Will a Recovery Really End Structural Inequality? by David Rosen

What the Times calls a “boom” may signal the coming end of what is best understood as the Second Great Recession.  However, while some level of economic “recovery” is likely, the long-term consequences of the U.S. rollercoaster economy may be a deepening inequality, American new social dis-order.

 

Photograph by Nathaniel St. Clair

On April 16, 2021, the New York Times ran a front-page story entitled, “Economic Pace Signals a Boom on the Horizon.”  With a self-confident chortle celebrating the likely containment of the Covid-19 pandemic, the article announced, “After months of false starts, evidence is mounting that the economy has definitively turned a corner, with more growth on the horizon.”

The Times piece notes that “job gains” as well as retail sales are up while jobless claims are down. It singles out the upswing in sales of “big-ticket items” like cars and “discretionary sales” like clothing and accessories as well as increases in restaurant and bar sales and airline reservations.  It reports that the Conference Board found “consumer confidence in March recorded its biggest one-month gain in nearly a decade …”  Yet, in a cautionary aside buried in the piece, it warns, “but if the economy appears to be on the upswing, the recovery is still fragile.”

The unasked or even implied question in the Times article is whether a possible “boom on the horizon” will address the deepening economic and social inequality – structural inequality — that the coronavirus pandemic has only make both more visible and worse?

***

On April 12th, Coney Island’s Luna Park, Brooklyn’s grand amusement playground, opened after a 529-day shutdown.  Its centerpiece is the Cyclone rollercoaster, a rollicking breathtaking adventure of crazy ups-and-downs with tight turns, steep slopes and sometimes inversions. The Cyclone can be a metaphor for the U.S. economy of the last 15 years.

The Great Recession lasting from December 2007 to June 2009 and, as a Federal Reserve reported, “this economic downturn was the longest since World War II.”  The unemployment rate increased from 5 percent in December 2007, to 9.5 percent in June 2009 and hit 10 percent in October 2009.

Other economic indicators reflected the crisis: home prices fell approximately 30 percent from mid-2006 to mid-2009; the S&P 500 index fell 57 percent from October 2007 to March 2009; and the net worth of households and nonprofit organizations fell from approximately $69 trillion in 2007 to $55 trillion in 2009.

Faced with an economic crisis reminiscent of the Great Depression, the Obama administration, in February 2009, implemented the American Recovery and Reinvestment Act, an $831 billion spending program targeted at economic growth and job creation.

In November 2013, the Fed, looking back, noted that the recession “was followed by what was, by some measures, a long but unusually slow recovery.  While the US economy bottomed out in the middle of 2009, the recovery in the years immediately following was by some measures unusually slow.”

Obama’s intervention steadied the economic rollercoaster that chugged along for the next 128-month period of expansion, the longest in post-World War II history. However, the National Bureau of Economic Research determined that economy peaked in February 2020 at the very moment that the Covid-19 pandemic struck the U.S.  Reuters reports that nation’s gross domestic product grew 2.2 percent in 2019 but “decreased 3.5% in 2020, the biggest drop since 1946.”

What the Times calls a “boom” may signal the coming end of what is best understood as the Second Great Recession.  However, while some level of economic “recovery” is likely, the long-term consequences of the U.S. rollercoaster economy may be a deepening inequality, American new social dis-order.

***

The U.S. is a divided nation, one grounded in inequality.  In a 2020 (but pre-Covid) report, Pew Research noted, “economic inequality, whether measured through the gaps in income or wealth between richer and poorer households, continues to widen.”

“The average household income (after taxes and government benefits, and adjusted for inflation) of the top 1 percent rose 226 percent from 1979 to 2016.  Meanwhile …  [the] income for the majority of the population — in the middle of the income distribution — grew just 47 percent over the same period.”

Pew found that between 1970 and 2018, median household income had increased by 49 percent, from $50,200 to $74,600.  It goes further revealing a disturbing development: “from 2000 to 2018, the growth in household income slowed to an annual average rate of only 0.3%.”  If this slowdown had not occurred, Pew project that the 2020 median U.S. household income would be about $87,000.

In a 2019 study, the Congressional Budget Office (CBO) found that over the 1979–2016 period, the average income of the top fifth of households (in 2016 dollars) of the income distribution curve grew faster than the average income of households in the lower income quintiles. Written before Covid hit, the CBO projected the trend to continue through 2021.  It adds a revealing clincher:  “The differences between the rates of growth of the two income measures — particularly those for the highest quintile — are attributable to reductions in tax rates.”

The Council of Foreign Relations summarized the CBO’s findings in stark terms: “The average household income (after taxes and government benefits, and adjusted for inflation) of the top 1 percent rose 226 percent from 1979 to 2016.  Meanwhile …  [the] income for the majority of the population — in the middle of the income distribution — grew just 47 percent over the same period.”

Looking deeper into U.S. tax policy, the Institute of Taxation and Economic Policy reveals that in the 1950s thru 1970s corporations paid half of their profits in taxes.  However, over the last few decades, at least 55 of America’s biggest corporations pay zero federal taxes, including FedEx, HP, Booz Allen Hamilton and Nike – including former Pres. Donald Trump.  During this period, Republican and Democratic politicians, ever influenced by well-paid lobbyist (often former politicians) have successfully pushed cuts in corporate taxes.

