How rising inequality hurts everyone, even the rich

Over the past 40 or so years, the American economy has been funneling wealth and income, reverse Robin Hood-style, from the pockets of the bottom 99 percent to the coffers of the top 1 percent. The total transfer, to the richest from everyone else, amounts to 10 percent of national income and 15 percent of national wealth.

It’s part of a massive concentration of wealth and income among the rich that has put the United States at levels of inequality not seen in this country since before World War II. It’s a trend that economists such as Thomas Piketty believe will continue unchecked in the coming decades, with the top 1 percent of Americans capturing a quarter or more of the national income by 2030.

The problem is commonly understood as an issue for those who have less, and it certainly is. But recent studies demonstrate that inequality is bad for everyone in society.

Some of the pain is economic: The studies suggest that the inequality depresses economic growth, leaving less for society to divvy up — regardless of how its members decide to do so. And some of it is social: Studies have found that inequality, particularly the high level seen in the present-day United States, gives rise to criminal behavior.

Those effects can take a chunk out of your paycheck, regardless of whether you’re in the bottom 99 percent or the top 1 percent. Leading economists and economic organizations are coming around to the idea that to maximize income and wealth for everyone — including those at the top — there have to be meaningful checks on income and wealth inequality.

Inequality hurts economic growth, especially high inequality (like ours) in rich nations (like ours).

In 2014 the Organisation for Economic Co-operation and Development, a collective of the world’s 35 wealthiest countries including the United States, found that rising inequality in the United States from 1990 to 2010 knocked about five percentage points off cumulative GDP per capita over that period. Similar effects were seen in other rich countries.

“The main mechanism through which inequality affects growth is by undermining education opportunities for children from poor socio-economic backgrounds, lowering social mobility and hampering skills development,” the OECD found. Children from the bottom 40 percent of households (a huge chunk of the population) are missing out on pricey educational opportunities. That makes them less productive employees, which means lower wages, which means lower overall participation in the economy.

– The Washington Post

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