31,672, and the gap between CEO and median worker pay at these enterprises averaged 603 to 1." That would equal $15.22 per hour for a full-time worker. At Lowe's hardware, the giant mega-hardware, it's median worker earns $29,384, which is $14.12 per hour for a full-time worker. Of course, the median earning Lowe worker is not full-time. The "average" household income in the U.S. is $170,000 per year. I show more about this later. "Can we afford higher wages?" strikes me as an ignorant question. 

Another example, The Dollar Tree: 

"Dollar Tree: CEO Michael Witynski reaped the biggest stock gain in the Low-Wage 100. During his three year stint before resigning in early 2023, his personal stock holdings ballooned 2,393 percent to $30.5 million. Dollar Tree’s median pay fell 4.4 percent to just $14,702 in the same time period, while the retailers’ customers saw an increase in most products from $1 to $1.25. The retailer has spent over $2 billion on buybacks since 2020."  

The Average Household Income in 2024 ---  $170,000 per year  

I walked today around the little neighborhood where I live in Mariposa, California. My friend and neighbor with two chihuahua dogs walked with me and got me talking about the economy. I mentioned that the average household income in the U.S. is $170,000. She didn't believe me, so I explained, and she still had a hard time believing. This paragraph is an aside -- I'm adding it much after the other parts. The theme is "What is the average household income in 2024?" The answer: $170,000. Let me explain: four sources confirm this number. How many households in the U.S. is answered by the U.S. Census: 131,434,000 in 2023. What's the total income? The Congressional Joint Committee on Taxation, Overview, states it's $19.926 trillion (see page 39). The Federal Reserve's report Flow of Funds says it's $22.5121 trillion (see page 10). The Bureau of Economic Analysis says $23.289 trillion (see bea.gov, Interactive Table 2.1). The "average household income" answer is either $151,604, or $171,280, or $177,191, respectively. Let's try RealTime Inequality; their answer is $22.2 trillion total, yielding an average of $168,906. The average for the lower-earning 50% of households is $36,546 (says dqydj.com, household income by percentile calculator). The average for all households, $170K, is about five times the average of the lower half's average, $36K. This paragraph may read like over-kill, but I have a hunch my neighbor is like most people -- totally ignorant and unbelieving, but willing to listen and learn. Her two dogs enjoyed the other dogs along the way, and returned home very happy. Change happens gradually, but it needs conversation and actual facts. I hope everyone will have this conversation, and act on it.  

But first -- My May, 2023, essay says that 90% of U.S. household earn less than $200,000 per year (117 million out of 130 million), and all 90% could/would have $29,000 more income each year if we had the income distribution ratios of 1976, according to data from RealTime Inequality. This is an important claim; in the near past we had a much more equitable economy; it is possible to enrich everyone; we did it before. I load so much data and information into these essays, I hope readers take away at least one thought. Take your choice. You don't have to understand everything, just understand we have fixable inequality. It depends on a mass public understanding, and then voting for common sense equality of income and wealth.     ------- Read on  -----

                    ***      ***      ***      ***      ***      ***       ****

We might require the largest corporations to share 50% of profits in bonuses to employees. This sharing of profits would raise incomes considerably. This would be a statutory requirement for corporate licenses, only applied to companies with more than 2,000 workers. Something like that. Nonfinancial domestic corporations have increased their profits by 95% since October of 2019 (from $1302 billion to $2551 billion), shows the Table 6.16D at BEA.gov, Interactive Tables. Here's the graph showing profits from 2011 to 2023 Q3:

A second, confirming report comes from the Flow of Funds report, a Federal Reserve quarterly report. It reports an increase of 91% (adjusting for inflation), (See December reports for 2019 and 2023, Table F.3, line 9). In Q3 2019 "domestic nonfinancial corporations" earned 6.0% of all income, and in Q3 2023 they earned 11.2% of all income. Adjusting for inflation the pre-tax profits of 2019 reveals the same 91% increase. (I did the inflation adjustment here.) 

