Thursday, September 30, 2010

The term "inequality" is like pointing to the tip of the iceberg

In 1991, Nicholas Scheele, the head of the Ford Motor Company in Mexico . . . said, "But is there any other country in the world where the working class . . . took a hit in their purchasing power of in excess of 50 percent over an eight-year period and you didn't have a social revolution?" []

I don’t think anyone would call that kind of wage gouge by the weak, wan term “inequality.”

US average income doubled since 1968 while the median hourly wage grew 20%: from $12.50 to $15 – instead of a potential $25. Could that be a hidden gouge of 40%?

No need for “hidden loss” to describe the US federal minimum wage hit – as average income doubled. Between 1968 and early 2007 the minimum hourly dropped from $10 ($1.60 adjusted) to $5.50 – as average income doubled.


From 1966 to 1968 I lived in an East Village Manhattan apartment which featured year ‘round rats, gas jets (inoperable) in wall that once provided light and windows overlooking a long park along which we could watch every free police car in the precinct line up for every call – show of force – before returning to their normal beats.

If you wanted your car burned for the insurance you just removed your plates within sight of my block and within the hour the neighborhood kids would have it burned to the ground – no gratuity. One 16 year old told my 17 year old brother he could not wait to be 17 years old so he could go to Vietnam like his brother (it wasn’t patriotism)!

These days, drug gangs would contest a neighborhood like this. Back then, heroin was obtainable by the sorry few addicts – but supporting a neighborhood requires drugs with broader, especially suburban, appeal. Back then, the minimum hourly was 80% of, for its time, a much healthier median wage.


Yesterday something caused me to look up the 90th-to-10th percentile income ratio in The State of Working America 2008-2009 (table 8.15 on p. 380). US ratio was approaching 5 while the average of other OECD nations was a tad over 3.

Suddenly it hit me the US ratio is more like the tip of the iceberg. It is true that 15% of US income share shifted from the bottom 90% to the top 10% [] BUT the 90-97 percentile did not get the extra share – the 90-97 percentile managed to keep pace with doubling income but that was all – they still enjoy the same percentage share they got 40 years ago (that their predecessors got anyway).

If today’s median hourly income dropped from $15 back to $12.50 over the next eight years would the media report it as mere “inequality”? Supposed it dropped to $10 or all the way back to $7.50 – at what point would everybody come up with a phrase that communicates the disaster as something much worse than a rise in “inequality”?

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