Wealth Distribution and William Domhoffs "Wealth, Income, and Power"

As the 2016 United States election is fast approaching, the debates on wealth inequality has once again captured the public’s attention. The society is divided in its opinion of whether the government is responsible for allowing the leading financial institutes and business tycoons to accumulate their affluence within a lax regulatory environment. Others argue that the imbalance of income distribution between the rich and the poor are just simply part of the capitalism package. In order to understand the roots of wealth inequality and to review some of the key concepts that are fundamental to these discussions, former Reuters editor Chrystia Freeland’s "Plutocrats" is a riveting account on the rise of plutocracy.

In today’s capitalist economy, where economic transactions and business in general is centered on self-interest, there is a natural tendency for some people to make more than others. That is the basis for the “American Dream,” where people, if they worked hard, could make money proportional to their effort. However, what happens when this natural occurrence grows disproportional in its allocation of wealth within a society? The resulting issue becomes income inequality. Where a small portion of the population, own the majority of the wealth and the majority of the population own only a fraction of what the rich own. This prominent issue has always been the subject of social tension

There is no doubt that wealth inequality in America has been escalating quickly; the portion of total income earned by the top one percent has doubled since the beginning of the 1970’s. The wealthy are the main beneficiaries

Furthermore, when analyzing the different classes, and the distributions of wealth and income in the United Sates; for instance, the upper, middle, and lower classes – it is an astronomical amount of wealth that the top 1 percent acquire. It is also noted by Johnson & Rhodes (2015), “that income and wage inequality have risen sharply over the last thirty years” (pg. 228). Equally important to this, is how the average change in income is divided in Americas quintiles and the widening gaps. For example, in Table 5.2, while the lowest fifth quintile increased from $11,128 to $11,361 – a difference of $233.00 from years 2006 to 2012; the highest quintile increased from $289,446 to $319,918 – an exponential increase of $30,472 (pg. 229). With income inequalities at this rate, it is difficult for the majority of the United States to experience upward social mobility. Pursuing this further, in a line stated by Johnson and Rhodes (2015), “The wealthiest Americans can live on the dividends from their investments without having to touch the principle or work for a salary” (pg. 230). From this, it is visible to see how society has compartmentalized different levels of functions to keep a so called balance for the greater

In “inequality for all”, a documentary presented and narrated by Robert Reich, Reich discusses what is happening in terms of the distribution of income and wealth in the US, why it is happening, and is it a problem. “Inequality for all” is directed by Jacob Kornbluth, it premiered in 2013, and it runs for 90 minutes. Reich studied at the University of Oxford in during the late 1960’s, where he befriended future president Bill Clinton. Subsequently, they kept in touch, and in 1993, when Clinton was elected president, he reached out to Reich, to be secretary of labor. Reich was in office for the following four years, and today he is a professor at the University of California, Berkeley. For about three decades now, Reich announced that out of all developed countries, the US has the most unequal distribution of wealth, and that inequality is getting even greater in the US. In the documentary, the most compelling topics covered by Reich, are the changes that started happening in the late 1970’s, the fact that 42 percent of Americans born into poverty stay poor, and that nowadays, money controls politics.

I can assure you that if there were to be a vote in assessing whether the wealth distribution in America should be changed, the majority will abide for a change. In fact, most American’s don’t even realize the severity of the wealth distribution. When Americans were asked what they thought the wealth distribution in America was, ninety-two percent of Americans thought that the distribution was better than it actually is, where the rich were just about a hundred times better off than the poor when in reality the rich are about three hundred times better off than the poor and fifteen percent of the poor are below the poverty line

Multinational Monitor: Wealth and Income Inequality in the United States Between the Rich and the Rest

The highest earning fifth of U.S. families earned 59.1% of all income, while the richest earned 88.9% of all wealth. A big gap between the rich and poor is often associated with low social mobility, which contradicts the American ideal of equal opportunity. Levels of income inequality are higher than they have been in almost a century, the top one percent has a share of the national income of over 20 percent (Wilhelm). There are a variety of factors that influence income inequality, a few of which will be discussed in this paper. Rising income inequality is caused by differences in life expectancy, rapidly increases in the incomes of the top 5 percent, social trends, and shifts in the global economy.

Also income is less concentrated than wealth. Also the Federal Reserve’s Survey of Consumer Finances (SCF) is the main source to obtain information related the allocation of wealth for household. The SCF income distribution received approximately a third of all income in 2013 data also shows that the top 3 percent of the, while the top 3 percent of the wealth distribution held 54 percent of all wealth (Stone, et al).  Similarly, the top 10 percent of the income distribution received a little less than half of all income, while the top 10 percent of the wealth distribution held three-quarters of all wealth. In fact, the average wealth has amplified over the past 50 years, but it has not developed equally for all groups

Capitalism has been the central force behind the growth of the United States’ progressive economy. Within such advanced economic system the chances of economic disparity are significantly high. In fact, over the past three decades there has being a steady increase in unequal wealth distribution among the economic classes. To sustain the current unequal wealth distribution among the classes of the American population, there are numerous factors that influence and shape this trend. For some members of the population it is alarmingly disturbing to know that recent statistics have shown that, “In the US [alone] the wealthiest 1% of its population owns more than the bottom 95 %” (Gutman). As for the difference in economic wealth, it resulted

A major social problem in America today is its inequality of the distribution of income. "Income inequality refers to the gap between the rich and the poor. The United States has the most unequal income distribution in the industrialized world, and it is growing at a faster rate than any other industrialized country" (Eitzen & Leedham, pg. 37). The main reason as to why income is distributed so unequally is because of the gap between social classes.

According to Adams, M., Readings for diversity and social justice (Third ed.) pg 156, “the wealthiest 1 percent of the American population holds 34 percent of the total national wealth. Approximately 183,000 Americans, or ¾ of 1 percent of the adult population, earn more than $1 million dollars annually. The middle class in the United States holds a very small share of the nation’s wealth. Nearly 37 million Americans lived in unrelenting poverty”.

In “Economic Elites, Investments, and Income Inequality” from the academic journal, Social Forces, graduate Ph. D student from Ohio State University, Michael Nau presents throughout his study the rise of an additional factor that has evidently influenced the concentration of vast amounts of income among the elite class, income from investments. In this era, the common beliefs were that demography, labor market institutions, and technology were causing the inequality to rise and for the elites to produce this astounding amounts of income. Nau’s findings present how the debate over the incomes of the elites has to be expanded apart from the ‘working rich class’ to also include the income producing wealth. In addition, Nau presents how the

In the article “Of the 1%, by the 1%, for the 1%” by economist Joseph E. Stiglitz, the increasing gap in wealth and power between America’s richest and the lower classes is explained by analyzing the policies that allow the upper class to control the distribution of wealth and the consequences of this control. Stiglitz creates an effective argument by logically refuting opposing claims, using his expertise as an economist, and appealing to the American spirit.

Additionally, it is important to distinguish wealth from income. A person’s income is what is earned from any work they do, or services they provide. However, income is also derived from dividends or interest they earn from investments, or rent that may be paid to them from property they own. It is interesting to note that in 2008, there were 13,480 tax returns with a reported income of over $10 million. “Of the $400 billion in income reported on those 13,480 returns, only 19 percent of it came from wages and salaries, much less than came from capital gains, even in such a bad year for stocks.” (Norris, 2010) This report demonstrates that the majority of the wealthy in the United States do not ‘work’ for a living; rather they live off of the results of investments they have made. This fact also bring to light another question. Exactly how is wealth within the United States distributed amongst the population?