Inflation has gone up 19.7% over the same four year period shows the data at BLS.gov, see CPI data. The public should be asking very hard questions about corporate price hikes. The supply chain bottleneck problems are over, we have greed in operation. It seems to me absolutely impossible to generate such huge profits during a period of very high inflation. Corporations are making a killing at the expense of all consumers. Shareholders are the wealthy minority, and they are literally killing our economy. My January, 2023, essay is all about inflation and its causes.

By my calculations the share of national income going to nonfinancial corporations pre-tax profits increased from 6.0% in 2019 to 11.2% in 2023, Q3 for both years. I calculated the figures from the Fed's Flow of Funds report, Table F.3, Lines 1 and 10, from the Dec. 2019 report and Dec. 2023 report.. The increase of $1.202 trillion in profits means every household paid an additional $9,037 to corporations for the same amount of goods. 

The Pulse Survey from the U.S. Census       

Naturally not every household could afford such a huge increase. Hardship is the result; families experience  added anxiety, worry, grief and ill-at-ease. The U.S. Census conducts a Pulse Survey almost every month, the last issue was November 2023, and they asked questions about many topics including "Spending" and "Health". When asked to rate "Difficulty paying usual household expenses over the last seven days" only 30% report no difficulty, another 30% state "a little difficult", and the last 41% report "somewhat" and "very difficult" about evenly divided. True to the United Way report, the ALICE report, 41% of U.S. households experience hardship. And the Census's Supplemental Poverty Report also reports 41% of households living with incomes less than 200 percent of the very low Official Poverty Line.

 The Poverty threshold for a family of 4 is $29,950, that doubled is $59,900, but the United Way ALICE basic survival budget requires $73,464, the M.I.T. Living Wage Calculator requires $76,814, and the EPI.org Household Budget Calculator requires $72,640 in the median cost county of Des Moines, Iowa. But in late January, 2024, the EPI re-adjusted its calculator. Now EPI reports $90,260, which is 3 times the Official Poverty Line (OPL). And the M.I.T. Living Wage Calculator shows the living wage income needed is $95,763 if both parents are working. The M.I.T. report is dated February, 2023. The Census report HINC 01 shows the median household income for a 4 person household is $117,900 in 2022. The median is nearly 4 times the Official Poverty Level of $29,900 (4 times $29,900 is $119,600). So, 52% of 4 person households live with incomes below $119,600.  

The Consumer Financial Protection Bureau report "Making Ends Meet"  

A short quote from the 2023 document: 

"More families had difficulty paying their bills, but average financial well-being was unchanged. The share of families with difficulties paying bills or expenses increased from 35.7 percent in 2022 to 37.8 percent in 2023 but is still below its 40.4 percent level in 2019."

"Looking to the future, many consumers are unprepared for an economic downturn, should one occur. If they lost their main source of income, 37 percent of households could not cover their expenses for more than a month. Half of Black and Hispanic households could not cover their expenses for more than a month."

The Supplemental Poverty Measure and the ALICE report      

The U.S. Census' Supplemental Poverty Measure for 2022 (page 13) shows that just 22% of U.S. households have incomes 4 times above the OPL using the SPM (bluish-grey strip in the chart below); 78% have incomes below 4 times OPL. So, the total living with income above 4 times is 22%, but for 4 person households it is about 50%. The four-person houehold must be doing better than the other 1 and 2 and 3 person households who have at least 78% living below the 4 times OPL level. Using the HINC-01 data, about 40% of 4 person households earn too little, not the amount the EPI or the M.I.T. studies indicate are basic floors to avoid hardship. A basic survival income of $90,260 is 24% less than what half earn, the median, for a family of four ($117,900). This shows that about 39% of 4 person households live with incomes below the basic survival budget. Looks like the ALICE report is accurate. Hardship afflicts at least 40%, more or less, of Americans, the richest nation on earth. I should analyze the 1 and 2 and 3 person households, but I don't have the patience. If I did the conclusion would be worse, not better, is my guess. Excuse me. I'm not wasting your time, I hope.  

