On Occupy's Two-Year Anniversary, Gap Between Rich And Poor Grows
Today marks the two-year anniversary of the Occupy movement.
As protesters plan to mark the anniversary of the resistance of the 99 percent, a new report shows that the employment gap between the richest and poorest Americans is at its highest level since officials started keeping track ten years ago. Americans who earn $150,000 or more a year face an unemployment rate of 3.2 percent, while a staggering 21 percent of people making less than $20,000 a year are out of a job. Meanwhile, the top one percent took home 19.3 percent of all income in the U.S. last year — a number eerily close to 1920s levels.
It’s yet another reminder that the gap between the rich and the poor in America is widening, and has been for the past thirty years. But it wasn’t always that way. Wealth stratification has ebbed and flowed over the past hundred years, steadily falling after World War II and rising back to pre-war levels between the 1970s and now. Here's a brief history of the wealth gap in America:
The 1920s & The Great Depression
During the “Roaring Twenties,” most of the roaring in question was concentrated in the hands of the wealthiest Americans. In 1928, just before the Great Depression hit, the top one percent earned 19.6 percent of all income in the United States. After the stock market crashed, this number steadily decreased, and wouldn’t again hit such an extreme until 2007 — right before the next financial crisis.
It’s interesting to note, however, that while income disparity was enormous in the late 1920s, the unemployment rate was actually kind of low (around five percent). A lot of this is due to the fact that union membership plummeted throughout the decade, and so by 1929, employers could afford to hire more workers, because they didn’t have to pay them as much. But as we’ll see, the share of income reaped by top earners last year was more or less the same as in 1929, yet unemployment last year was far higher.
Then, in 1929, the stock market crashed, and everything went to hell. By 1932, a third of the country was unemployed, and the top ten percent of earners were still taking home more than 45 percent of the country’s total income.
While it would be hard to argue that World War II was in any sense good or desirable, the American economy was unquestionably in far better shape after the war than before. There’s still a whole lot of debate over which policies contributed to this (whether the economy rebounded because of the New Deal or in spite of it is a perpetual point of contention), but it’s undeniable that wartime manufacturing resulted in a huge boost in employment. By 1944, unemployment fell to 1.2 percent, an all-time low that’s significantly below the five percent unemployment rate that economists traditionally consider to be “full employment.”
The next several decades saw a big drop in wealth disparity. Between 1947 and 1973, the income of the median American family doubled; in fact, it doubled during that period for Americans in all income groups, rich and poor alike. After World War II ended, the share of income going to the top one percent steadily declined, and in 1974, the richest of the rich took home “only” 7.7 percent of all income in the country. This would be the last time, however, that the top one percent had to make do with such a small piece of the economic pie.
It’s worth mentioning, by the way, that the top tax rates were at their highest during this period than at any point in this country’s history. They peaked at 91 percent under President Eisenhower—yes, you read that correctly—and while this doesn’t necessarily account for the decrease in wealth disparity, it does put into perspective the recent Republican hysteria over a return to the Clinton-era rates of 39.6 percent.
Reagan to Bush
Between 1979 and 2007, after-tax incomes of the bottom 20 percent of earners rose by 18 percent. That might sound impressive — except for the fact that the top one percent of earners saw their incomes grow by 277 percent during that same time period. The average income growth in America during that time was 62 percent, which means that the richest Americans’ income has grown at a rate four times that of the average American since Ronald Reagan took office.
Another way to look at it: In 1979, your average one-percenter made about 22 times more than someone in the bottom fifth of earners. In 2007, they made around 74 times more.
While it’s debatable what caused this, the 1980s marked an era of vast financial deregulation. George W. Bush continued this general policy, and wealth disparity continued to rise until the next financial crisis.
The collapse of Lehman Brothers in 2007 marked the beginning of the Great Recession, and while everyone was hit hard by the financial collapse, rich Americans were hit the hardest. Between 2007 and 2009, the top one percent of earners saw their incomes fall by 36 percent, compared with an 11.6 drop for the rest of Americans.
But things quickly rebounded for the very rich. Last year, incomes for the top one percent rose by 20 percent, while the rest of America saw a mere one percent increase in their take. In totality, 95 percent of income gains since 2009 have gone to the richest of the rich.
Last year, the top one percent took home 19.3 percent of all income in the United States which, you’ll recall, is just a hare below the 19.6 percent share we saw in 1929. But in 1929, unemployment was low, even though workers weren’t making very much money. Now, wealth stratification is essentially the same as it was on the eve of the Great Depression, yet unemployment is higher (7.3 percent, as of last month).
While President Obama often claims that his administration helped prevent another depression, there’s little evidence so far that the financial stimulus — or the Dodd-Frank financial reform bill, or any of his policies, really — have done anything to alleviate the wealth disparity that’s been slowly growing in America for the past three decades.