U.S. Wealth Inequality May Lead Industrialized World

Article excerpt

WASHINGTON _ New studies on the growing concentration of American wealth and income challenge a cherished part of the country's self-image: They show that rather than being an egalitarian society, the United States has become the most economically stratified of industrial nations.

Even class societies like Britain, which inherited large differences in income and wealth over centuries going back to their feudal pasts, now have greater economic equality than the United States, according to the latest economic and statistical research, much of which is to be published soon.

Economic inequality has been on the rise in the United States since the 1970s. Since 1992, when Bill Clinton charged that Republican tax cuts in the 1980s had broadened the gap between the rich and the middle class, it has become more sharply focused as a political issue.

Many of the new studies are based on the data available then, but provide new analyses that coincide with a vigorous debate in Congress over provisions in the Republican Contract With America.

Indeed, the drive by Republicans to reduce federal welfare programs and cut taxes is expected, at least in the short term, to widen disparities between rich and poor.

Federal Reserve figures from 1989, the most recent available, show that the wealthiest 1 percent of U.S. households _ with net worth of at least $2.3 million each _ owns nearly 40 percent of the nation's wealth. By contrast, the wealthiest 1 percent of the British population owns about 18 percent of the wealth there _ down from 59 percent in the early 1920s.

Further down the scale, the top 20 percent of Americans _ households worth $180,000 or more _ have more than 80 percent of the country's wealth, a higher figure than in other industrial nations.

Income statistics are similarly skewed. At the bottom end of the scale, the lowest-earning 20 percent of Americans earn only 5.7 percent of all the after-tax income paid to individuals in the United States each year. In Finland, a nation with an exceptionally even distribution of income, the lowest-earning 20 percent receive 10.8 percent of such income.

The top 20 percent of American households in terms of income _ $55,000 or more _ have 55 percent of all after-tax income.

"We are the most unequal industrialized country in terms of income and wealth, and we're growing more unequal faster than the other industrialized countries," said Edward N. Wolff, an economics professor at New York University. He will publish two papers in coming months that compare wealth patterns in Western countries.

Liberal social scientists worry about poor people's shrinking share of the nation's resources, and the consequences in terms of economic performance and social tension.

Margaret Weir, a senior fellow in government studies at the Brookings Institution, called the higher concentration of incomes and wealth "quite divisive," especially in a country where the political system requires so much campaign money.

"It tilts the political system toward those who have more resources," she said, adding that financial extremes also undermined the "sense of community and commonality of purpose."

Robert Greenstein, executive director of the Center on Budget and Policy Priorities, a Washington research group, observed, "When you have a child poverty rate that is four times the average of Western European countries that are our principal industrial competitors, and when those children are a significant part of our future work force, you have to worry about the competitive effects as well as the social-fabric effects."

Conservatives have tended to pay less attention to rising inequality, and some express skepticism about the statistics or their significance.

Marvin H. Kosters, an economist at the American Enterprise Institute in Washington, said he thought the gap, as measured, was being used as a false villain. …