Rich Man, Poor Man
Americans remain optimistic that it is possible the American dream has not receded entirely into the mists of history. We still have faith in it because, as a people, we are natural optimists. The hard reality, however, is that it is no longer possible for more than a very small minority to start out poor, work hard, and become well off. Our fabled equal-opportunity society is in hostage to a gathering of circumstances we must address with urgency, for the sake of social justice, but also to obtain the greatest benefits from the talents of our fellow citizens and maintain a cohesive community.
The generation that emerged from World War II enjoyed income growth fairly evenly spread throughout our entire population. The past 25 years tell an utterly different story. Median family incomes have risen by less than 1 percent a year--for a total of 18 percent overall--but median incomes for the top 1 percent have gone up more than 10 times faster--by an astounding 200 percent! As a nation, America has experienced extraordinary growth. From 1980 to 2004, our gross domestic product rose by almost two thirds, but when you factor in inflation, the wages of the typical earner actually fell--not a lot, but compare that with the top American earners, and the widening gap between the richest and poorest Americans becomes starkly clear: Among the top 20 percent of American earners, real incomes increased 59 percent.
And there's no sign the trend is moderating. This year the top 10 percent of wager earners are projected to receive 45 percent of all household cash income, up from 40.6 percent in 2000. And what about the average family in the 80 percent of the workforce who make up our rank and file? Incomes are actually slightly lower, after adjusting for inflation, than they were four years ago. This means that those Americans have effectively taken a pay cut since 2002, even as the economy has been growing by over 3 percent a year. Sadly, this isn't--or shouldn't be--terribly surprising: Except for a few years in the late 1990s, the hourly pay of most workers has done no better than inflation for the past 30 years.
Translate these graphs going in opposite directions, and we have a picture of two highly divergent societies. Today, in fact, we have slipped back to the excesses of the notorious Gilded Age and beyond. Making matters worse, the gap between the ostentatious new rich and the rest of America is growing fast. Twenty-five years ago, the top fifth of all American households' post-tax incomes were 6.7 times those of the bottom fifth. Today, that ratio has jumped to 9.8 times--nearly a 50 percent increase. The result? More and more American workers are in danger of slipping into outright poverty. Not only were 37 million Americans living below the poverty line in 2004, but an additional 54 million were the "near poor," who live between the poverty line, earning annual incomes of roughly $19,000, and double the poverty line. Between 1982 and 2004, median earnings of fully employed men grew by only 2.7 percent. That's just about as close as you can get to absolute stagnation over a span of 22 years.
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