I prefer my earlier essay of August, 2019, A Litany of Economic Woes. I have neglected this blog for about a year. I added to the Covid article during 6 months when it was new and unknown, and now it's mostly unreadable, and then I added a pretty good synopsis article, Poverty and Covid. Today's entry was first a Letter to the Editor of the local newspaper, published in May, 2021.
Below, the changing share of income over 43 years, from the RAND report of September 2020. The lower-earning 90% of households lost 17% of the national income, about $3.0 trillion in 2018, which is also about $28,600 more income in 2020 for 90% of U.S. households, on average. My "Letter to the Editor" below speaks of the shift and the growing impoverishment of most American families. There are other studies, and recently, June 1, 2021, Pitchfork Economics interviewed two scholars from the Economic Policy Institute detailing the shift, with slightly different conclusions. They conclude that two-earner families with median wage incomes, husband and wife working full-time year-round, would gain $40,000 more income each year, had the stagnation of wages not occurred. It was a policy failure, states Lawrence Mishel and Josh Bivens, in this interview. Many other news sites are publishing the RAND study's conclusions, here's one. The graph from RAND:
Figure 2: Distribution of Shares of Taxable Income, 1975–2018
Biden’s Recent American Rescue and Jobs and Families Plans
(This letter (a shorter version) appeared as a guest article in the local Mariposa newspaper.)
There is controversy over the Biden program of reform, the various American Plans (Rescue, Jobs, and Families) totaling about $6 trillion in added expenses over an 8 year period. I’d like to add to the conversation some background, even though it’s a bit detailed.
President Biden in his speech of April 28th, 2021, said that during last year, 2020, 650 billionaires increased their wealth by $1 trillion in the past 12 months. He repeated this statement twice. A trillion divided between 650 is $1.5 billion per billionaire, added to each one’s net worth. This is not income, it is unrealized stock gain, taxable only when sold (realized).
From Biden’s speech: “At the same time, the roughly 650 Billionaires in America saw their net worth increase by more than $1 Trillion. Let me say that again. Just 650 people increased their wealth by more than $1 Trillion during this pandemic. They are now worth more than $4 Trillion. My fellow Americans, trickle-down economics has never worked.”
Total household net worth surpassed $130 trillion in Q4 of 2020, states the Flow of Funds report of the Federal Reserve, page 2. Therefore the "average" U.S. household owns $1 million because there are 130 million households. But just 8% of U.S. adults own a million or more, states the Credit Suisse Global Wealth report (Databook, page 169). And 40% of households own 0.2% of everything; therefore the $1 million average is just a sign of the enormous wealth at the top.
In contrast the U.S. Census’ weekly Pulse Survey reported in March, 2021, that 13% of adults could not afford food for the next week, and 31% could not afford basic expenses, as reported by the Center for Budget and Policy Priorities.
We have a growing problem of inequality, hardship and poverty, amidst great prosperity and wealth.
The US Census has conducted this weekly Pulse Survey report since April 2020. In March of 2021, a total of 31% of U.S. adults, 73 million, report in Table 4 they "had difficulty paying for usual expenses such as food, rent or mortgage, car payments, medical expenses, or student loans in the last seven days." The ALICE report from United Way charity, “On Uneven Ground”, published in December, 2020, states that 42% of households in 2019 could not afford seven basics. They project that data for 2020 will raise the rate to over 50%; these households could not afford food, housing, utilities, medical, transportation, phone, childcare — 7 expenses in all — half of U.S. households.
The contrast between the millions who are unable to buy food and normal expenses and the billionaires watching their fortunes soar to unimaginable levels is mind-boggling. What has gone wrong with the economy? It should surprise no one that millions are angry and even willing to attack the seat of government as they did on January 6, 2021.
I support Bernie Sanders’ radical progressive agenda, but I understand the anger. I’m a bit more leftward than Sanders with my agenda, but Biden is moving in a pragmatic way, doing the almost possible.
Biden’s basic plan is to use government power to shift the income imbalance that is the result of 50 years of bad economic management. In 1966 the average weekly wages were higher than in 2020, 54 years later. Some 82% of workers are employees, or “nonsupervisory workers”; their “average weekly [and yearly] earnings” were higher 54 years years ago. This is from the Bureau of Labor Statistics. Since 1966 the “real” (inflation adjusted) per capita income expanded by 161%, and the real per capita GDP by 156%, but average weekly and yearly incomes for 82% of workers are lower by about $2,000, $45,006 vs. $43,042. The median sales price for a house was about 4 times workers’ annual wage earnings in 1972, and now in 2021 it’s about 8 times.
