Ahlin: Facing a rigged economy – INFORUM

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The conversation had started on the subject of inequality and the growing belief of young people—his generation— that the economy is rigged against them no matter who is in the White House. Indeed, as numbers for the last four decades show, they’re probably right.

A study out last fall from the RAND Corporation points up the dramatic rise of income inequality in the U.S. by looking at how incomes have changed since 1975. (Note: RAND is a nonpartisan research organization.) The primary measuring stick for the study was gross domestic product. It was chosen because in the first three post-World War II decades, incomes for all participants in the economy rose proportionally to GDP. Starting in 1975 that changed.

Here are a few examples by percentiles of income distribution. Workers in the 25th percentile in 1975 earned $28,000 per year. By 2018 they earned $33,000. However, had income risen in step with GDP, 2018 income would have been $61,000. In the same way, income at the 50th percentile in 1975 was $42,000; by 2018 actual income rose to $50,000. But rising with GDP, it would have been $92,000.

In other words, if young people today were entering an economy where incomes rose the way incomes for their grandparents had, salaries would be almost twice as much as they actually are.

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Contrast those numbers to income for the top 1%, which in 1975 averaged $289,000. By 2018 that number rose to $1,384,000. Here’s the clinker: if income for the top 1% had risen with GDP—as it had for 30 years after WWII—the 2018 number would have been $630,000.

You don’t have to be a math whiz to see the top 1% more than doubled their income proportionally to GDP while people in the 50th percentile got about half.

What happened? Should we blame the decimation of labor unions? Was it women going to work in droves, making two-income households the norm, thus lessening the blow of stagnant individual wages and salaries? Have government policies increasingly favored the rich and stymied everyone else?

How about all of the above, although the greatest impediment by far has been government policy that increasingly (relentlessly) favors the richest Americans. In fact, government policies have so depressed wages, people in low-wage jobs cannot make a living.

In 2020 the federal poverty level was $26,200 for a family of four ($12.60 per hour) while the median necessary living wage for that family was $67,690 (for rural states like North Dakota about $50,000, which equates to $24 per hour).

Actual federal minimum wage was $7.25 per hour ($15,000 per year).

The reason young people think the system is rigged is because it is.

Jane Ahlin lives in Fargo and is a frequent contributor to The Forum’s opinion pages. Email janeahlin@yahoo.com.

This column does not necessarily reflect the opinion of The Forum’s editorial board nor Forum ownership.

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