Photo above: ©Jim West, below ©Rick Gerharter
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STRANGE STATE OF AFFAIRS  

For a country built on myths, and partial realities, of upward mobility, this is a strange state of affairs. Census Bureau figures released last fall showed that the median U.S. household had still not regained the income lost in the 1989-93 slump. Average 1996 incomes were virtually the same as 1973's, meaning 23 years of stagnation. So there's a lot of catching up to do.

Throughout U.S. history, there have been several long waves of increasing and then decreasing income inequality. In early America, slaves constituted 15-20% of the population, which made for a highly inegalitarian society. Among whites, however, income was much more evenly distributed than in Europe. But even this was not to last.

Inequality from early on

Right-wingers who like to quote French statesman Alexis de Tocqueville on the wonders of the American way of life rarely include this observation from his mid-19th century visit to America: "I am of the opinion...that the manufacturing aristocracy which is growing up under our eyes is one of the harshest that ever existed... The friends of democracy should keep their eyes anxiously fixed in this direction; for if a permanent inequality of conditions and aristocracy...penetrates into [America], it may be predicted that this is the gate by which they will enter."

And enter they did. There was a steady increase in inequality -- both in income and wealth -- from the 1820s through the Civil War, bringing the U.S. up to European levels of lopsidedness. It stayed high until the outbreak of World War I. (Wars usually lessen the degree of inequality; they require the mobilization of unskilled workers to make armaments, pushing up low-end wages, and wartime inflations can ravage old fortunes.) Inequality quickly returned to prewar levels during the 1920s.

The crash, depression, and World War 2 changed that. Fortunes were destroyed, and in the postwar boom, incomes at the bottom and middle of U.S. society rose strongly, bringing about a significant compression in the distribution of material goods and money. Of course, even at its most egalitarian moment, the U.S. remained a polarized society, but it was still widely thought that something had changed to make the new arrangements permanent.

In 1955, economist Simon Kuznets published his famous "inverted U" theory: that in a capitalist economy, income inequality rises in the early stages of development, and falls as the economy matures. Economists came to believe this as a fact of their "science," and you still hear it from development specialists at the World Bank and in academia to excuse the vast increase in inequality in the Third World over the last 15 years. Recent U.S. experience suggests that Kuznets' U may have another tail to tell.

U.S. income inequality has been going up ever since the late 1960s. The point is made most clearly by the "Gini index," a device economists sometimes use to gauge the level of economic equality (or inequality) in a society. The index is a way to compare income distribution over time, or to compare distribution of wealth in two societies at a given time. It ranges from zero (perfect equality -- in which wealth is equally distributed among everyone) to 1 (perfect inequality -- in which one person has all the society's wealth). The graph here is cobbled together from several sources, and its first half should be taken with a grain of salt. But it does show the relative inequality of the late 1910s and 1920s, the leveling trends of the 1930s through the 1960s, and the polarization ever since. Income inequality in 1996 is just a hair below 1994's post-World War 2 record, and the long-term situation is at its most unequal in 60 years.

For some reason, the 1990s do not share the 1980s' reputation for stagnation in average incomes and polarization between rich and poor, but they should. The median real income of U.S. households fell 7.3% between 1989 and 1993. A bit over half of that loss has been regained, but 1996's figure was still 3% below 1989's. (The median is the spot at the middle of a distribution, with half of the population coming in above that level, and half below. It's a better measure of distribution than the arithmetic average or mean, since very high incomes would misleadingly pull such an average up. Medians, however, are unmoved by good times at the upper extremes.) Recent performance is far worse than that of the 1980s.

Behind it all: Stagnation

What's been going on behind these averages is stagnation, with poor and middle-income households moving slightly downward, and high income households doing very well. Put another way, almost all the benefits of economic growth, at least by official measures of inflation-adjusted income, have gone to the richest 5% of U.S. households. The next 15% have done well, if not spectacularly, while the bottom 80% has been lucky to stay in place.

Because of this, more people are working longer hours than at any time in modern history. While this helps keep up incomes, it's hell on both home life and the public culture. People who work 50 hours a week or more have little spare energy for anything more challenging than a TV.

There's yet another story to tell if you break things down by sex and race. As the chart shows, black households have been doing a bit of catch-up with whites. This is the combined result of broad income gains for black households -- at all income levels, even the poorest -- and stagnant-to-declining incomes for the bottom 80% of the white population. The gap remains huge, with average black incomes just 63% of white. For "Hispanic" households, the news is a lot less good, with a one-year bounce in 1996 coming after more than 20 straight years of relative decline.

News on the gender gap is more dramatic. Average incomes for all women were 54% of men's in 1996, a vast canyon for sure, but a lot better than the 1980's 39%. Part of the reason for this gap is that fewer women work (for pay, that is) than men, and of those who do work, fewer work year-round full-time. For women who work outside the home, their incomes were 62% of men's in 1996, up from 47% in 1980 and 38% in 1970. For those who work a full schedule, their incomes were 74% of men's, up from the 60% average that prevailed through most of the 1970s.

men going down

As with the black-white gap, this narrowing is the joint product of eroding male incomes and rising female ones. Men's real incomes in 1996 were 5% below 1989 levels, while women's were 5% above. It must be said that these gaps are still too wide, that women are paid significantly less than men with similar qualifications, and that employed women still do a lot more housework and childcare than their male companions. But progress, at least in material terms, has been made.

It's unfortunate that such material progress for women and African Americans has come amidst a general stagnation of incomes, and a sharp and steady erosion of white men's paychecks -- and it should not be forgotten that there's still lots of polarization within sexual and racial categories, as well as between them.

-- Doug Henwood 

Doug Henwood is editor and publisher of Left Business Observer, 250 W. 85th Street, New York, NY 10024-3217. 

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