Ignorance of Income Inequality is Damaging to our Society

Three years ago the Occupy Wall Street movement got America’s attention with the cry of “We are the 99%.” Income inequality was put under a spotlight for a time. But how far did the understanding penetrate? Unfortunately, not very far.  

First, in a recent poll the average American thought CEOs made 30 times the wage of their employees, which hasn’t been true for 50 years. Today the figure is ten times as much—over 300 times.

Second, most people are completely unaware of the extent of wealth inequality, which is much worse than income inequality.  The wealthiest 20% in the U.S. own about 84% of the wealth. Think about that for a moment: only 16% of wealth is left for over three-quarters of the population. When you get to the bottom half of the population, those 155 million people own only about 2% of the total wealth.

To see an illustration of the income and wealth inequality in the United States, watch this episode of a TV show I did with Arthur Hancock in 2010.

The chart above, created by Pavlina Tcherneva, an economics professor at Bard College, vividly shows one of the contributors to the rise of income inequality in the last few decades. The graph portrays the distribution of national income growth during economic expansions since WWII. The blue represents the bottom 90%, the red the top 10%. In the last thirty years all the gains have gone to the wealthy, in fact, in the latest expansion most Americans have been losers—the truth is most of us don’t even realize we’re in an expansion, the Great Recession hasn’t ended for us yet.

In a recent column, “Invisible Rich,” Paul Krugman asks:

So how can people be unaware of this development [massive income inequality], or at least unaware of its scale? The main answer, I’d suggest, is that the truly rich are so removed from ordinary people’s lives that we never see what they have. We may notice, and feel aggrieved about, college kids driving luxury cars; but we don’t see private equity managers commuting by helicopter to their immense mansions in the Hamptons. The commanding heights of our economy are invisible because they’re lost in the clouds…

Does the invisibility of the very rich matter? Politically, it matters a lot. Pundits sometimes wonder why American voters don’t care more about inequality; part of the answer is that they don’t realize how extreme it is. And defenders of the superrich take advantage of that ignorance. When the Heritage Foundation tells us that the top 10 percent of filers are cruelly burdened, because they pay 68 percent of income taxes, it’s hoping that you won’t notice that word “income” — other taxes, such as the payroll tax, are far less progressive. But it’s also hoping you don’t know that the top 10 percent receive almost half of all income and own 75 percent of the nation’s wealth, which makes their burden seem a lot less disproportionate…

Today’s political balance rests on a foundation of ignorance, in which the public has no idea what our society is really like.

And the wealthy, in control of the media and the government, have a vested interest in keeping us ignorant.

A Guaranteed Annual Income

I have been thinking and reading about the implications of the coming robot revolution ever since I wrote my first post about it. The essence of that post is that artificial intelligence (AI) and robots have been steadily increasing in computational ability and they are about to put almost everyone out of work. In fact, some observers suggest that this is already happening: this is why the unemployment rate has stayed so stubbornly high in the last few years. There are economists who forecast 50 to 75 percent unemployment twenty years from now. What would this mean? How would people live without jobs?

Economist Paul Krugman wrote a column last summer called “Sympathy for the Luddites,” in which he suggests a basic income for everyone is the only solution.

This fall, activists in Switzerland collected enough signatures to bring a referendum to the ballot that calls for a minimum income for every citizen in the country. When the group brought the petitions to Parliament, they also brought a truck filled with 8 million coins, one for every Swiss citizen. If enacted, the measure would guarantee an income of about $2800 per month per citizen, regardless of any other income.

Business Insider published an interview with Daniel Straub, one of the people who initiated the Swiss referendum, and Straub linked the concept of a minimum income to the future of robots:

BI: Why choose a minimum income rather than, say, a higher minimum wage?
DS: A minimum wage reduces freedom — because it is an additional rule. It tries to fix a system that has been outdated for a while. It is time to partly disconnect human labor and income. We are living in a time where machines do a lot of the manual labor — that is great — we should be celebrating.

I agree with Straub that we should celebrate this—I imagine our robot future in a very positive way—but of course there are many dystopian views. I guess that’s not surprising in our culture, where the movie industry constantly pumps out films portraying a bleak future where the machines rule, the earth is devastated, and humankind fights for survival.