Equally significant, for the top 1 percent, most of their income comes from the stocks and corporate dividends that go untaxed, as opposed from their salaries or bonuses.  A report by American For Tax Fairness and the Institute for Policy Studies reveals the combined wealth of all U.S. billionaires increased by $1,138 trillion (39 percent) between March 18, 2020 and January 18, 2021, from approximately $2,947 trillion to $4,085 trillion. Of the more than 600 U.S. billionaires, the richest five — Jeff Bezos, Bill Gates, Mark Zuckerberg, Warren Buffett, and Elon Musk — saw an 85 percent increase in their combined wealth during this period, from $358 billion to $661 billion.

This was the same period that saw 533,291 Americans died from the Covid pandemic and millions of workers lose their jobs.

***

The NIH defines structural inequities as “the personal, interpersonal, institutional, and systemic drivers—such as, racism, sexism, classism, able-ism, xenophobia, and homophobia—that make those identities salient to the fair distribution of health opportunities and outcomes.

The U.S. society needs to be understood not simply suffering from inequality but a far more telling condition – structural inequality.

The NIH defines structural inequities as “the personal, interpersonal, institutional, and systemic drivers—such as, racism, sexism, classism, able-ism, xenophobia, and homophobia—that make those identities salient to the fair distribution of health opportunities and outcomes. Policies that foster inequities at all levels (from organization to community to county, state, and nation) are critical drivers of structural inequities.”  Going further, it notes,  “the impact of structural inequities follows individuals ‘from womb to tomb.’”

In 2011, the Stanford Center on Poverty and Inequality published what it called “20 Facts About U.S. Inequality that Everyone Should Know.”  It is useful now, a decade later, to recall the Stanford list — taken together — define key features of the structural inequality that is the America’s new social order.  (The Stanford “facts” have been reorganized and quoted, and updated where possible.)

Economic

Wealth Inequality

“The ownership of wealth among households in the U.S. became somewhat more concentrated since the 1980s. The top 10% of households controlled 68.2 percent of the total wealth in 1983 and 73.1% of the total wealth in 2007.”

In 2020, the top 10 percent controlled $85.6 trillion or 69.6 percent of the nation’s wealth.

Wage Inequality

“Over the last 30 years, wage inequality in the United States has increased substantially, with the overall level of inequality now approaching the extreme level that prevailed prior to the Great Depression.”

The Congressional Research Service found that in 1975, the average income of households in the top fifth of income distribution was 10.3 times as large as average household income in the bottom fifth of the distribution; in 2019, average top incomes were 16.6 times as large as those at the bottom.

Intergenerational Income Mobility

“Intergenerational income mobility can be measured by calculating the rate at which individuals move to income quintiles that are different than that of their families of origin. The proportion of sons who remained in the bottom quartile declined between 1961 and 1972 and stayed the same afterward.”

A 2015 Pew Trust study found that children born into lower-income families can expect very different futures relative to those from higher-income families.

Intragenerational Income Mobility

“Intragenerational income mobility refers to the rate at which a person moves to a higher or lower income level during her or his work career. More than half of those individuals in the bottom income quintile in 1994 remained there 10 years later, and less than 4 percent reached the top quintile.”

Employment

Deregulation of the Labor Market

“The percentage of all wage and salary workers who are union members has declined from 24% in 1973 to 12.4% in 2008. The decline in the private sector was steeper than the decline in the public sector.”

Between 2008 and 2020, union members further declined to 10.8 percent.

Job Losses

“Employment fell by 3.1 million jobs during 2008, and by another 4.7 million jobs in 2009.”

Unemployment increased during the Great Recession of 2007-2009 but declined between 2009 and 2020 to 4.1 percent.  However, the Covid pandemic drove unemployment to 14.7 in May 2020; as of March 2021, nonfarm unemployment was 916,000 or 6.0 percent.

Bad Jobs

“’Bad jobs’ are typically considered those that pay low wages and do not include access to health insurance and pension benefits. As shown here, about 10% of full-time workers are in low-wage jobs, about 30% don’t have health insurance, and about 40% don’t have pensions.”

Discouraged Workers

“Discouraged workers are persons not currently looking for work because they believe that there are no jobs available for them. The number of discouraged workers in the U.S. increased sharply during the current recession, rising to 717,000 in the first quarter of 2009, a 70-percent increase from the first quarter of 2008.”

Between 2009 and 2020, the total unemployed and discouraged workers fell from 10.1 precent to 4.1 percent during Q-1 2020; by Q-4 2020, the number had increased to 7.1 percent.

CEO Pay

“Recent decades have seen a clear increase in the difference between CEO compensation and that of the average worker in manufacturing or ‘production.’ CEOs in 1965 made 24 times more than the average production worker, whereas in 2009 they made 185 times more.”

