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Booming Economic Inequality, Falling Voter Turnout
Income gaps have grown
We should have a lot more to show for an economic boom that recently broke the record for the longest expansion in our nation’s history. February marked 107 months—nine years—of uninterrupted economic growth beginning in March 1991. The previous record was 106 months from February 1961 to December 1969.
The 1990s boom has been a dud compared to the 1960s when it comes to raising incomes and reducing poverty. During the 1990s, the poverty rate fell slightly, from 13.5 percent in 1990 to 12.7 percent in 1998 (the latest figure available). During the 1960s, the poverty rate fell sharply from 22.2 percent in 1960 to 12.8 percent in 1968.
Today’s poverty rate is just about the same as it was near the end of the 1960s economic boom. The typical man saw his income rise 4.7 percent from 1990 to 1998, according to the Census Bureau. Male median income grew from $25,308 to $26,492, adjusting for inflation (in 1998 dollars).
During the 1960s, male median income grew five times as much, gaining 25.2 percent from $20,337 in 1960 to $25,459 in 1968 (in 1997 dollars). Today’s male median income is just about the same as it was near the end of the 1960s economic boom.
The male-female earnings gap narrowed in the 1990s as the typical woman’s income rose 14.9 percent from $12,559 in 1990 to $14,430 in 1998, adjusting for inflation.
During the 1960s, women’s median income grew more than twice as fast, rising 36.8 percent from $6,285 in 1960 to $8,595 in 1968.
For three decades after World War II, Americans grew more prosperous and less unequal. Families in every fifth of the nation’s income distribution saw their incomes double between 1947 and 1979. Families in the bottom fifth actually gained income at a faster pace than those at the top.
In the last two decades, we changed course and grew more unequal. Between 1979 and 1998, the top fifth of American families gained 38 percent—and the top 5 percent gained 64 percent—while the bottom fifth lost 5 percent in real income.
During the 1960s boom, inequality decreased. During the 1990s boom, inequality increased to record levels.
In 1990, the lowest fifth of households had 3.9 percent of the income, the middle fifth had 15.9 percent, and the top fifth had 46.6 percent. In 1998, the lowest fifth had 3.6 percent, the middle fifth had 15 percent, and the top fifth had 49.2 percent. The top 5 percent’s share of household income rose from 18.6 percent to 21.4 percent.
Winners and Losers
Measured in millionaires, the boom has been a bonanza. The United States has 5 million millionaires, up from 1.3 million a decade ago.
Measured in real net worth, the boom has been a bust for families headed by persons younger than 55 years old. The typical net worth (assets minus debt), including home equity, of families headed by persons younger than 55 actually fell between 1989 and 1998, adjusting for inflation.
According to the latest Federal Reserve Survey of Consumer Finances, the median net worth of families headed by persons younger than 35 fell 9 percent from $9,900 in 1989 to $9,000 in 1998, adjusting for inflation. The median net worth of families headed by persons 35 to 44, fell 12 percent from $71,800 to $63,400. For families headed by persons 45 to 54, median net worth dropped 16 percent from $125,700 to $105,500.
These families had less real wealth to draw on for children’s college educations, dealing with unemployment or health crises, or building on for retirement than when the boom began.
The Federal Reserve has been raising interest rates to slow down economic growth and restrain wage and price inflation. Last year, employee compensation (including benefits) rose 3.4 percent—the same as 1998—barely ahead of inflation, which rose 2.7 percent. Real compensation rose less than 1 percent despite robust productivity and low unemployment—4.2 percent in 1999 by official count compared with 3.5 percent in 1969. The median wage still lags behind its 1973 peak, adjusting for inflation.
For the current boom to live up to its reputation, it must deliver more real wealth and income growth for those at the bottom and in the middle.
We’re in the midst of a record-breaking boom, but the minimum wage doesn’t bring a full-time worker with one child above the poverty line. The real value of the minimum wage went up in the 1990s, but it’s still down 27 percent since 1968, when it was worth over $7 in 1999 dollars.
Thirty countries have better child mortality rates than the United States, although we are the world’s richest nation. That means in those countries a fewer proportion of children die before the age of five. We rank behind Greece, Ireland, Italy, Canada, and many other countries, according to UNICEF’s report, The State of the World’s Children 2000.
The number of people who do not have health insurance rose by nearly 11 million over the last decade.
We’re in the midst of a record-breaking boom, but the percentage of Americans living in extreme poverty—less than 50 percent of the poverty level—is higher than it was a decade ago.