          This is page 13 or the 2022 year Supplemental Poverty Measure, U.S. Census
 

So, we might ask "What is the average household income in 2023?" The Flow of Funds tells us the national income in Q3 2023 was $22.512 trillion, and divided evenly among 133 million households, the average is $169,000. The median income for all 133 million was $74,580 in 2022. If the average were $1000, then 50% would be earning less than $450, and their average would be around $300. We have massive and harmful inequality.    

A look at the U.S. Census Hinc 0-1 file shows the details of income distribution. But this site shows a total of $15.1 trillion as the national income, which is far short of the $22 trillion shown by the Flow of Funds or the Bureau of Economic Analysis. Furthermore, one should be sure to compare post-tax and post-transfers incomes with the same.     

Corporations have subdued wage increases, and they have also had no restraint in raising prices.The "retail trade" corporations have seen their profits grow by 153% over the four year period, Oct. 2019 to Oct. 2023. 

Retail trade profits since 2012 to Q3 2023. 

In that 4 year period inflation rose by 19.6%. The net result is the impoverishment of workers, their families and communities. Does society benefit or only the profit driven corporations? Corporations should be forced to share their profits with workers. A national corporate licensing law would effect all large, multi-state corporations employing more than 5,000 workers. There should be a flexible rate of mandatory bonus dispersal, be it 50% or 10% or between both. Workers deserve raises. 

The largest corporations are "looting" America claims professor William Lazonick. (See here and here)  Between 2017 and 2019, 111.8% of their total profits were used for shareholder dividends or stock buybacks. In other words, they took all their market profits and also borrowed additional billions, going into debt, to buyback their own shares. His 2014 article in the Harvard Business Review claims that 91% of profits since 2003 have been dispersed through the combination of buybacks and dividends.  The word 'eviscerating' captures the essence of this greed. That chart in Lazonick's recent essay, page 17, shows the growth of this process. 

Lazonick makes a strong case for ending stock buybacks in essay after essay, take a look. 

The "Real GDP per capita" grew by 153% between 1969 and 2023, from $26,162 to $67,039, inflation adjusted, an increase of a multiple of 2.5. The "Real disposable income per capita" grew by 2.7 times (from $18,249 to $50,438). If we multiply the $50,438 post-tax income by all 335 million American citizens, the total "disposable"  income (335M x $50,438K) should be almost $17 trillion. The "average" family of four therefore has a post-tax income of 4 times $50,438 = $201,752. But, instead, the median post-tax  income for a family of four is about $92,000 in 2022, not $201,000. The median household income of $74,582 is 45% of the average of $170,000? Inequality? Yes. The national income divided among all households in 2023 is now $170,000 per household, but half of households have incomes below $80,000, and the average for the lower half is below  $40,000, a quarter of the average for all. (See the Fed's Flow of Funds report, Dec. 2023, page 10 for national income.)

Comparing income growth with wage growth    

The graph below shows the inflation adjusted ("real") disposable personal income per capita, January 1968 to December 2023. It increased by 290%.

In stark contrast, for the same dates, the "average weekly earnings" for 80% of all workers over  the same 54 year period increases by under 2%.  

I am a bit obsessed with this piece of news. I try to repeat it over and over. The economy is broken, my friend. 

And the  hourly wage earnings increased by only 8% over 54 years (the graph at the Fed FRED web page shows numbers unadjusted for inflation, but you can do that here). 

To drive home this fact, the Realtime Inequality web page shows the income growth for adults age 20 to 64 years old from 1976 to 2023. The four groups are top 1%, the next top 90 to 99%, the 50th to 90th percentiles, and the lower-earning 50%. The EPI growth numbers are very similar:

In 1976 the income difference between the lower 50% and the top 1% was 22 times

and in 2023 it was 75 times. Even worse than what the EPI reports, as I show in the following paragraph. 

The Economic Policy Institute has tracked this problem for decades, and their report (here) shows that between 1978 and 2019 annual wage income for the lower 90% has grown by 26%, or $8,043 (from $30,880 to $38,923); (see Table 1) while wages for the top 90 to 99%% (less the top 1%) has grown by 64%, or $64,781 (from $101,220 to $166,001). And wage income for the top 1% has grown by 156%, or $466,815 (from $299,240 to $766,055).

