The wealthiest 1% has taken $50 trillion from working Americans and redistributed it, a new study finds. Here's what that means.
- Paul Constant is a writer at Civic Ventures, a cofounder of the Seattle Review of Books, and a frequent cohost of the "Pitchfork Economics" podcast with Nick Hanauer and David Goldstein.
- In the latest episode of
Pitchfork Economics, Carter Price, a senior mathematician at RAND Corporation, discusses a new report from RAND's researchers.
- The report found that $2.5 trillion is redistributed from the bottom 90% of American to the wealthiest 1% of Americans every year.
- The median college-educated American worker would have seen their annual pay doubled without this theft.
In a Pew poll conducted last fall, 61% of all respondents agreed that there's too much income
Here's the true cost of income inequality: every year, $2.5 trillion — yes, trillion, with a "t" — has been redistributed from the bottom 90% of Americans to the wealthiest 1 % of all Americans.That's roughly 50 trillion dollars —again, with a "t"— that used to go to the middle class and working-class Americans which has instead been rerouted to the pockets of the top one percent. When viewed through the data in this report, that huge gap in income inequality doesn't look so much like a law of nature as it does a massive heist.
Even those Americans who are lucky enough to be in the upper class — from the 90th to the 99th percentile — have basically been treading water these last few decades. People of color, women, and white men have all lost massive sums of money over the last few decades. It's only the top one percent that has benefitted from this $50 trillion transfer of
If the ultra-rich hadn't rigged the system in their own favor, your annual pay would be doubled — somewhere between $48,000 and $63,000 higher per year.That's about a thousand dollars or more per weekly paycheck that you could have spent in your community, invested in home improvements, or saved for a rainy day, but which instead went to the wealthiest Americans.
So if it feels like you're working harder for less money than your parents' and grandparents' generations, that's because you are.Think about what you could do with an extra thousand dollars a week. We've all heard the statistic that nearly half of all Americans are only ever one $400 emergency away from catastrophe. This is why Americans don't have that $400 — that money, and much more, has gone to some rich guy's offshore bank account.
"To be clear, this is not some fantasy," and those numbers aren't hypothetical, David Goldstein said early in the latest episode of Pitchfork Economics. "That is what you would have been earning had income distributions remained constant, and had incomes broadly continued to grow at the same rate as the GDP, as they had done in the three decades prior to 1975."
"If we just kept things the same" as they were in the early 1970s, Goldstein said, "the median worker would be earning twice what they are now."Even someone in the very-well-to-do 90th percentile of all workers making $133,000 per year in 2018 would instead be earning $168,000 a year if more equal pre-1975 economic conditions had persisted.
The episode features an interview with Carter Price, a senior mathematician at RAND who co-authored the report, about his team's findings.
"If you look at income from 1947 to 1975, it more or less grew with per-capita GDP across the board," Price said. The incomes of the poorest Americans and the wealthiest Americans were all growing at roughly the same rate. "If you look after 1975, we see a big difference between what those at the bottom of the income spectrum were making, and those at the top."Was Price surprised by the final $2.5 trillion-per-year total?
This kind of wealth concentration isn't just wage theft on a massive scale — it's terrible for the economy.
"There have certainly been a lot of studies that indicate that lower inequality supports faster economic growth," Price said. "It's not a clear-cut case, but there is very strong evidence that that's the case."Or as Nick Hanauer, the host of Pitchfork Economics, has written: "I already earn about 1,000 times more per hour than the average American, but I couldn't possibly buy 1,000 times more stuff. I only own so many pairs of pants. My family and I can only eat three meals a day."
The possibilities of what America's workers might have done with the 2018 equivalent of an extra $2.5 trillion in every one of the past 45 years is staggering. It's not hard to imagine the streets of our COVID-ravaged communities filled with bustling shops and service providers, and the generations of young low-income Americans who might have been able to transform their parents' extra cushion of savings into greater possibilities.
Instead, that exact same money now sits, basically unnoticed, hoarded in the untapped capital of the wealthiest humans in history.Ultimately, Price said, the paper's findings show that "a rising tide has not been lifting all boats, and that's understandable and observable. We're hoping that this helps people better quantify that, and better understand." Now that we understand the real price of income inequality, it will be easier to press our leaders into getting our money back. Hanauer urges everyone to share the RAND report with political candidates and everyone else in power. "Our elected leaders must reckon with this data and grapple with this problem at the scale of the problem," he said.
"If they understand this as a $50 trillion problem," Goldstein said, "we have a better shot at getting a $50 trillion solution."
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