3/15/2012 2:17 PM ET|
Fast-growing income gap in US
Statistics paint a picture of a widening divide between the rich and the poor, with incomes of the rich going up much more than those of everyone else.
If you're an "average" American, you earn close to $40,000 a year -- pretty good money compared with the rest of the world.
But recent data from a number of sources conclude that the average U.S. income, while solid among its peers around the world, still leaves many grappling to make ends meet. Additionally, the 2011 U.N. Human Development Report finds the gap between the rich and poor in the U.S. continuing to widen.
First, what seems to be good news: For 2010, the average U.S. income was $39,959, according to the Social Security Administration. However, the median income -- meaning half of Americans made more, half made less -- was substantially lower, at $26,364.
The U.N. analysis uses yet another measurement. That report puts the United States' gross national income per capita at $43,017, relatively high compared with its industrialized counterparts. The top 10 per capita countries are:
- Qatar, $107,721
- Lichtenstein, $83,717
- United Arab Emirates, $59,993
- Singapore, $52,569
- Luxembourg, $50,557
- Kuwait, $47,926
- Norway, $47,557
- Brunei, $45,753
- United States, $43,017
- The Netherlands, $36,402
Overall, the U.S. placed fourth in the U.N. study's Human Development Index, which measures three basic factors of human well-being: a long and healthy life, education and standard of living. Norway, Australia and the Netherlands occupy the top three spots.
The comprehensive U.N. study examines a number of factors, including income, environment and gender equality, with a focus on identifying programs and strategies that are effective in promoting well-being and prosperity.
What 'average' will buy
Unfortunately, in the U.S., an average $40,000 income often means living paycheck to paycheck and, perhaps more significant, living beyond your means. To that end, the Federal Reserve reported a nearly 10% jump in overall consumer debt in November 2011, to $2.48 trillion -- the biggest one-month percentage increase in overall debt in more than 10 years.
"The average American struggles," says Ronald Hill, a professor at Villanova University who has studied poverty worldwide. "They have an old car they're struggling to keep on the road, they may be late with rent payments, and they can't afford to send their kids to college. At $40,000 a year, they probably haven't been on a vacation in five years. They feel great restrictions."
Moreover, the U.N. study also says the growth in financial inequality in the United States easily outpaces its peers. Moving down the list, it's not until you get to Chile (No. 44 in the overall study) that there's a faster-growing gap between the wealthy and the poor.
According to the Internal Revenue Service, the average U.S. income, when adjusted for inflation, declined 1% between 1988 and 2008, while Americans making $380,000 or more saw their incomes grow 33%.
"What's striking about the United States is that, comparable to other countries of comparable income, the inequality in the United States is much wider than any other country," says William Orme, a spokesman for the U.N. report. "That's not only the result of increasing concentration of wealth at the top but the stagnation of income for the bottom 75% over the last 10 years. The U.S. is certainly not unique in having little real significant income growth, but the disparity is more acute."
A possible explanation
But, adds Orme, the income difference can be linked, at least in part, to a cultural and social diversity that's unheard-of in most other nations.
"It's not surprising -- we are a hugely diverse country," he says. "Compare suburban Boston with a county on the Texas-Mexican border. You simply don't find those extremes in other industrialized countries."
So that raises the question: At what income level does the average American begin to feel the financial noose loosen just a bit? Naturally, every little bit helps, but Hill suggests it takes a good deal more income for someone to feel on the cusp of financial security.
"It's not until about $50,000 where people reach the place where they don't need any help, and it's not until the $60,000 to $70,000 range that they begin to stop living beyond their means," he says. "They would certainly be getting by, but they wouldn't be doing great. Realistically, you would almost need to double that income average in the United States to feel like you were living a reasonable life."
Another worry for Americans
Further sharpening many Americans' struggles is the all-too-common absence of health insurance (estimates put the range of uninsured between 45 million and 48 million, or 14% to 15% of the population).
While most other countries that placed high on the U.N. Human Development Report have lower median incomes than the United States (including Australia, the Netherlands and Ireland), the guarantee of health care removes the anxiety of a costly illness.
Along those lines, the Corporation for Enterprise Development, a Washington, D.C., advocacy group, estimated in late January that 43% of U.S. households -- roughly 127 million people -- would fall below the poverty line within three months if confronted by a serious medical illness or some other emergency.
"In a lot of countries where the social safety net is much larger, such as Sweden and Canada, nobody has to worry about health care," Hill says. "In the United States, a person making that median income likely doesn't have health insurance. If they do, they are fortunate among their friends who probably don't have coverage."
But the news is not entirely negative. For one thing, although the level of financial disparity in the U.S. is high compared with its Western peers, it's far from the worst in other parts of the world. For instance, the spread between the haves and have-nots in countries such as Chile and Brazil is much greater -- and even more so in countries in Africa, the Caribbean and other regions where relatively few, exceedingly wealthy people live with an enormous population existing in crippling poverty.