Wages grew by     $8,043 for the lower 90%

                     by   $64,781 for the 90% to 99%

                     by $466,815 for the top 1%.

Looking closely, this shows the difference between the 90% and the 1% was 10 times in 1978 and 20 times in 2019! And a look at the Fed's FRED page shows that between those same years  the Real GDP/capita grew by 95%, almost 4 times faster than wage growth of the lower 90%. Where did the extra money go? Workers' income growth was virtually paralyzed. The page from the Job Quality Index, Buffalo, shows between 1990 and October 2023 full-time year-round nonsupervisory weekly (and yearly) wages grew by 18%. The Fed's Real GDP/capita shows a growth of 66% between Q3 1990 and Q3 2023, which is 3.6 times faster than wage growth. ___________________________

The New Gilded Age,                                                                                      a report from the Economic Policy Institute                         

Reinforcing the data supporting the extreme income distribution shift, a report from the EPI confirms in short paragraphs on page 12 of the pdf version of The New Gilded Age: 

 

"The pattern in the distribution of income growth reversed itself from 1973 to 2007 as the income of the bottom 99 percent of families grew much more slowly (by just 15.4 percent) compared with the top 1 percent, whose average income grew by 216.4 percent. As a result, over half (58.7 percent) of all income growth in this period landed in the hands of the top 1 percent of families. (Data are shown in Appendix Table B8.)" 

Almost 60% of income growth over a 34 year period went to 1 out of 100 households -- Is that Stupendous or Disastrous? 

During the 28 years preceding, 1945 to 1973, it states, "Faster income growth for the bottom 99 percent of families meant that the top 1 percent captured just 4.9 percent of all income growth over the period. (Data are shown in Appendix Table B7.)" Therefore, the lower 99% received 95.1% of growth, and incomes increased by 100.1% (doubled) for the lower 99%. 

The BEA.gov Table 2.1 shows Personal Income, per capita, on line 39, in "Chained 2017 dollars", meaning adjusting for inflation. 

In 1947 the per capita income was $10,311, 

                          and in 1973 it was $21,020 (doubling, up 104% in 26 years  --- 4.0%/year). 

                         And in 2007 it was $50,233 (up 139% in 34 years  --- 4.1%/year)   

That reflects growth per capita, but we should check the middle household income growth to see if income growth was equally shared. 

The median household's income 

in 1947 was $3,000, and adjusting to chained 2017 dollars, that's $33,991. 

Median income in 1973was $12,050, and that "inflation adjusts" to $68,906 -- basically doubling.

Now how did middle family income grow from 1973 to 2007? 

It was $68,905 in 1973, and in 2007 it was $50,223, and that adjusted for 2017 inflation comes to $60,442. 

Recap: 

Median Household Income 1943  -- $33,991

                                             1973  -- $68,906    -- Where did growth go?  To the middle.

                                             2007  -- $60,442    -- Where did growth go?  To the top.   

Not satisfied with this conclusion I looked further. The U.S. Census has a table that reports median income grew by 10% or 17% between 1973 and 2007. But that is paltry growth when the "disposable personal income per capita" (as shown above) grew by 139% in 34 years. 

I rest my case. 

__________________________________________________

Let's try comparing Median earnings for "men" nonsupervisory workers, and for all nonsupervisory workers, and with Real disposable income per capita: 

Weekly earnings for men were higher in 1979 than in 2023, for all workers in 2023 they were 9% higher, while per capita disposable income increases from $5,164 in January 1979 to $16,848 in October, 2023, an increase of 226%! It tripled. 

This is a disaster. It is a devasting hurricane, flood, tsunami, and earthquake fire in one slow movement. It is absolutely necessary to grasp the importance: Eighty percent of workers saw no income increase in 54 years while the economy more than doubled on a per person basis. Where did the additional income go? Not to workers. The economists and media downplay this event, they say "wages stagnated"; instead they should say wages did not grow at all while the economy did very well. 

