An inquiry into the nature and causes of the wages and wealth of the nation

from David Ruccio

The Economic Policy Institute has just completed two studies that assist us in understanding the nature and causes of the stagnation of wages and the increasingly unequal distribution of wealth in the United States.

In the first study, “The Sad but True Story of Wages in America,” Lawrence Mishel and Heidi Shierholz analyze the relationship between productivity and wages in the United States from 1989 to 2010. Their conclusion, as the graph below shows, is that productivity grew far more than wages: 62.5 percent versus 12 percent. 

The result was, of course, an increasingly unequal distribution of income.

In the second study, “The State of Working America’s Wealth, 2011,” Sylvia A. Allegretto shows that the distribution of wealth in the United States is even more unequal than that of income. It was unequal before 2007 and it’s become even more unequal since the onset of the Second Great Depression. Why? Because even as the pie shrank, the share of wealth held by the richest fifth of American households increased by 2.2 percentage points to 87.2 percent, while the remaining four-fifths gave up those 2.2 percentage points and held onto just 12.8 percent of all wealth. The result was that the wealthiest 1 percent of U.S. households had net worth that was 225 times greater than the median or typical household’s net worth in 2009, the highest ratio on record.

It is not from the benevolence of the butcher, the brewer, or the banker, that we’ve seen the distribution of income and wealth become increasingly unequal in the United States, but from their regard to their own self interest. As a nation, we have addressed ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

And now we’re suffering the consequences.