Inequality in the USA

The United States is the most unequal, rich country in the world. It has the highest Gini coefficient of any country in the OECD, and this number has been trending upwards since the 1970s.

95% of the gains since the recovery began have been enjoyed by 1% of the population.

U.S., 75.4% of all wealth is owned by the richest 10% of the people. Australia 50.3%, Canada 57.4%, Denmark 72.2%, Finland 44.9%, France 51.8%, Germany 61.7%, Ireland 58.4%, Israel 68.9%,

Italy 49.8%, Japan 49.1%, Netherlands 54.6%, New Zealand 57.6%, Norway 65.9%, Singapore 61.1%, Spain 54.0%, Sweden 71.1%, Switzerland 71.5%, U.K. 53.3%.

Not only is income and wealth unevenly distributed in the USA, but Americans do not (yet) have a European style health system to support them during illness.

Why so unequal? 1. Dramatic fall in the number of

unionised workers in the manufacturing sector. This results in falling real income. This has been most pronounced in the manufacturing sector. Many of these jobs have in fact left the country.

Why so unequal? So somebody working for Ford in 1970

received a good salary, sick pay, medical insurance and holiday pay. That person is now flipping hamburgers.

Why so unequal? The Federal minimum wage is _______

an hour.

An estimated 27.8 million people would earn more money under the Democratic proposal to lift the hourly minimum from $7.25 today to $10.10 by 2016. And most of them do not fit the low-wage stereotype of a teenager with a summer job. Their average age is 35; most work full time; more than one-fourth are parents; and, on average, they earn half of their families’ total income.

Too big to fail – This is an implicit subsidy to the

financial elite allowing them to take foolish risks and reward themselves handsome bonuses.

Tax America’s complex tax code means it is

worthwhile for the American wealthy to hire tax lawyers and avoid many higher taxes. The burden is passed on to those lower down the income chain.

Buffett says he's still paying lower tax rate than his secretary.

How does he manage this?

Still many American states have indirect taxes on food.

Education It is not unusual for children of richer

parents to do better in school. However in the USA, it is especially true.

American schools collect taxes from local residents. Richer areas have richer tax payers and therefore more resources.

So what? The USA’s inequality is a necessary

consequence of the most creative country on earth. Every majoy technological advancement (except for Skype, Spotify and Angry Birds) has come from the USA.

So what if Larry Page & Sergey Brin are obscenely wealthy thus warping the USA Gini coefficient? They helped improve the quality of life of all other Americans and billions of people around the world.

However, it is not only the creative geniuses like Larry Page who are obscenely wealthy – also the Wall Street Bankers. They get an implicit subsidy from the US government if they are deemed too big to fail, can take foolish risks and reward themselves handsomely whether they win or lose.

http://www.youtube.com/watch?v=cG_TKAJyV6k

http://www.ted.com/talks/richard_wilkinson.html - TED talks on inequality

Problems of an unequal economy. Social problems including crime.

The total utility of the population is not maximised.

Less social mobility – the Great Gatsby Curve

–who leads America tomorrow will not be the best and brightest, but instead it will depend more on what their fathers did for a living.

Higher rate of relative poverty (unlikely to have absolute poverty in the USA).

http://www.dailymail.co.uk/news/article-1326187/Las-Vegas-tunnel-people-How-1-000-people-live-shimmering-strip.html

People living in the sewers in Las Vegas.

15% or 46 million people live below the poverty line. (_____ % of ________ income).

Up from 37 million in 2007.

Food insecurity limited or uncertain availability of

nutritionally adequate and safe foods.

The number of Americans living in such conditions:

Food insecurity limited or uncertain availability of

nutritionally adequate and safe foods.

The number of Americans households living in such conditions: 17.2 million or 14.5%

Solutions 1. Simplify the tax code. This would

allow a larger burden to be carried by the wealthiest and allow American states to, for example, remove the indirect tax on food.

2. Increase the US minimum wage. In real terms it is well below 1960s level. Cheap manufacturing jobs have already left the country anyway, it would increase the income of 27 million people who work in low end tertiary sector whose jobs are next to impossible to outsource to Asia anyway.

Provide equal opportunity to every American student.

Positive discrimination/affirmative action.

This gives an advantage to those who have historically been discriminated against. It applies when applying to many universities and many public sector jobs.

Affirmative action: problems – how long should it last and how comprehensive should it be?