Portrait of inequality in USA

Inequality in the United States is greater today than at almost any time in the last century, according to a new report. It points out that gaps in income and wealth also run deeper in the USA than those in virtually any other democratic and developed economy. The report sketches recent trends, and sets out radical policy solutions.

Key points

  • The USA has been affected by the same trends – such as globalisation, deindustrialisation and declining trade union influence – as other developed countries. But the worsening trend in inequality has been particularly prominent in the USA, suggesting the importance of political factors.
  • The meagreness of social programmes (especially after 1996) and the decline in job-based benefits for those on low wages are the most important factors in explaining growing inequality in recent years. At the top of the wage spectrum, the main factors are a shifting tax burden and patterns of corporate governance and 'financialisation'.
  • The core logic of austerity politics is that the rich need to be paid more to work harder, whereas those in poverty should be paid less to do the same. But there is little evidence to support this approach. Economic growth is sustained not by 'unshackled capital', but by the security and stability that comes with broadly shared prosperity.
  • Inequality is rooted in the labour market. There needs to be a substantial increase in the minimum wage, a more systematic commitment to the earned income tax credit, a renewed effort on enforcing labour standards, and help to rebuild union strength.
  • Healthcare and pensions need to be disentangled from job-based eligibility or participation. This would involve moving towards a sort of 'Medicare for All' healthcare system, and a system of universal and portable retirement accounts. Social programmes such as unemployment insurance and food stamps need to be reformed so that they are a better match – in terms of eligibility, coverage and duration – for the challenges faced by the current generation of working families.
  • Much higher taxes on the rich are needed, such as a financial transactions tax. These could be accompanied by checks on executive pay, either through more transparent and active forms of corporate governance or through public leverage (such as public contracts, subsidies or bailouts).

Source: Colin Gordon, Growing Apart: A Political History of American Inequality, Inequality.org
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Publication date: 
Jun 15 2013