Perspective 96. Inequality in the United States: On the Rise?

Feb 14

President Biden, in his State of the Union address, clearly tried to reconnect with the historic working-class base of the Democratic party on issues such as taxation of corporations (55 of the largest corporations having paid no tax at all!). Is economic inequality in fact increasing in the United States, and is it potentially a key future issue?

Yes. By any measure inequality has been growing over time, and furthermore the United States lags more and more behind comparable nations on quality of life issues of particular significance to lower-income groups.

In perspective, a Pew Research Center study found that over the last 50 years the share of national income going to the top 20 percent of households rose from 43 percent to 52 percent. In other words, presently the uppermost fifth earns more than all the rest put together. And the top 5 percent of households take in 23 percent of the total, up from 16 percent.

But maybe this happens in all advanced industrial economies, as technological innovation and industrial decline tend to concentrate wealth? Not as strikingly as with the U.S. economy. The Organization for Economic Cooperation and Development (OECD), the club of developed nations, now ranks the United States as fifth highest of its 38 member states on the Gini Index, the generally accepted measure of inequality. Only four less developed states outrank the U.S. on this dubious scale.

So maybe income alone is not the best measure of human welfare? Maybe there are other “quality of life” dimensions that should be taken into account? The United Nations has developed a “Development Index” that adds education, healthcare, and other social factors to the calculation. But on this index as well, most comparable advanced industrial countries rank significantly ahead of the United States. In the latest UN report, the United States was in 21st place, behind most Western European and some Asian states. (For the many Israelis on this list, Israel was right behind at 22nd.)

The U.S. score on the Development Index was depressed, in part, by its relatively poor performance in life expectancy, surely a key measure of healthcare. According to the most recent figures of the UN Population Division, the United States ranked 46th in the world in life expectancy, sandwiched between Cuba and Albania. Explanations for this relatively miserable performance usually center on the fact that other advanced nations have universal healthcare. Not surprisingly, healthcare is also part of President Biden’s outreach to the less advantaged.

Furthermore, the recent decline in life expectancy coincides with the pandemic, with the United States leading the world in Covid deaths. As the U.S. does lead the world in medical research, explanation for the decline inevitably turns to the policies and actions, or lack thereof, of the previous administration: a topic, perhaps, for another occasion.