Zelin: By the Numbers: How Gaping Disparities in Wealth Fuel a Generational Cycle of Inequality

Protesters affiliated with the Occupy Wall Street movement gather at Zuccotti Park in New York on September 30, 2011.
(Unmodified photo by David Shankbone used under a Creative Commons license. bit.ly/1E6HPMf )

We have all heard a great deal about the growing levels of income inequality in the United States. The top one percent of all earners in the U.S. rake in 40 times more than the bottom 90 percent, and the top one-tenth of the one percent has seen rapid levels of income growth as real wages continue to stagnate when compared to growth in productivity.

Concerns for the snowballing levels of income inequality are extremely important; however, there needs to be a greater focus on wealth inequality if we are to truly construct an egalitarian society in the richest country in the history of the world.

Wealth, or capital, consists of assets like real estate, stocks, bonds, equity, and debt. Increases in capital income are different from boosts in labor income, which is earned through salaries and wages. That is, capital income is earned regardless of whether one works at all.

I want to emphasize just how much income is created from passive control of investments rather than from actual labor. The top one-tenth of one percent of income earners averaged about $28 million in 2014. Seventy-five percent of that income, or $21 million, resulted from capital.

In 2015, total household wealth in the U.S. reached a staggering $71.4 trillion. The top 10 percent of American households own 76 percent of that wealth while the bottom 50 percent owns an average of $349 in wealth assets per family.

From 1963 to 2013, the bottom 10 percent of households have seen their wealth dip from having an average of no wealth at all to procuring $2,000 in debt. The top one percent saw their wealth balloon six times over the course of the same period.

Wealth disparities are even further evident when considering race. The median white family in 2011 owned $111,146 in capital while the median black family owned $7,113, and more than one-in-four black households possessed absolutely no wealth whatsoever.

Latinos also experience vast levels of wealth inequality with the median family holding only $8,348. These numbers show crystal clear evidence of the long-lasting effects of institutional racism and discrimination that people of color have endured since the dawn of the U.S.

With this in mind, it is important to note that income and wealth inequality do go hand-in-hand, as those with the highest earnings obviously have the capacity to purchase assets that generate even more wealth than they already have. This breeds an endless cycle of generational inequality that leaves a growing portion of the population unable to lift themselves out of poverty and contribute to society.

It is time to dispel the myth of the “American Dream” that is so deeply ingrained into our culture. Darrick Hamilton, a professor of economics at the New School, argues that “wealthier families are better positioned to afford elite education, access capital to start a business, finance expensive medical procedures, reside in higher-amenity neighborhoods, exert political influence through campaign contributions, purchase better legal representation, leave a bequest, and withstand financial hardship resulting from an emergency.”

Without the foundational safety, opportunity, and power that comes with inherited wealth, the vast majority of Americans are left in the dust facing an insurmountable wall of institutional challenges and disadvantages.

This is not to say that there are not rare exceptions to the rule, but the idea that anyone can fix their socioeconomic situation with enough grit and hard work only serves to perpetuate and exacerbate the existing problems of inequality. Forty-three percent of children that come from the bottom 20 percent, or quintile, of income earning parents remain in that same income bracket their entire lives.

Only 4 percent of those same children reach the top quintile. Children born into the top quintile have basically the same chances except reversed. Such children are not inherently more talented, capable, nor genetically superior than kids born into poverty. They simply lack adequate access to the resources that lay the foundation for a safe, healthy, and productive life. We must acknowledge reality and address this problem so that more young people can realize their fullest potential and experience upward economic mobility in their lifetimes.

These dilemmas are even further compounded by the fact that those in the top one percent of income earners save an average of 38 percent of their annual earnings. That is billions if not trillions of dollars that are virtually dead upon arrival in someone’s bank account, never to be circulated in the economy again. In my opinion, there is no moral justification for such enormous sums of money to simply be stashed away while millions are impoverished and unable to access health care, education, and other essential aspects of human life.

We live in a country that has more than enough wealth to achieve these goals. If we want to create a society in which everyone has the opportunity to create wealth, innovation, and prosperity, we must confront the issue of wealth inequality head-on before it is too late.

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