Amid Discouraging New Inequality Stats, Some Encouraging Rays of Hope

Back in the early 20th century, earnest middle-class reformers out to overturn America’s plutocratic order gravitated to the pages of The Public, a weekly magazine whose editor, Louis Post, would become the U.S. assistant secretary of labor in 1913.

One year later, the associate editor of The Public would offer a cutting critique of the legal system that so protected our nation’s plutocratic powers-that-be. That system, Stoughton Cooley of The Public avowed, rendered judgments “so far from justice and common sense” that average citizens believe “absolutely that the poor have no redress against the rich.”

“If the lawyers and judges do not reform the machinery of the law,” Cooley declared, “the people will.”

The people eventually did just that. By the end of the 1930s, amid the ferment of the New Deal era, the courts were no longer routinely striking down progressive legislation and squashing the rights of workers. The United States, over the next generation, would become a significantly more equal place.

How much more equal? In 1928, just before the Great Depression began, America’s richest 0.1 percent held nearly a quarter of the nation’s wealth. By mid-century, that top 0.1 percent’s share of U.S. wealth was hovering down close to 5 percent.

In other words, by the 1950s, Americans no longer lived in an economy — and a polity — tightly rigged to enrich the already rich at the expense of average working families. The outrage of early 20th-century egalitarians like Stoughton Cooley suddenly seemed an artifact from a no longer relevant plutocratic past.

But here today that work of Cooley and his fellow progressives of over a century ago resonates as more relevant than ever. The progress against plutocracy the vast majority of average Americans experienced in the mid-20th century has, to an unnerving extent, gone by the boards.

Two sober new reports from inside the Federal Reserve system detail just how deep our new inequality runs.

Analysts at the Minneapolis Fed, in one of these newly published studies, have taken a crack at connecting the “very fragmented” research on American income and wealth distribution in a more “systematic fashion.” Their analysis of the years between 1967 and 2021 begins with wages and salaries, the “natural first cut on inequality.”

The paychecks of the nation’s highest 10 percent of earners, the Minneapolis Fed study shows, “have pulled away” from the paychecks of the bottom 90 percent, with this “widening” mostly driven by the pay that’s been going to our “top 2 percent.”

At the household level, meanwhile, earnings have increased for typical households, mainly because “women have closed the gap with men in both wages and hours worked.” But households below the median level “have made less progress,” with today’s poorest households actually making less, after inflation, than our nation’s poorest households 50 years ago.

Government programs have, to be sure, somewhat helped poor households cope with their declining real wages. But that help — via programs like food stamps and unemployment insurance — hasn’t kept the income gap from expanding. A half-century ago, households in our most affluent 10 percent had — after taxes and government support programs — about seven times the disposable income of households in our nation’s poorest 20 percent. That gap in 2021: about 11 times.

Another set of alarming data points comes from a new study on intergenerational economic mobility that the Philadelphia Fed has just published.

“According to ‘the American Dream,’ if we work hard enough and play by the rules, we’ll improve our situation and do better than our parents,” notes this study’s author, Bryan Stuart. “But the data show that this is not equally true for all Americans.”

The share of American young people “who earn more than their parents did at the same age,” Stuart’s analysis goes on to show, “has decreased over time.”

One particularly telling pair of stats: Over 90 percent of Americans born in 1940 would end up earning “more income than their parents” at comparable ages. The figure for kids born in 1980? Just 50 percent of these young people have gone on to earn more than their parents.

What explains stats like these? A number of factors, of course, contribute to our widening inequality and economic insecurity. Right at the top of that list: the shrinking union presence, over recent decades, in America’s workplaces.

Back in the middle of the 20th century, over a third of U.S. private-sector workers carried union cards. That share now sits at just 6 percent.

This declining union presence has had a devastating impact on our economic and political life. But no stat may illustrate that impact more dramatically than the ratio between CEO and worker pay.

Back in 1965, the Economic Policy Institute detailed last month, chief execs at America’s major corporations took home 21 times as much as America’s most typical workers. CEOs last year averaged 344 times typical worker pay.

Can we turn these sorts of dynamics around? One particularly hopeful sign: Some 67 percent of Americans now approve of unions, pollsters at Gallup reported this past August, a figure leaving the nation not all that far from the record 75-percent favorability rating unions enjoyed back in the mid-1950s.

Our current — and growing — public support for the labor movement has helped buoy a variety of recent union bargaining and organizing victories. And that support will likely continue growing if lawmakers across the country start following California’s recent lead.

Earlier this month, Californians saw signed into law legislation that will help high school students learn about their workplace rights and how to defend themselves against employer abuses. This new legislation establishes a “Workplace Readiness Week” that will give students at all California’s public high schools a basic sense of the on-the-job rights all young people share, including the right to join or start unions to defend and advance their interests as workers.

Young people today work disproportionately in fields where wage theft and on-the-job injuries run rampant, points out the sponsor of this new California legislation, state lawmaker Liz Ortega.

“Teaching our youth about their rights at work,” says Ortega, amounts to “essential education” and “could save their lives.”

And, in the process, that education could become still another building block for what we Americans today so desperately need: a considerably more equal USA.

Sam Pizzigati, an Institute for Policy Studies associate fellow, co-edits Inequality.org. His latest books include The Case for a Maximum Wage and The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970.