Women joining the work force contributed about 91% of the rise in household income over these past decades, reports the Brookings Institute. From the report:
“We now come to the interesting part of the story about women and middle-class incomes. Without women’s contributions, these gains would have been small to nonexistent. By our estimates, based on a method initially proposed by Heather Boushey at the Center for Equitable Growth and using pre-tax money income in the Current Population Survey, average middle-class household income grew from $57,420 in 1979 to $69,559 in 2018. If the average contribution of women to household income had not changed, most of these gains would not have been seen. Average income would have increased to just $58,502 in 2018. Women therefore accounted for 91 percent of the total income gain for their families.1”
The RAND Corporation in July, 2020, issued the report “Trends in Income between 1975 and 2018”, that’s 43 years, and one finding states that the average income of all full-year, full-time, prime-age workers increased from $42,000 in 1972 to $50,000 in 2018 (for supervisory and nonsupervisory workers). But the average could have risen to $92,000 had wage growth matched productivity growth, as it had between 1946 and 1972. This is not too complicated. The typical, or “median”, household could be earning about $120,000, not $65,000.
From the RAND report: The top 1% increased it’s share by 13% from 9% in1975 to 22% in 2018.
The lower 90% of earners lost 17% of the total income share, from 67% to 50%.
Figure 2: Distribution of Shares of Taxable Income, 1975–2018
Top 1% 9% 22%
90-99% 25% 28%
Bottom 90% 67% 50%
Source: Authors' calculations from U.S. Census Bureau, Current Population Survey; and World Inequality Database.
Trump’s major accomplishment in 4 years was to pass a Tax Cut and Jobs Act which was a huge tax give-away to the wealthiest Americans, after they had amassed over 90% of all economic growth over the past 4 decades. Not a sensible or constructive accomplishment, in my opinion. This next act in America’s economic history, Biden’s objective, would reverse the trends I’ve reported. Don’t curse the darkness, light a candle, light some hope. And please don’t shoot the piano player who would be me. I recommend epi.org and prospect.org as good starting places for accurate reporting on the economy.
An article about a study that claims that distributing wealth to lower-earning families increases the growth rate of wealth, and of course improves the quality of life for them dramatically -- read it at Inequality (dot) org.
Comment about Covid Poverty -- May 28, 2021
I left this comment at the web page of National Jobs for All Coalition, njfac.org.
It draws heavily from the Center for Budget and Policy Priorities article of May 28, 2021, about the U.S. Census' Household Pulse Survey of April, 2021.
I just looked today, May 28, 2021, at the Center for Budget and Policy Priorities update (dated 5.28.21) on the U.S. Census' Household Pulse Survey, (sometimes referred to as "weekly") ending May 10, 2021. Grim, as I expected.
A quote stands out: "Some 25 million people either met the official definition of “unemployed” (meaning they actively looked for work in the last four weeks or were on temporary layoff) or lived with an unemployed family member in March. This figure includes over 6 million children." I assume only one person per household is responding to the survey, and taking out the retired 65-and-over households, 25 million (households) is about 22% of households (or 19% if senior households are included).
And "When family members are considered, some 35 million people in March, including close to 9 million children, lived in a family where at least one adult did not have paid work in the last week because of unemployment or the pandemic, we estimate." Excluding retired population, that would be 12.5% of population. But 35 million households (minus 9 million children = 26 million adults) represents 20% of all U.S. households.
And, the last, "Some 62 million adults — 27 percent of all adults in the country — reported it was somewhat or very difficult for their household to cover usual expenses in the past seven days, according to data collected April 28–May 10.”
As there are around 130 million households, that 62 million adult figure could represent 47% of all households. The ALICE report from United Way charity reports (On Uneven Ground, Dec. 2020) they expect around 50% of U.S. households to be classified as experiencing material hardship, unable to pay for seven basic expenses. This “27% percent of adults” is an improvement from the January report from CBPP, reporting on an October 2020 Pulse Survey, when it was 31%.
The portion who worry excessively is still over 50% of those who responded (the survey on Food, Table 4).
The report also states that 56% of the job loss occurred to workers in low-income jobs, about a third of all “jobs” (but I didn't find the criteria for low-income). 22 million jobs were lost in March-April 2020, and 12.6 million restored yet 9.4 million are still lost in April 2021 (BLS data). Most of job recovery, ⅔ of restored employment happened May thru August, only about ⅓ from September to April.
The actual-most-last: "15,379,000" number receiving jobless claims in U.S., that would be about 9% of work force. Strangely the BLS reports just 9.8 million unemployed in April, 2021. Some non-working workers are classified as "employed" and still receive UI benefits.
All from Center for Budget and Policy Priorities,