It’s difficult to comprehend an economy where a corporate executive leaves his office every night wearing a watch that cost more than the building janitor makes in a year.
But that is the reality of an economy where income inequality is growing more extreme by the day.
Money is moving out of the pockets of workers in America and into the hands of the ultra rich at the fastest pace ever recorded on a sustained basis. Hard evidence is found in a wide range of measures of income inequality.
One of the broadest measures is labor’s share of the national income. National income is the sum of all incomes generated by the economy in a given year.
The real decline in labor’s share has occurred in private sector wages and salaries. In 2000, private sector wages and salaries stood at 46.1 percent of national income, but this share dropped to 42.9 percent in 2006, the lowest level in more than half a century.
The trend toward a smaller share for labor continues as real average hourly earnings in the private sector fell by 0.4 percent in the first quarter of 2007.
Meanwhile, corporate profits rose 21.4 percent in 2006, following a 12.5 percent increase in 2005. For the Fortune 500, profits rose 29 percent in 2006 to $785 billion, on revenue growth of only 8.9 percent.
More evidence of labor’s shrinking share and growing inequality appears in the rapid growth of the ultra rich. Ten years ago, 250,000 U.S. households had a net worth of $5 million or more, not including the value of their primary residence, according to consulting firm Spectrem Group, which specializes in the affluent market.
Today, 1,140,000 U.S. households have a net worth of $5 million or more, a fourfold increase. The number of households with $1 million or more has doubled in the last decade.
On a global level, the standard measure of income inequality is the Gini index, which uses 0 to represent perfect income equality and 100 to represent total inequality. In 1990, the U.S. had a Gini score of 42.8. Fifteen years later, in 2005, the U.S. scored 46.9, the highest rate of income inequality in the developed world, and comparable to the levels reported in underdeveloped countries marked by extreme wealth and poverty.
The bottom line is that this growth in income inequality has accelerated as union density has declined. Reversing the decline in workers’ share and the rise in income inequality is a huge economy-wide task that can only begin when workers unite in the workplace and regain some collective control over their wages and income.
Greg Tarpinian is the Executive Director of Change to Win.
Comments (1)
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We would not have a significant American Middle Class without the union movement. The decline in living standards of many middle class Americans can be directly linked to the declining percentage of workers who are unionized.
We must pass the Employee Free Choice Act to make it possible for American workers to unionize. The current system is rigged to favor corporations and unfairly deny workers their collective bargaining rights.
Posted by Stephen Crockett on May 2, 2007 at 10:54 PM
Posted on May 2, 2007 at 10:54 PM