The Washington Center for Equitable Growth presents this graph that disaggregates the growth, or separates growth among four income groups: the lower 50%, the next 40%, then the top 10%, and the top 1% of households (I presume households). Note: not much for the grey lower 50%, somewhat more for the blue 40%, mostly orange and red. 

And another from WCEG compares two periods: 

         Wealth         

Total national private wealth (household net worth) is almost $151 trillion (see here, page 1), which comes to $1.1 million per household as an average savings for all U.S. households. Yet the lower half own about 1% of all wealth (0.8% shows Realtime Inequality). Therefore, the average household net worth for the lower half of the U.S. is about $18,300. The Federal Reserve shows the lower half owning 2.6% of all wealth, about $59,500 per household. But the lower 40% own very little, just 0.7%, which equates to just less than $20,000 per household for the lower 40%. The average for all, again, is $1.1 million. (see the Credit Suisse Databook for 2022, page 144). 

Here is the Fed's page on wealth, 1990 to 2023 Q3.:

Here is the RealTime Inequality page on wealth, 1976 to 2023, notice the growth of the yellow line, representing the top 1%, its share growing from 22.5% to 35.6%.

       The Hypertrophic Wealth Picture     

I should also mention that wealth has exploded since 2009, tripling in nominal terms (from 48 trillion to $154 trillion, and adjusting for inflation increasing by 140%, a multiple of 2.4). There's a graph at the Fed's FRED page showing the ratio of "household net worth"(i.e., private savings) to annual "disposable personal income" (i.e., after-tax income). We are in extraordinary times: 

You can see that 

            from 1946 to 1997 the ratio ranged around 520%, and then it increased for the dot com boom, and the for the financial/housing price debacle, and now as a result probably of the corporations pouring profits into the hands of the minority of the population who own most of the financial assets. The Fed's Flow of Funds  reports the same ratio as in the graph above, at Table B.101 (line 50, page 142, September, 2023). The total private savings stands at $154.281 trillion. It was at $48 trillion in 2009. The "national debt to the penny" on November 9, 2023 stands at $33,700,702,394,486.03.  

       A Wealth Tax     

The part of the debt held by the public is $26.6 trillion, the national income in 2023 Q2 is $21.8 trillion. The federal budget expenses for 2023 will be $6.3 trillion, and the deficit is projected at $1.56 trillion; the deficit of $1.56 is about 25% less than total budget expenditures. It's also about 1% of total savings ($150 trillion). Since 2009 wealth has been exploding; it increased by $106 trillion, from $48 trillion to $154 trillion -- or $7.5 trillion per year  -- greater than annual federal expenses of $6.3 trillion. Obviously a modest wealth tax could balance the budget and pay down the debt rapidly. Bernie Sanders proposed a modest wealth tax in 2020, it would bring in $4.3 trillion over 10 years, or $435 billion per year. Adjusting to inflation it now would equal about $500 billion per year. A wealth tax of $500 billion is a 0.3% yearly tax on total wealth, a very small tax (500 divided by 151000 = 0.3). Thinking more radically, we might tax wealth to fund the entire federal budget until the ratio of wealth to annual income came into the range of the 1950 to 1995 norm. Not likely, but a valid goal to think about.

To recap-- wealth has exploded. 

In fact, if we reduced the total wealth figure down to its historical norm, 520% of "disposable personal income", we would have about $45 to $60 trillion less wealth. I judge this to be hoarded wealth, and it should be reduced and put to use. This would improve the economy because "reducing the wealth" would transfer the wealth into actual tangible goods distributed to the lower earning 90%. But that would be socialism, and we only permit socialism for the wealthy. 

The Sanders' wealth tax amounts to 0.3% per year. Reducing wealth until the ratio returned to its historical norm would add $45 to $60 trillion to the U.S. Treasury, enough to fund the entire federal spending for 8 to 10 years. This tax would be broadly supported by the public. My conclusion is that finding the optimum, correct and sensible income and wealth distribution profiles are imperative and inseparable to a healthy economy.   That thought is worthy of a book, and it is eminently intuitive.   

 

The Federal Reserve Balance Sheet -- Did It Exacerbate Inflation?  