The Economic Policy Institute reports that between 1978 and 2018, CEO compensation increased by 1,007.5 percent while wages for the typical worker grew by 11.9 percent.

Gender Pay Gaps

“Throughout much of the 20th century, the average woman earned about 60% of what the average man earned.”

In 2021, women earned 82 cents for every dollar earned by men.

Occupational Sex Segregation

“Women and men tend to work in very different occupations. And overall ‘men’s jobs’ are better paid than ‘women’s jobs.’”

Occupational segregation persists. In 2015, for example, men were 53 percent of the U.S. labor force, but held less than 30 percent of the jobs in education and more than 98 percent of the jobs in construction.

Education Wage Premium

“Only college graduates have experienced growth in median weekly earnings since 1979 (in real terms). High school dropouts have, by contrast, seen their real median weekly earnings decline by about 22 percent.”

In 2019, full-time workers age 25 and older had median weekly earnings of $975. Those with a bachelor’s degree earned $1,281 a week; those with an advanced degree (master’s, professional, and doctoral degrees) earned $1,559 a week.  High school graduates (with no college) earned $749 a week; workers with some college or an associate degree earned $874; and those without a high school diploma earned of $606.

Social

Homelessness

“There are 750,000 Americans who are homeless on any given night, with one in five of them considered chronically homeless.”

A January 2021 report from the U.S. Department of Housing and Urban Development’s (HUD) claims that 580,466 people were counted as homeless during the 2020 Point-in-Time count, representing a 2.2% increase over 2019. This marks the fourth consecutive annual increase in homelessness.

Child Poverty

“In the United States, 21 percent of all children are in poverty, a poverty rate higher than what prevails in virtually all other rich nations.”

The U.S. Census reports that as of January 2021, one-in-seven – i.e., nearly 11 million — children lived in poverty.

Health Insurance

“In 2007, 8.1 million children under 18 years old were without health insurance.”

In 2016, the nation attained a historic low of 3.6 million uninsured children. This progress occurred as a result of expansions of public coverage — primarily Medicaid and the Children’s Health Insurance Program (CHIP) — and was accelerated by the implementation of the Affordable Care Act’s (ACA) major coverage expansions in 2014.

Racial Discrimination

“Racial discrimination continues to define the labor market.”

In a 2017 study, Germany’s Institute for Labor Economics reported that “in the US labor market the average black worker is exposed to a lower employment rate and earns a lower wage compared to his white counterpart.”  In stated: “we … conclude that discrimination resulting from employer prejudice is quantitatively more important than skill differences to explain wage and employment gaps.”

Residential Segregation

“We all know that the rich in the United States tend not to live in the same neighborhoods as the poor.”

In 2018, the Census Bureau released its American Community Survey for the 2013-2017 period and found that black-white residential segregation varies widely across metropolitan areas.  Equally telling, neighborhood segregation declined only modestly since the beginning of this century. Most white residents of large metropolitan areas live in neighborhoods that remain overwhelmingly white, and while black neighborhoods have become more diverse, this is largely due to an increase in Hispanic rather than white residents.

Racial Gaps in Education

“High-school dropout rates are least among whites and highest among Hispanics, while college enrollment rates are least among blacks and highest among whites.”

The Stanford Center for Education and Policy Analysis reports: “Although the white-black and white-Hispanic achievement gaps have been narrowing nationally over the last decade or more, the rate at which these gaps are changing varies among the states.”

It goes on to acknowledge: “On average, the within-state white-black achievement gaps have been narrowing at a rate of roughly 0.05 standard deviations per decade since 2003. The corresponding rate for white-Hispanic gaps is roughly 0.10 standard deviations per decade.”  It admits, “although the gaps are, on average, closing, they are doing so very slowly, compared to their current size.”

Incarceration

“The incarceration rate in the United States has grown so dramatically since the 1970s that the U.S. now has one of the highest rates in the world. The rise in incarceration has been especially prominent among young Black males and high school dropouts.”

The Vera Institute reports that between 2010 and 2020, the U.S. incarceration rate for both prisons and jails had declined from 1,613,803 to 1,435,509 in 2019.

Vera notes, “the BJS [Bureau of Justice Statistics] report on the 2018 jail population found that the national Black jail incarceration rate was 3.2 times the white jail incarceration rate, down from 4.9 times in 2008.”  It adds: Latinx “incarceration had declined significantly over the last decade,” but warns that “national incarceration statistics for Latinx people are limited by inaccurate or inconsistent race and ethnicity data gathering at the local level.

Immigrants and Inequality

“Does immigration to the U.S. bring highly-skilled workers into the labor force or unskilled workers? The answer is both!”

The broad consensus of existing literature is that immigration does not significantly contribute to income inequality.

These “facts” are useful tools to assess claims about the coming end to the Covid pandemic and the Second Great Recession.  Using them together may enable people to understand how deep and unyielding is the structural inequality that has come to define American life.

David Rosen is the author of Sex, Sin & Subversion:  The Transformation of 1950s New York’s Forbidden into America’s New Normal (Skyhorse, 2015).  He can be reached at drosennyc@verizon.net; check out www.DavidRosenWrites.com.


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