The greatest income inequality in the free world is found in the United States. This situation has led to the Occupy Wall Street movement, a political protest movement. The protest started at Wall Street in New York City and spread to more than 600 cities across the country. By claiming to be the “99 percent,” the protesters are demonstrating against the premise that one percent of the population controls the bulk of the income.
Over the past 30 years, income for the top one percent increased by 176 percent, while the balance of the population experienced an average increase of 26.6 percent.
But, this has not always been the case.
Since the end of the Great Depression, corporate executives have had the ability to pay themselves high salaries and bonuses. However, the New Deal instituted by the Roosevelt administration imposed standards of relative equality of pay. These standards were followed for more than 30 years.
After Reagan was elected president, the corporate climate began to change. In the 1980s, American politics began to change direction. It quietly abandoned the goal to improve the lot of the lower and middle classes and started to give more attention to pressure groups and well-financed lobbyists hired by upper income groups. As time went on, oversight diminished, giving way to increased deregulation. Corporate culture norms shifted from the old standards to the “greed is good” mantra touted in the movie, “Wall Street.”
Over the past 30 years, income for the top one percent increased by 176 percent, while the balance of the population experienced an average increase of 26.6 percent. The average annual pay for the top 100 C.E.O.s exploded. Where this number had been $1.3 million, or 39 times the pay of the average worker in 1982, by 2002 it suddenly became $37.5 million, which translates to more than 1,000 times the pay of ordinary workers.
In addition to the pay increases, large reductions in the top marginal income tax rates contributed to the income inequality. During the Reagan administration, the highest rate was reduced from over 70 percent to 28 percent. This allowed those earning the huge salaries to keep a larger portion of their earnings, again increasing after tax income equality.
Experts do not agree on the causes or the effects of the growing income inequality. Some cite partisan politics while others blame automation and the decline of lower-skill jobs. Many social scientists and economists argue that government policies have had the most impact on the disparity.
Studies show that income inequality has increased more rapidly under Republican administrations than under Democratic administrations. During Democratic administrations, the greatest income gains came at the bottom and tapered off the higher they went up the income scale. Under Republican administrations, the opposite has been true.
The importance of this issue is disputed by scholars, scientists and politicians. Various theories have been advanced and then discredited. Blame has been attributed to outsourcing, information technology and the emerging economies of China and other Asian countries. Some have pointed to immigration, both legal and illegal, as a major cause. The current economic crisis in the U.S. and the struggling of everyday citizens in today’s job search market cannot be ignored. The unemployment rate is at an all time high.
While each of these situations may have contributed to income inequality, none of them, either separately or together, is adequate to account for the enormous size of the disparity. The proof lies in the fact that other countries with similar situations have not been subject to the extreme widening of the income gap that the United States has experienced.
The need for a solution is also debated. Those adversely affected argue that income equality endangers the social stability of the country. Others claim that the protests are simply an excuse for “class warfare rhetoric.”
Simply by having the wealth, the one percenters are able to hire the lobbyists and control the media. They portray the protesters as being too lazy to work. They claim that anyone who is willing to put in the effort can still obtain the American Dream. They justify paying themselves huge salaries by saying that they are the job creators and they deserve it because of the current unemployment status. They accuse anyone who disagrees with them of being a socialist. The Occupy Wall Street movement efforts continue and whether their efforts are in vain remains to be seen.
Over the centuries, countries have fallen because the “have nots” have risen up against the “haves.” As in other areas of life, it is important to learn from the past in order to avoid the same mistakes in the future. America may want to heed a warning by Greek/Roman historian Plutarch: “An imbalance between rich and poor is the oldest and most fatal ailment of all republics.”