No, “Income Inequality” Is Not A Problem in America

By I, AnCap

Originally submitted to an English 3 course at Clovis Community College

Few topics are more divisive than politics. Even fewer are as complex as political economics. Political engagement is positive, but insubstantial without subject knowledge. Gregory Mantsios attempted to refute several myths about American economics in an essay. The essay, “Class in America” argues that American society is disproportionately favorable to the rich. The four myths are 1.) America is a classless society, 2.) largely middle class, 3.) Americans are getting richer, and 4.) everyone has equal chance to succeed. Mantsios then presents several pieces of supplemental data. However, many following premises are based off flawed reasoning, not accounting for variables to the larger economic equation. Finally, Mantsios calls for more equitable wealth distribution mechanisms within America. The article’s main premise is that the “American Dream” died, and its resurrection requires enormous economic central planning. Realistically, such an idea would result in drastically lower standards of living for all members of society and should strictly avoided. The American Dream is not only largely alive, but improved. Income inequality is not a pressing concern in America, economic mobility is both possible and probable, and there exist fewinequalities derived from racism or sexism.

Firstly, Mantsios implies the top one percent of income earners hold thirty-four percent total wealth. Admittedly, this statistic that this includes all financial assets from cars, to houses, land, and stocks. He then states that the richest twenty percent of all earners own eighty five percent of all aforementioned assets. As mentioned, this figure is a person’s net worth. That is to say, their debts versus assets. Meaning that the top twenty percent of people have very high asset to debt ratio. It was not included that this figure is largely the result of over sixteen million households – nearly one in five – having no or negative net worths. Theoretically, a person with no debts and some spare change is wealthier than nearly twenty percent of the country combined.  This is an extremely flawed way of measuring household wealth. Truthfully, it shows easy access to credit enables artificially high standards of living, not disproportionate opulence.

Mantsios proceeds onto how government tax policy and weakening of labor unions has diminished middle class. A decline in the middle class and a wealth gap is described from 1979 to 2000. However, the measurement is only of pre-tax cash units between classes, a notoriously unreliable display method. It fails to account for factors such as cash transfers, healthcare benefits, observed improvements in middle class resources, among other things. What’s more, nonprofit group National Bureau of Economic Research has accounted for these factors. In the paper “A ‘Second Opinion’ on the Economic Health of the American Middle Class, the bureau states its findings as follows:

“Using cross-sectional data to capture the economic resources available to individuals at the same point in the distribution over time, we find that the evidence of a middle class decline is far from clear, and that such results are highly sensitive to how available resources are measured.” (Burkhauser, Richard V, et al. ) Admittedly, when adjusted for inflation, the Census Bureau did find that middle income earners (those making between 25k and 75k a year) have declined from 61.8% of the population to 39.2% in 2009. However, same paper, “Money Income of Families—Number and Distribution by Race and Hispanic Origin: 2009,”  found earners making over 75k a year had increased twenty seven percent in number in the same time period. Evidently, the middle class has shrunk upwards rather than downwards as Mantsios is suggesting.

Next, Mantsios presents examples implying that those born within wealth and power retain it. In other words, those who are rich are only rich because they were born so. Therefore, simply by the family you are born into, you will either be extremely wealthy or not regardless individual merit. This claim withstands very little examination. Realistically, inheritance accounts for at most fifteen percent of all wealth enjoyed by the rich (Wolff & Gittleman). Some argue that this may make the difference to secure aristocracy. However,William’s Group wealth consultancy states that 70% of all supposed rich families lose the entirety of their wealth by the second generation (Taylor). This hardly constitutes an institutional family structure marginalizing anyone.

Mantsios also illustrates that they wealthy and powerful often use their education to further advance. Conversely, the poor and struggling can’t use education to accomplish as much. This is commonly argued by folks claiming education can be a tool to squash class mobility. One such paper on the subject comes from the Federal Reserve of Boston, “Equality of Opportunity: Definitions, Trends, and Interventions.” This paper discusses the role class plays in education. Some have used it as a way to suggest rich dropouts outperform poor graduates. Upon examination, however, it becomes baffling to believe that education is a tool to prevent class mobility. The paper finds that a “poor graduate” is over one hundred and forty percent more likely to reach the top quintile as a rich drop out, and over two hundred percent more likely to reach the top two quintiles. Comparatively, a rich high school drop out is over one hundred and fifty percent more likely to end up in the bottom two quintiles as a “poor graduate” is. (Reeves & Sawhill) This paper is hardly indicative of any kind of attack on class mobility. It is widely understood that despite its cost, a college education is the best way to increase one’s earning potential. (Ferguson & Solis) There are arguments about the student debt crisis to be made. The inability to afford college is certainly a blight on the American economy. Guaranteed student loans have encouraged colleges to raise their tuition rates to unaffordable levels. