Report: growing divide at decade's end

For Immediate Release Dec. 15, 1999
Contact: Betsy Leondar-Wright
(617) 423-2148 x13

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More billionaires, more bankruptcies

New report reveals growing divide at decade's end

The record-breaking economic boom of the 1990s has left Americans more polarized and debt-ridden, shows a new report, Divided Decade: Economic Disparity at the Century's Turn, by Chuck Collins, Chris Hartman and Holly Sklar. The report, available from United for a Fair Economy and posted on the web at www.faireconomy.org, reveals how the rising tide has lifted the yachts to tremendous heights, but many Americans are still bailing out their boats after decades of sinking real wages and wealth.

For a quarter-century after World War II, Americans grew more prosperous and less unequal. Families in every fifth of income distribution saw their incomes double between 1947 and 1979. But the next quarter-century changed course dramatically. Between 1979 and 1998, the top fifth gained 38 percentóand the top 5 percent gained 64 percentí·while the bottom fifth lost 5 percent of real income.

In 1989, the United States had 66 billionaires and 31.5 million people living below the poverty line. A decade later, the United States has 268 billionaires and 34.5 million people living below the official poverty lineóabout $13,000 for a three-person family.

At the dawn of the 21st century, the distribution of wealth has regressed to the perilous inequality of the 1920s. The top 1 percent of households has more wealth than the entire bottom 95 percent combined. Since 1977, the top 1 percent has doubled its share of the nation's wealth to 40 percent.

Together, the 400 richest Americans are worth more than $1 trillioní·about one-ninth of the total gross domestic product (GDP) of the United States, the world's richest economy. The people in the Forbes 400í·they could all stay at New York's Plaza Hotel at the same timeóhave about as much wealth as the 50 million households in the bottom half of the population.

The nation's prosperity is cruising precariously in a sea of red ink. Total revolving consumer credit, most of it credit card debt, has more than tripled from 1989 to 1999. The personal savings rate dropped from 7 percent in 1993 to 2 percent in third quarter 1999. Total bankruptcies have more than doubled between 1989 and 1999.

The Dow has broken 11,000, but a lot of Americans are just plain broke. They have nothing to tide them over in case of a health crisis or unemployment, much less save for college or retirement. Nearly one out of five households has zero or negative net worth (greater debts than assets), compared with one in ten in 1962.

The Standard & Poor's 500 Index generated a cumulative return of 574 percent between January 1, 1989 and December 13, 1999. But the booming stock market has been a bust for many Americans. Almost 90 percent of all the stock and mutual fund value owned by households is held by the nation's richest 10 percent.

While the top 1 percent was becoming more fabulously wealthy, the typical American was stagnating. The inflation-adjusted net worth of the median household fell from $54,600 in 1989 to $49,900 in 1997 (the latest figure available).

The economic boom is on the verge of becoming the longest in American history. But typical workers are still catching up with the wages their counterparts made a quarter century ago. If wages had risen at the pace of productivity, which rose 46.5 percent from 1973 to 1998, the median worker would be earning $17.27 an hour, rather than $11.29, or $12,438 more a year for full-time workers.

The pay gap between CEOs and workers is five times wider than it was at the start of the decade, and ten times wider than it was two decades ago. In 1990, according to Business Week, CEOs at large companies made 85 times the pay of average factory workers; in 1998, CEOs made 419 times the pay of workers.

Even married couple families have higher poverty rates today than they did in the 1970s, despite women's greatly increased hours on the job. The percentage of people in extreme povertyí·less than 50 percent of the poverty levelí·rose from 4.9 percent in 1989 to 5.1 percent in 1998, and is way up from 1975, when it was 3.7 percent. The ranks of those without health insurance swelled during the decade, rising from 13.6 percent in 1989 to 16.3 percent in 1998.

The report recommends that our nation make a renewed commitment to the kind of asset-building policies -- like the G.I. bill after World War II -- that will strengthen prosperity in the 21st Century. Elements include expanded tax exempt savings programs for low- and middle-income Americans, a higher minimum wage, expanded Earned Income Credit, policies promoting wider homeownership, and broadened employee ownership through Employee Stock Ownership Plans and other means.

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United for a Fair Economy is a national organization that spotlights economic inequality and advocates positive solutions for shared prosperity.

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