The Economics Behind Occupy Wall Street: Shameful Income Inequality

Oct 19, 2011Bryce Covert

One of the biggest driving forces behind the movement is a phenomenon 30 years in the making.

What could we call the economics behind the Occupy Wall Street protests and the "We are the 99%" movement? One of the most driving themes behind both is this country's growing and embarrassing income inequality. In the aftermath of the recession, incomes have been on the decline for most of us. Median household income fell to $49,445 last year, the lowest in more than a decade. Yet those making over $100,000 a year have actually seen improvements.

Not to mention that corporate profits have rebounded while wages have staggered backward. Those profits accounted for 88 percent of economic growth during the first year and a half after the recession ended, while wages and salaries for the rest of us only accounted for one percent. Corporate profits were $343 billion higher from 2008-2010 than predicted, while personal income for families was $265 lower than expected. The booming profits have brought little for most of us, but have meant nice raises for top executives: their median pay at 200 major companies was $9.6 million in 2010, up 12 percent from the year before.

But the income inequality that has urged so many take to the streets is not an overnight phenomenon. It's part of a much longer-term trend. As the CBPP reports, the gap between the after-tax income of the richest one percent of Americans and the rest of us more than tripled over the last three decades, far before the Great Recession started. And after this 30-year rise, we're now at a level of income inequality not witnessed since the Great Depression. As one telling example, in 2007 the top 1 percent had an income of $1.3 million, up $88,800 from just the year before -- and that $88,880 gain is more than the total income of the average middle-income household. Meanwhile, the discrepancy between income at the top one percent and in the bottom fifth grew ever faster during the last three decades: in 1979, the top income was 22.7 higher, but by 2007 it was 74.6 times higher.

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What brought us here? I've just finished reading Barbara Ehrenreich's classic, Nickel and Dimed, in which she details her entry into the low-wage labor force and her struggle to both make ends meet and hold onto her human dignity. The most striking thing about reading the book now is that she wrote about these struggles at a time when the country was experiencing booming prosperity. In the late 1990s and early 2000s, there was actually a reported labor shortage, a housing boom, and other signs of economic health. But as she shows, little of that was shared with those at the bottom of the ladder struggling to make ends meet. Even then, with incredible national wealth, income inequality was growing and the lower classes were falling farther behind. As she recently wrote in reflecting on those times, a report shortly after the book's publication found that 29 percent of American families earned less than what they needed to cover housing, child care, health care, food, transportation, and taxes.

At the end, she evaluates both her ability to subsist (and her attempts to thrive) and our country's support for low-wage workers. She talks about what she saw as a "culture of extreme inequality": part of it is to do with cutting services for the poor while "investing ever more heavily in prisons and cops" to police them. Another factor has been the invisibility of the poor:

Some odd optical property of our highly polarized and unequal society makes the poor almost invisible to their economic superiors. The poor can see the affluent easily enough -- on television, for example, or on the covers of magazines. But the affluent rarely see the poor or, if they do catch sight of them in some public space, rarely know what they're seeing, since -- thanks to consignment stores and, yes, Wal-Mart -- the poor are usually able to disguise themselves as members of the more comfortable classes.

This invisibility was reflected in policies that made things worse for the less well off, such as welfare reform and bankruptcy reform that just made things more difficult for people who need those services, lowered tax rates for the very wealthy, and attacks on social safety net programs. Many of those problems are with us today.

That dynamic, in which the poor are invisible and ignored by politicians, is one of the things Occupy Wall Street has served to change. The poor, downtrodden, jobless, over-indebted, and financially strapped are easy to find and to see. They're hanging out in Zuccotti Park. One can only hope that by bringing income inequality into the spotlight, they will also be able to help get something done to address it.

Bryce Covert is Editor of New Deal 2.0.

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