Millions of Americans are getting their meals at food banks and sleeping on the streets or in homeless shelters. The share of the homeless population who are families with children increased from 27 percent to 37 percent between 1985 and 1999. Homelessness has reached levels unthinkable in the 1960s.
A record $13 billion in year-end bonuses was handed out on Wall Street last year, an 18 percent increase over 1998. In cities across the United States, emergency requests for food assistance also increased 18 percent last year.
The U.S. Conference of Mayors 1999 survey of hunger and homelessness in 26 cities blames low-paying jobs and the lack of affordable housing for the increase in need. Most adults requesting food assistance are employed. The nation’s food banks, soup kitchens, and shelters can’t keep up with the rising demand.
Growing Income Gaps
In the last two decades, as income gaps have grown, voter turnout has fallen, and higher-income voters make up a disproportionate share of the electorate.
A recent report by the Center on Budget and Policy Priorities and the Economic Policy Institute, analyzing income gaps (pre-tax) within states, says “Since the late 1970s, the incomes of the poor have actually fallen or stagnated in most states…while the incomes of the wealthiest grew rapidly.” The middle class in most states lost ground or gained little.
Middle-income families actually lost money in 11 states—Wyoming, Arizona, Montana, New Mexico, Iowa, Texas, Louisiana, California, Alaska, Nevada, and West Virginia—between the late 1970s and the late 1990s, adjusting for inflation.
The income gap between the middle and top is widest in Arizona. There, adjusting for inflation, average income in the middle fifth of families was $38,624 in the late 1990s, a drop of $4,518 since the late 1970s. The top fifth, meanwhile, gained $33,712, to reach $141,190.
The incomes of the poorest fifth of families have declined in 18 states since the late 1970s. Incomes dropped by more than 10 percent in 11 states. In four states—Arizona, New Mexico, New York, and Wyoming—the incomes of the poorest fifth plummeted by more than 20 percent.
New York takes the prize for the greatest increase in income inequality. Between the late 1970s and late 1990s, the average income of the top fifth of families increased from $106,870 to $152,350, adjusting for inflation. The average income of the poorest fifth dropped from $13,670 to $10,780.
Income gaps would be even greater if capital gains from the sale of stock and other assets were counted. The top 5 percent of American families received 75 percent of all capital gains in 1997.
Beginning with the most unequal, the ten states with the widest income gaps are New York, Arizona, New Mexico, Louisiana, California, Rhode Island, Texas, Oregon, Kentucky, and Virginia. In seven of the states—New York, Arizona, New Mexico, Louisiana, California, Texas, Oregon—official poverty rates range from 15 percent to 20.4 percent despite the booming economy.
The ten states with the smallest income gaps (beginning with the smallest) are Utah, Indiana, Iowa, North Dakota, Colorado, Alaska, Maine, Wisconsin, Wyoming, and Nebraska.
Income gaps translate into voting gaps. In the ten states with the smallest income gap, an average 57 percent of the voting age population turned out to vote in the 1996 presidential election, according to Federal Election Commission data. The ten states with the widest income gap had an average voter turnout of only 48 percent.
Voter turnout has fallen dramatically and rising economic inequality is one reason why. Upper-income Americans participate in the electoral process at much higher levels than middle- and low-income Americans.
Among the eligible citizen population, 76 percent of those with family incomes above $75,000 voted in 1996, the last presidential election. Only 63 percent of those with family incomes ranging from $35,000 to $49,999 and 57 percent of those in the $25,000-$34,999 range voted, according to the Census Bureau. Among those with family incomes under $10,000, just 38 percent voted.
Looking at turnout by occupation, 73 percent of those in managerial and professional jobs voted in 1996, compared with only 43 percent of those employed as operators, fabricators, and laborers.
As the Keystone Research Center noted in a 1999 report on democracy in Pennsylvania, “Over half of middle- and low-income Americans believe, ‘People like me don’t have any say about what the government does.’ Only 30 percent of Americans held this view in the 1960s.”
Democracy’s dilemma is that the more people feel like they have no influence, the less they participate in the electoral process—and the less influence they have. When upper-income Americans provide a disproportionate share of the campaign contributions and votes, democracy is not rule by the people, but rule by the people with more money. If the trend continues, we will be left with a democracy in name only. Z
Holly Sklar is co-author of the report, Divided Decade: Economic Disparity at the Century’s Turn, available from the Boston-based United for a Fair Economy, www.stw.org.