America’s founding myth has always been that of “equal opportunity” to advance the “self-made man”. The notion was that, with enough work and dedication, anybody can climb the social ladder and become wealthy, or at least become wealthier than a previous generation.
Data shows that the most important drivers of current living standards are however determined at birth. Most of the poor are poor because they were born in poor households. In the United States, income inequality, or the gap between the rich and everyone else, has been growing markedly, by every major statistical measure.
The Gini coefficient is a scientific measure used to show inequality. It is a number between 0 and 1, where 0 represents perfect equality and 1 perfect inequality where one person has all of the country’s income. The five countries with the worst income inequality — the United States, Israel, Chile, Mexico, Turkey — also had the five highest poverty rates in the OECD.
Opportunity has long been one of the cornerstones of modern capitalism, and inequalities are accepted as long as the possibility of betterment exists. We tolerate unfairness as long as there are good chances of improving our condition.
But as the middle class has been shrinking, American median incomes have fallen, too. In 190 of America’s 229 metros, the median income dropped over the same time. As the middle class has shrunk, Pew Research points out, the lower and upper classes in America have grown in size and significance.
“No matter what your educational background is, where you start has become increasingly important for where you end,” says Michael D. Carr, economist at the University of Massachusetts. Social mobility is no longer the norm but an exception.
Most of the nation’s economic growth over the past 30 years has gone to the top 0.1 percent. Inequality is now approaching the extreme level that prevailed prior to the Great Depression, researchers told the Washington Post. In fact, inequality is so high that a third of the population has no wealth at all.
That would mean that in for example a town of 1000 people, one person would have more money than 900 other villagers together. And researchers from all over the political spectrum, have drawn the same conclusion: the US is by far the most unequal society in the developed world. And things are getting worse every year.
According to a research paper by the National Bureau of Economic Research, US social mobility fell by more than 70 percent in the past half-century. It is much harder to get ahead: in 2016, about half of 30-year-olds earned less than their parents at the same age.
Income growth is an interesting metric because it’s a proxy for “better quality of life”: with higher income increased purchasing power and better standards of living.
Since 1979, all of the income gains in the US have been captured by the top 1 percent and wages have stagnated for everybody else. Thus households in the US have not seen any increase in their revenue for three decades.
With remarkable consistency, superrich Americans have managed to pocket all the productivity gains, while for the last 40 years, income and wages have stagnated for most Americans.
Ironically, since the end of Apartheid in South Africa, a World Bank report showed that inequality had deepened significantly. “Freedom” came at a high cost for blacks: more than 75 percent of South Africans slipped into poverty at least once between 2008 and 2015.
Between 2011 and 2015, at least 2.5 million more South Africans slipped into poverty. About 40 percent of South Africans lived below the lower bound poverty line in 2015, up from 36.4 percent in 2011, with a Gini coefficient of 0.63 measured in 2015.