Written by Malak Kalasho
Since its beginning, the United States has prided itself on being the land of opportunity, a place in which all individuals have the opportunity to succeed. Many people continue to refer to it as such, but a closer look at wealth and income distribution in the U.S. tells a different story. To the extent to which success depends on economic status and mobility, the notion that the U.S. is still the land of opportunity is simply false. Since the 1970s, economic inequality in the U.S. has skyrocketed, leaving many Americans living paycheck to paycheck while the nation’s top earners hoard all the gains from economic growth. The rise in economic inequality can be attributed to various factors that are often still debated, but a common theme among many of the causes rests on the enactment of legislation geared towards helping the wealthy and against the protection of workers.
Politicians often boast about America’s strong economy, highlighting low unemployment rates, a growing GDP, and soaring stock prices, yet this narrow outlook fails to account for the fact that the benefits of economic growth have only gone to the country’s top earners. According to the Economic Policy Institute, productivity has increased by 61.8 percent since 1979, yet hourly pay for workers has only increased by 17.5 percent as of last year (“The Productivity-Pay Gap,” 2021). The widening productivity-pay gap has also been accompanied by a widening wage gap between the nation’s top earners and the bottom 90 percent. Since 1979, the top 1.0 percent of earners have seen a 179.3 percent increase in wages and the top 0.1 percent have seen a 389.1 percent increase while the bottom 90 percent have only seen a 28.2 percent increase (Mishel & Kandra, 2021). The figure below shows the change in wages by wage group from 1979 to 2020.
Along with the failure to increase wages with rising productivity, the widening economic gap can also be attributed to a stagnant minimum wage. Up until the 1970s, the federal minimum wage continued to rise in inflation-adjusted dollars, but has since declined in real dollars. According to an article by the Economic Policy Institute, in 1968, minimum wage workers earned 10.59 dollars an hour in inflation-adjusted dollars, 46 percent more than the earnings of minimum wage workers today (Cooper et al., 2021). Had the minimum wage continued to rise with productivity, today’s federal minimum wage of 7.25 dollars would be over 22 dollars. The Raise the Wage Act of 2021 could increase the federal minimum wage to 15 dollars by 2025, though this increase would not close the productivity-pay gap. The figure below shows real and nominal federal minimum wages in comparison to productivity-tracking minimum wages from 1950 projected to 2025.
The rise in economic inequality can also be attributed to the decline of the union movement. Legislators have continuously failed to make workers’ rights a priority, allowing corporations to hold all the power in labor contracts. According to an article by The Washington Post, “In 1983, unions represented about 1 out of 5 workers; now it’s 1 in 10 workers” (Rosenberg, 2020). This decline can largely be attributed to union busting, in which employers take various actions to prevent their workers from joining unions and often threaten to cut wages and benefits, or even fire their employees. The actions taken by large corporations— and policymakers who are equally, if not more, complicit— to reduce union involvement are a direct source of rising economic inequality. In fact, according to an article by CNBC, in 2019, “…nonunion workers made just 81 cents for every dollar union workers made” (Hess, 2021), further illustrating the extent to which the decline in union involvement has contributed to the decline in wages.
Economic inequality in the U.S. is a complex issue and the widening income and wealth gaps between the rich and the poor can be attributed to various sources. The widening productivity-pay gap, stagnant minimum wage, and decline of the union movement make up only a few of the factors contributing to the issue. Other potential factors include outsourcing, deregulation of various industries, automation, trade policy, corporate tax cuts, along with many others. Despite the severity of the issue; however, the widening gap between the rich and the poor is not inevitable but can rather be addressed through political action. Because the rise in economic inequality can be attributed to such a wide range of causes, addressing the issue also requires a wide range of policy changes. Some of the potential policy changes include eliminating corporate tax cuts, protecting and strengthening unions, raising the federal minimum wage, or even increasing public school funding in low-income areas. In order to reduce the economic gap, policymakers must side with the working class whom they have continuously failed by siding with large corporations. And until they do so, the U.S. will never live up to its title as the land of opportunity.
References
(2021, August). The Productivity-Pay Gap. Economic Policy Institute. https://www.epi.org/productivity pay-gap/
Cooper, D., Mokhiber, Z., & Zipperer, B. (2021, March 9). Raising the federal minimum wage to $15 by 2025 would lift the pay of 32 million workers: A demographic breakdown of affected workers and the impact on poverty, wages, and inequality. Economic Policy Institute. https://www.epi.org/publication/raising-the-federal-minimum-wage-to-15-by-2025-would-lift-the-pay-of-32-million-workers/
Hess, A. (2021, February 5). Union enrollment declined for decades but union workers still earn more. CNBC. https://www.cnbc.com/2021/02/05/union-enrollment-declined-for-decades-but-union-workers-still-earn-more.html
Mishel, L., & Kandra, J. (2021, December 13). Wage inequality continued to increase in 2020: Top 1.0% of earners see wages up 179% since 1979 while share of wages for bottom 90% hits new low. Economic Policy Institute. https://www.epi.org/blog/wage-inequality-continued-to-increase-in-2020-top-1-0-of-earners-see-wages-up-179-since-1979-while-share-of-wages-for-bottom-90-hits-new-low/Rosenberg, E. (2020, January 23). Union participation is still declining despite workers’ strikes, new BLS data shows. The Washington Post. https://www.washingtonpost.com/business/2020/01/22/workers-are-fired-up-union-participation-is-still-decline-new-statistics-show/