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Income Distribution: Does It Really Matter

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Message Harold Hellickson

The value of the Finance, Insurance and Real Estate Industry first exceeded that of the Manufacturing Industry in 1990.  It is the largest contributing segment of our Gross Domestic Product.  As our economy increasingly has become more service oriented and less dependent upon manufacturing, the value attributed to labor has decreased and that of capital has increased.  So too has the value of the minimum wage decreased; in 2007 dollars it peaked in 1968 at $9.47 per hour.  Households have had to depend upon two worker incomes, longer working hours, and increased debt just to stay even.  With polygamy continuing illegal, they have no means of assisting the economy out of the current recession. Much has been written about the increasingly concentrated wealth amongst the very-very wealthy, the top 0.1 and 1.0 percent.  But what about everybody else?  How was our 2007 national income distributed or as some would say, mal-distributed?  How has it changed in the last three decades?  Why does it even matter?

For purposes of simplicity, lets say ten dollars is distributed to ten households.  Who gets what? Well, two of the households, the top earners, will have $4.97 leaving $5.03 for the other eight households. The next two top earning households will receive $2.34, just under one-half of those "gated community" top earning households.  Between these top four earning households, they have $7.31 of each $10.00 of national income leaving $2.69 for the remaining six households. The middle two households will split $1.48 between them leaving $1.21 for the lowest four earning households.  The mean 2007 income for these two households was $50 thousand; none earned more than $62 thousand.

Of the remaining $1.21, the next lower earning two households received $0.87 and the lowest earning two households received $0.34.

Since 1977, the top quintile, the top 20 percent earning households have increased their share of the American income pie from 44.0 percent to 49.7 percent  The remaining eight households have all experienced a smaller share.  The 4th quintile off 1.3 percent, the middle off the most, down 2.1 percent. The 2nd quintile off 1.5 percent and the lowest quintile off 0.8 perceent.  For more than 30 years labor's share of national income has declined while that of capital has increased.

Until or unless the low-to middle-class families in this country regain the ability to, and actually do, achieve significantly increased real income, our current economic quagmire will look better than any we may find in the future.  Nothing in the current stimulus package(s) increases the value of non-executive labor upon which the vast majority depend.  Does this not portend to a long and deepening recession if not a depression?

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A retired MBA, I am a former corporate ideologue, former 3rd party advocate and current curmudgeon. While a continued supporter of a 3rd party, I have concluded their efficacy cannot be demonstrated until our form of Government is changed to (more...)
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