And if you happen to be one of the fortunate Americans who count themselves as relatively well off, it doesn't come with the grim circumstances that often exist in other countries where income disparity is more than a matter of numbers.
"Wealthy people have access to things that ordinary people don't have. But they're not happier than others -- there's simply no data to suggest that," Hill says. "And you're also a big target to others who resent your wealth. That means kidnappings and other crimes. You almost have to live like a drug lord in some of these places because you stand out so much. You're much more powerful, but you also face a certain amount of isolation."
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half of the USA pays no federal income tax due to the fact that our government may have created an environment which forces employers to more profitable areas to do business....therefore moving jobs. Let's stop fighting each other and let's stop the class warfare. Let's convince our government to create an environment in the USA which fosters high paying manufacturing jobs rather than low paying service jobs.
This is not a republican vs. democrat issues. This is a survival issue for Americans.
I understand both sides of the argument, but everyone is missing a big point - COST OF LIVING - it has skyrocketed. It doesn't matter so much what you take in as WHAT YOU PAY OUT. I started doing some analysis after much lamenting from my father that - "With what you make you should be rich by now" and I thought - hmmm I wonder why I'm not? I don't spend a lot, don't have brand new vehicles or take expensive vacations.
Here's the reason and why we're worse off than our parents. A loaf of bread cost 50 cents in 1975 and that loaf - which is now smaller - fewer slices, etc. costs - $3.50 - that is an increase of over 7 times and you get less.
Now unless you make 7 times more than you used to - your adjusted cost of living is 700 percent more. So a person making $40,000 in 1975 had 7 times the buying power than the person making $40,000 in 2012.
When basic neccessities cost 7 times more than they did 20 years ago - guess what? You're poor! not because of your salary but because you have 7 times LESS buying power, so you're 40,000 is now equivalent to - approx $7,000.
Until people STOP letting companies RIP THEM OFF! they we will continue to pay more and get less. I bought a bag of potato chips last week - $3.70 for a BAG OF CHIPS - that is literally half the size of a chip bag 10 years ago and is now HALF EMPTY due to 'settling' BS.
STAND UP AMERICANS - You are being nickle and dimed to poverty!!!!
The income gap has been growing wider since major corporations began paying the 'suits' those over the top, ridiculous, obscene salaries. And that was way back in the seventies. That's when companies had to start cutting back on their 'average' employees as well as their customer service. After all, if they pay the 'working man' a decent wage with good benefits and provide good customer service that doesn't leave enough money to pay the CEO and the other 'top dogs' their expected millions!
This country was doing fairly well 'til then. Now look at it! More people than ever before on food stamps, thousands homeless and long standing companies closing their doors. Someone needs to wake up and realize that if the average American doesn't have money to spend our economy goes in the tank. It certainly doesn't recover! And bigger government is NOT the answer. Government jobs do NOT grow our economy!
Companies(most, not all) look on their workers as liabilities. As long as workers are not united, companies will spend as little on them as possible. They have eliminated their pensions, passed on healthcare costs and reduced their time off while demanding longer days. This drives up profit and makes the CEO look good. He gets a big check, the shareholders get capital gains taxed at 15% and workers go from middle class to poverty.
Corporations are sitting on millions of dollars in cash. When they take away employee benefits, it's not because they have to, it's because they can. Meanwhile, the executives get huge salaries, stock options, fully paid medical and a company paid pension. Class warfare has been going on for about 20 years and the middle class is getting their clock cleaned. If unions don't make a comeback, things won't get better. It's not a problem the government can fix. Americans need to demand to be treated fairly.
And it amazes me to hear people defend CEO salaries. A worker doesn't deserve more than $30K, but a CEO is justified getting a multi-million dollar salary. Really? What does the CEO bring to the table? He gets his salary because a board made up of other overpaid executives votes on it. That's how the CEO of Yahoo can get canned for doing a lousy job, then be given $9 million as she's kicked out the door. Basically a bunch of ego-maniacs telling each other how great they are.
Let's add one more fact here. ECONOMICS IS NOT A SCIENCE!!!!!!!!!!!! Did you realize that? You can't depend on economists for any rational prediction. WHY? Because the theory of macro economics is influenced by external forces that make it less predictable than the weather. Go ahead, show me another science that has 'consumer confidence' as a tenet to being able to accurately predict anything. Why do natural disasters (which absolutely no one can predict) cause the economy to suffer? So if you are running a country, WHY WOULD YOU PLACE AS MUCH EMPHASIS ON ECONOMICS AND BUSINESS PEOPLE AS THIS COUNTRY DOES? A country is not a business. The 2 must be kept separate or this country will go down the tubes just like any business has the risk of doing any day of the week. Go ahead, ask yourself if this country should be placed on the same level as Bear Sterns (bankrupt)? Wonder why Congress' approval is at 9% or so? Because there are all these business people running it! What did Rick Scott do before he was governor of Florida? STOP VOTING FOR BUSINESS PEOPLE TO RUN THIS COUNTRY! Stop voting for people who keep using the same spin as the corporations! The CEO of a business is like a king (everyone does exactly what he says). Is that what our government leaders are? NO!!!! They are there to SERVE US!!!!! It is the total opposite of what a business is.