Not all government spending proceeds from Congress and the President. The Federal Reserve buys back Federal Treasury Bonds, owns them as assets; here is the graph: 

Note that it bought them in emergencies such as the financial crisis of 2008 and then the crisis instigated by the Covid crisis. It ensured that banks had enough reserves to weather the economic storm. It prints money out of thin air and distributes it to banks, upon which the banks do what? Mostly place the money in other financial assets, thus boosting the value of the financial assets. Socialism for the rich. That's my theory, I have to admit I know little about this. Now I will find a graph of the rise in value of the S&P 500 since 2009:-- From Yahoo Finance, it shows a 7.5 fold increase since March 2009 to May 2024. 

The S&P 500 grows by 7.5 times since 2009 -- $7,000 becomes $52,000 in 15 years   

Comparing Growth Rates -- 

     Financial Assets, Real Disposable Income Per Capita, and Wages 

1969 to 2024

Total Financial Assets (inflation adjusted) in 55 years increased by 8.9 times.

Real disposable income increased by 2.7 times.

Weekly wage income decreased by 0.1%.

 

1996 to 2024

The financial assets increased by 150%, as this Federal Reserve graph shows, below.

Real disposable income per capita increased by 50% times. 

And "average weekly earnings" for nonsupervisory workers increased by 24%. And the cost of rental apartments increased by 66% (see here and adjust for inflation here). 

2009 Q1 to 2024

After the Great Recession financial assets increased by 93% since Q1 2009. 

The "Real disposable income per capita" increased by 26%. 

Inflation adjusted wages for nonsupervisory workers increased by 10%. 

The pattern is clear -- wages never keep up with average income or financial assets.

Below is "Domestic Financial Sectors: Total Financial Assets, Level (in current dollars, not inflation adjusted). -- 

Let's look at the household debt level as a percentage of GDP, from the FRED pages: 

                          

Average Household Debt Load 

From 1960 to 1980 the average appears around 45%, and of course we know it went through the ceiling around 2007 with the Great Recession, and now it's back to 73.4%, Q4 2023. That's not great, in my opinion. A fairly interesting report from Motley Fools, from April 2, 2024 shows the state of household debt, and it seems to be running within a range of stability. Here's a sentence I did not expect to find: 

"Average mortgage payment: $1,427

According to the U.S. Census Bureau's American Housing Survey, the average (mean) mortgage payment in 2021 was $1,427, while the median was $1,001."  

That would be an average of $17,124/year, and at the median $12,012/year. Much less than renting, for sure.

And also to bolster my case, a graph of the "median sales price of existing homes:    

The cost of a home, the median sales price, was $222,200 in 1969 (adjusting for inflation), and today the median price is $431,000. Wages have not grown at all, but the price of a house has almost doubled. How is it that the percentage of homeowners or mortgage holders has not decreased significantly? It has increased from 63% to 66%, see here.  I can't explain it. Median household income in 1969 was $75,679, adjusting for inflation (see here). In 2022 it was $74,580, a decrease of $1,099 or 1.4%. Again, the economy has grown by 153% on a per capita basis, but the median household income is 1% lower. How could this be?  Question: Is this damaging the economy? Does the "economy" work only for the wealthy? The Economic Policy Institute wrote a long article with 9 charts in 2015, it's worth looking at. 

William Lazonick's Research on Corporate Profits and Greed      

Instead of sharing the prosperity with workers or investing in innovative improvements, American corporations are bleeding their own organizations for the wealth they can extract. The victim is the U.S. population. Lazonick's 2020 book is titled "Predatory Value Extraction". We need a method to stop the bleeding and to distribute the rewards of work to all workers. . 
Requiring the largest employers to share their profits with workers is a natural response to this disaster.  (Another chart can been seen here.)

