"I Dream of Gini ..."

In this series of posts about rising economic inequality in America, I'm talking about how the American middle class has been hammered since the mid-1970s, while the well-off have seen their wealth and incomes skyrocket.

The map at left shows that distributing U.S. land according to how U.S. wealth is distributed would have the richest 10 percent of Americans hogging the whole continental United States north of a line stretching between Los Angeles and Raleigh, North Carolina. The remaining 90 percent of us would need to divvy up the land below that line. The poorest 40 percent among us would get squeezed into a tiny dot about the size of Corpus Christi, Texas.

That's one way to show the extent of the inequality, but economists prefer the Gini coefficient. According to "For richer, for poorer," a recent special report in The Economist:

The best-known way of measuring inequality is the Gini coefficient, named after an Italian statistician called Corrado Gini. It aggregates the gaps between people’s incomes into a single measure. If everyone in a [society] has the same income, the Gini coefficient is 0; if all income goes to one person, it is 1.

"America’s Gini for disposable income is up by almost 30% since 1980, [from 0.30] to 0.39," says The Economist. Is that bad, or not so bad?

Scandinavian countries have the smallest income disparities, with a Gini coefficient for disposable income of around 0.25. At the other end of the spectrum the world’s most unequal, such as South Africa, register Ginis of around 0.6. (Because of the way the scale is constructed, a modest-sounding difference in the Gini ratio implies a big difference in inequality.)

So 0.39 is pretty bad, but more worrying than that is the 30% rise since 1980. In this erstwhile land of opportunity, a sizable jump in Gini suggests that opportunity has been knocking on middle-class doors a lot less often that it once did.

By another formal measure of inequality, says The Economist, things look even worse:

Including capital gains, the share of national income going to the richest 1% of Americans has doubled since 1980, from 10% to 20%, roughly where it was a century ago. Even more striking, the share going to the top 0.01% — some 16,000 families with an average income of $24 [million] — has quadrupled, from just over 1% to almost 5%. That is a bigger slice of the national pie than the top 0.01% received 100 years ago.

Mark Twain

100 years ago, America was in the Progressive Era, a time in which the excesses of the Gilded Age — "an era of serious social problems hidden by a thin layer of gold," according to satirists Mark Twain and Charles Dudley Warner in The Gilded Age: A Tale of Today — were being forcibly pared back by activist government. It was during the Progressive Era that the U.S. Constitution was amended to allow the levying of an income tax, and that the corporate monopolies of the "robber barons" — at that time the monopolies were called "trusts" — were getting "busted."

If the top one percent grab fully 20% of the income our economy generates nowadays, isn't it fair to say that we live in a New Gilded Age today?

Who's Working Class? Me? You? Anybody?

The American political conversation these days seems to have deleted "working class" as a term representing a broad swath of the American people. We hear about "the wealthy." We hear about "the middle class." We hear reference made to "the poor." But what happened to "the working class"?

First of all, be it known that I personally am not working class. I'm solidly middle class, verging on upper middle class.

Since I'm retired, I don't actually "work." But I used to work. I was a computer systems analyst for the federal government. That made me what the smart set today call a "knowledge worker," meaning that everything I produced was a product of my brain. I didn't actually make things. But I did make certain "things" — specifically, computers — work better. The tools of my trade were items of knowledge that I held in my head, not tangible things I held in my hands.

Plus, I had a college degree ... in addition to, of course, my high school diploma.

My parents both came from families that were borderline working class. Dad's dad was a baker, except when there was no work to be found in that field, in which case he farmed some and scuffled some more. Mom's dad did a lot of scuffling, since his college education in a theological seminary was as a lay preacher, not a lucrative field by any means. After he decided his scuffling days were done, he became a (non-union) crane operator in a railroad roundhouse.

You could call both of my parents' families working class ... but in my estimation the better description would be lower middle class.

The working class proper used to include "blue-collar" workers who labored in factories with their hands. In the early twentieth century most of those salt-of-the-earth Americans were organized into unions. The unions fought for the rights of "labor" and often won ... at the expense of what was known derisively as "management."

Nowadays, if you factor out teachers' unions and those of other public-sector workers, unions in general are nowhere near as big or as powerful as they once were. And my granddad, the locomotive crane operator, got his working-class, ostensibly blue-collar job as a strikebreaker, I'm told.

Moreover, my investigations of the history of one of my favorite types of music, country music, have shown me that the term "working class" is customarily applied by scholars to its principal original audience, white Southerners who had more callouses on their hands than dollar bills in their pockets. These folks, often farmers, were never unionized. In fact, they hated unions.

A lot of those folks moved from the country and its nearby small towns to the big city, and after their standard of living rose with generally rising American prosperity in the years following World War II, they (or their children) moved to the suburbs. Today, those formerly "working class" families would probably say they're lower middle class or just plain middle class.

Yet it seems to me that it matters much that there is still a working class in America, composed of people doing various types of manual labor, producing "goods" rather than "services," doing so in factories, on farms, in mines, and in many other places.

It's important not to lose focus on those Americans because in today's economy it's downright hard, if not impossible, for them to move up the economic ladder, as earlier generations were able to do.

They typically don't have a college degree, and many lack a high-school diploma. Almost seventy years ago, at the end of WWII, that didn't matter much, for returning servicemen could go back to school on the G.I. Bill of Rights and climb the ladder that way. A decade or so earlier, during the Great Depression, the New Deal and the union movement offered ways of improving people's material circumstances. So for several decades of the twentieth century, climbing the ladder of success was quite possible for members of America's working class.

That's not the case today.

I'm reading Who Stole the American Dream? by Hedrick Smith. It describes how the period from the mid-1940s, just after WWII, to the mid-1970s was a golden age for American prosperity, with people on the lower rungs of the economic ladder moving steadily up while the wealthy did all right, too. But after the middle of the 1970s, business interests began wielding unprecedented political power. The result was that for the last nearly 40 years the gains made by the economy as a whole have been hogged by the well-to-do, not shared with the workers who were, thanks to all sorts of increased efficiencies, producing ever more goods and services.

A lot of the working class became middle class in the three decades after WWII. But in the last three or four decades, the working class has stagnated. The sad result has been that we don't even talk about the working class any more.