No matter how you lean, or how much you earn, how hard you work or don't work, it is pretty accurate to say that a large income gap is not a good thing for the country or it's economy. Now don't go off the deep end and conclude that I am saying we should be socialistic, though there is nothing wrong with being social according to my girlfriend. However, there needs to be a way to redistribute wealth better than what is happening now, which is not at all. I don't know the answer, but the path we are on is not sustainable. Soon no one but the rich will be able to afford anything but necessities and when that happens, the economy will falter, and the only real losers ( financially) will be the rich as so goes the economy, so goes their investments. Blaming this or that won't solve anything either, so don't even bother. It doesn't really matter how we got on this course, what we need is a way to get off of it. Seems to me that the rich would fair better with 75% of a robust economy than they would with 98% of a poor one and if things continue down this course, soon they WILL pay for everything if they are the only ones with any money
There are two questions that come from this article.
1 - Why is it happening? Are the wealthy smarter than they were 20 years ago or working harder? No. So why are they getting more of the money? You can come up with your own answer. My thought is the American worker is letting companies stick it to them. The article mentioned diversity. America has always been diverse. That used to be considered a strength.
2- Why is it a problem? Because the economy can't recover with it this way. There won't be more jobs until the middle class has disposable income to spend. Products won't be bought, new homes won't be built and vacations won't be taken. The top 1% can't spend enough money to drive the economy.
It isn't about wealth redistribution. It's about paying Americans a living wage with good benefits.
give the rich more tax breaks,that will create jobs...............
who is kidding who
the problems what we have here,they have the SAME problems in europe
the real problem here is CORPORATE GREED.
You must have traveled in different places than I have. I see way more people living on the streets in this country than I did anywhere in Europe. My definition of poor is also a little different than yours. My definition is no place to live, no food, no medical care and there are thousands of them out there. Now I realize that the republican idea is, if they have no food let them starve, if they can't afford to go to the doctor, let them die. Now if you travel to the far east, you really see poor people, because all the wealth is concentrated in a very few while everyone else fights over the scraps that are left. Unfortunately, that is the way we are heading in this country. When the 400 wealthiest in a country of 300 million hold 50% of the wealth, something is very wrong. Those people you seem so concerned about, that go to work every day, have not seen any increase in buying power in years as their wages have gone down or remained stagnant as prices continue to rise, while people making over $350,000 a year have seen their buying power increase 33%.
KT6797: most assuredly true. I was raised in the 60's and 70's and we lived through gritty times BUT food was reasonable and work with fair pay was to be had. We grew up in a dense, urban neighborhood and the entire community would help each other out with food, money and the children.
XDum: This article is quantative and global: it is not meant to be divisive but informative and as Someone (Hay Creek) and Joe284 have mentioned, there is a very real and tangible fault line running through this Country.
Who buys $2,000.00 handbags? $1,300.00 shoes? 100K + cars? $83,000,000.00 homes? The market for high-end goods is flourishing while those of us that were able to afford a modest vacation a mere 4 years ago cannot afford daytrips to the ballpark with their children because if they can afford the tix, they surely cannot afford the $8.00 hotdog, the $5.00 pretzel, the $6.00 softdrink - it is out of control. And sad.
I dont want wealth redistributed. I think what too many people fail to realize is that the working class(the majority) is only asking for a fair wage. The cost of living in our country (even in this recession) is well above the median income of 40k. Thats well out there and shown and there are facts behind it. I dont want a bonus hand out split from all the wealthys pay, i want a fair wage! I work hard, i work harder than the wage i earn. Thats not bs, or tooting my own horn, thats knowing the value of what I do at my company, and that my position is a necessary position, that has no room for error, requires speed and accuracy, and I never make costly mistakes. Thats my job, I do it well. I dont live and buy beyond my means. I put myself through college, i pay my student loans, i bought my own house, i bought my own car (used, and will be handed down to my son in a few yrs, i support 2 people on one persons income. 95% of my closet is used clothing. We eat out once a month, usually a local breakfast joint, I dont take vacations, I pay insurance out of my check, i contribute to my 401k, and pay all my bills on time. To say that anyone asking for a fair wage, is lazy, on welfare or any other bs excuse you want to try and come up with is ignorant and quite frankly its time to give it a rest. Im tired of watching greedy presidents and ceos get richer and richer for no other reason than that they control the purse strings...keep your damn handout and pay me my fair wage, keep wages current with cost of living. I expect people to work for their wage and a fair wage, but when the majority of our country is so underpaid, its obvious that that is not happening. I hate the lazy welfare give me more mentality just as much as the next person, since i worked for what ive got since i had my son at 17, but i also am painfully aware of the struggle of the hard working majority out there who is grossly underpaid.
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