 The U.S. Census reports on business firm sizes; Wm. Lazonick (on page 6 and 7, here) reports that in "2017 some 2,156 firms with five thousand or more employees in the United States, with an average of 20,859 people on the payroll, accounted for 35.0 percent of all business-sector employees . . ." These 5,000-plus employee corporations are the ones I would target to disperse half their profits to workers.  Let's say they create half of all nonfinancial corporate profits, about $1.132 trillion. Then each of the 64 million nonsupervisory workers, 40% of all workers, would receive around $9,000 in added pay each year. (I took the annualized pre-tax income for nonfinancial corporations, found on page 18, here, the Fed's Flow of Funds report.) But I think the details could be easily worked out. This policy would in turn add pressure for other employers to raise the wages of their employees. Therefore about 134 million workers would see the benefit.  

The RealTime Inequality web page, created by economists at Univ. of California, Berkeley, shows that an income shift of 15.4% of total national income has happened between 1976 and 2023. That's $3.4 trillion that once went to the lower-earning 90% now goes to the top 10%. If that $3.4 tr. were restored to the 90%, then every household, 117 million, in the 90% would receive $29,000 more income. The lower 90% in 1976 received 62%, now it's 48%; the top 10% received 38%, now it's 53% (factor or market income, pre-tax). The average household income is $165,000 (Fed's Flow of Funds' report - page 10, line 1), but half of households earn less than half, half earn less than $74,580 in 2022. The average household income for the lower 50% is about $40,000 (see here). The average for the lower 50% is about 1 seventh the average for the higher 50%. That may seem incredible, but in my earlier essay I show that income distribution of 53% going to the top 10%, and 47% going to the lower 90%, the 1 to 7 ratio is accurate. The U.S. Gini for income inequality is above all OECD nations except Mexico and Turkey. And "Our World in Data" also shows income Gini higher than other developed countries. The median wage income in the U.S. was $37,587 for 2021, shows the Social Security report on wages. The average for the lower half is around $17,000, and 30% of all workers earn below $20,000/year. The total wage earnings for the lower half is less than 7% of the national income. Wages were higher for "nonsupervisory workers" in 1969 than in 2023. And as Lazonick cites, 69% of workers in Urban locations are living "paycheck to paycheck". --- A mandatory sharing of profits is needed to quickly change this crippling malfunction.

            ***       ***       ***       ***       ***       ***       ***       ***    

Lazonick in his top paragraph links to six studies showing the fragility of working America. For instance, one shows that 61% of U.S. adults are living paycheck to paycheck, and 69% in urban areas. That paragraph is a good reference. A report he sources is from Oxfam America, The Crisis of Low Wages in the U.S.. If any reader gets this far in this essay, some other week or month later he or she may climb the mountain of the Oxfam report. 

Writing for In These Times magazine, Colleen Boyle claims and proves that "In  a Single year, $1.78 trillion Was Taken from the Working Class".  Boyle claims, "In 2017 alone, then, the average worker lost $17,385 — because wages have not kept up with productivity."

In a two worker family that would mean an added $35,000 per year. 

I am going to leave this as is, short, to the point. When I wrote "short", months ago, it was short. The posts that predate this long essay mostly repeat the details I've stuffed into this essay.  

An excellent source of Facts on Inequality can be found here at Inequality.org. They offer an informative weekly newsletter also. Marjorie Kelly is featured in the newsletter of September 25, 2023. The Prosperity Now Scorecard also details state by state the disparities of income, wealth and home ownership. 

I just discovered a few excellent articles at Common Dreams: Tim Koechlin has written about a dozen articles, the last echoes my own views. And I enjoyed this one by Bruce Boccardy; he also has published 12 articles, most recent was 10/29/23. 

This blog entry has been much too long. I will quote Tim Koechlin, from his article linked to above; it's a fitting conclusion: 

"The U.S. remains a very rich country. We have the capacity to do much better. We have the capacity to deliver equitable, sustainable prosperity—and we know how to do it. A detailed plan is beyond the scope of this short essay, but here’s a start: a tax on wealth; tax increases on corporations and the super-rich; a higher minimum wage; deliberate, active efforts to improve worker bargaining power; affordable health care for all; a well-funded effort to provide affordable housing for all; the promotion of renewable energy and sustainable production technologies, and affordable higher education—including the elimination of student debt. More generally, we need to reject the presumptions that (a) our well-being depends on growth and (b) prosperity requires that we pander to corporations."