Income Inequality 101 Why Income Inequality Living in

Income Inequality 101

Why Income Inequality?

Living in a Mythical Country Two BIG Myths The US is pretty equal The American Dream is alive and well

Living in a Mythical Country Two Big Myths What we think it’s like

Living in a Mythical Country Not This Or This

Myth: How Wealth is Distributed What Americans think it is

Myth: How Wealth is Distributed What Americans think it is What They Would Like it to Be top 20% 0 third 20% second 20% 20 40 bottom 20% fourth 20% 60 80 100 Source: Michael I. Norton, Harvard Business School; Dan Ariely, Duke University

Myth: How Wealth is Distributed What They Would Like it to Be

Myth: How Wealth is Distributed What they would like it to be What They Would Like it to Be What Americans think it is What they would like it to be top 20% 0 third 20% second 20% 20 40 bottom 20% fourth 20% 60 80 100 Source: Michael I. Norton, Harvard Business School; Dan Ariely, Duke University

Myth: US is pretty equal

Myth: US is pretty equal What it actually is! What They Would Like it to Be Actual Distribution of Wealth What Americans think it is What they would like it to be top 20% 0 third 20% second 20% 20 40 bottom 20% fourth 20% 60 80 100 Source: Michael I. Norton, Harvard Business School; Dan Ariely, Duke University

Myth: US is pretty equal I suggest dropping this slide

Which Real Country Is America’s Ideal? What they would like it to be top 20% second 20% 20 third 20% fourth 20% 60 bottom 20%

Myth: Comparatively, US is pretty equal

Is this the comparison we want?

Top 10 % Income Share 1917 -2008

THEN Top 10% Share Low and Steady I suggest dropping this slide and talking from the main graph slide

NOW Top 10% Back to Levels Last Seen Before the Great Depression I suggest dropping this slide and talking from the main graph slide

Does Economic Mobility Offset Inequality? Through much of the nation’s history, absolute mobility was high. But for the most recent generations, those born after about 1970… absolute mobility has declined. (Brookings, Economic Mobility in America, 2008)

Myth: US is Economically Mobile

Which politician recently said this? “movement up into the middle income is actually greater … in Europe, than it is in America. ” Joe Biden Mitt Romney Bill Clinton Rick Santorum Barack Obama

What’s So Bad About Inequality? Many think inequality is not a problem • It motivates people • Different outcomes are ‘natural’ • Afraid ‘fixing’ inequality is socialism, cure worse than the disease

But high levels of inequality DO matter 1. 2. 3. 4. Morally repugnant Dangerous to democracy Hurt the poor and middle class Tear apart our social fabric

Morally repugnant

Undermines Our Common Citizenship “The U. S. -based CEO of one of the world’s largest hedge funds told me that the hollowing-out of the American middle class didn’t really matter. ” Atlantic, “The Rise of the New Global Elite”

The Rich are SO Rich! 299 243 126 24

IT CORRUPTS OUR POLITICS Money for House and Senate Campaigns • 1974 $77 million • 1982 $343 million • 2010 • 2012 $1. 8 billion 3 -5 x more!

It Doesn’t Trickle Down! Productivity Growth and Worker Compensation 1979 -2005 PRODUCTIVITY COMPENSATION

Hurting the poor and middle class

Hurting the poor and middle class Share of total wealth gain, 1983 - 2009 81. 7% 50. 0% 40. 2% 41. 5% Share of total wealth gain % 40. 0% 30. 0% 20. 0% 10. 0% -7. 5% 10. 2% 9. 8% 5. 7% -1. 4% 0. 0% -10. 0% Top 1% (99 -100) Next 4% (95 -99) Next 10% (80 -90) Upper middle fifth Next 5% (90 -95) Source: Mishel analysis of Wolff in Allegretto (2010) Middle fifth -2. 0% Lower middle fifth -4. 1% Lowest fifth

Tearing apart our social fabric “Can the Middle Class Be Saved? ” • A cultural chasm has developed between the traditional middle class and the top 30 percent… Atlantic, Can the Middle Class Be Saved, Don Peck Sept. 2011

Health and Social Problems Associated with Income Inequality See next slide as a potential substitute for this one Health Problems Social Problems • Life expectancy • Infant mortality • Teenage births • Obesity • Mental illness and addiction • Low skills in math & literacy • Homicides • Imprisonment • Lack of trust • Low social mobility The Spirit Level Math Skills

What having no money can buy: 81. 7% 50. 0% 40. 2% 41. 5% Obesity Share of total wealth gain % 40. 0% Infant Mortality 30. 0% Teenage births Mental Illness Addiction Homicides 20. 0% 10. 2% 9. 8% 5. 7% 0. 0% -10. 0% Top 1% (99 -100) Next 4% (95 -99) Next 10% (80 -90) Next 5% (90 -95) Upper middle fifth Literacy Math Skills Trust Life expectancy Social Mobility

Tearing Apart Our Social Fabric USA F R A N C E UK SWEDEN JAPAN INCOME INEQUALITY

Why Has Inequality Gotten Worse? Two Main Explanations 1. Structural changes: globalization and technology 2. Government policies and programs: taxes, education, minimum wage, regulation

But Why Relatively Worse HERE? • In other countries inequality has not risen as it has in the US • Other countries strengthened cultural, institutional, and market mechanisms to counter inequality

Major Contributors to Rising Inequality Deregulation Trade Weaker Unions Lower Taxes on Rich Education decline Rising Inequality Skyrocketing CEO Pay

Why Has Inequality Gotten Worse? Timothy Noah, “The Great Divergence” “Most of these factors reflect at least in part things the federal government either did or failed to do”

Why Has Inequality Gotten Worse? POLITICIANS • Need more and more money for elections • Depend more on rich donors RICH ELITES • Buy access and privileges • Change the rules of the game in their favor • Get richer • Buy more access and privileges THE REST • Get poorer • Have less say • GIVE UP

People Blame Big Government BIG GOVERNMENT BIG BUSINESS 1965 2010

GOOD NEWS--We Are Waking Up!

GOOD NEWS--We Are Waking Up!

GOOD NEWS--We Have the Power! • THE REAL CAUSES OF RISING INEQUALITY ARE IN OUR CONTROL • THEY ARE IN OUR POLITICS • AND IN OUR MENTAL MAPS • NOT IN INEXORABLE FORCES

What can we do? § LEARN, SHARE, TEACH § MAKE YOUR VIEWS KNOWN § JOIN WITH OTHERS § STOP MONEY IN POLITICS Income-Inequality. org

Make It Bigger! “Whenever I run into a problem I can't solve, I always make it bigger. If I make it big enough, I can begin to see the outlines of a solution. “ Dwight Eisenhower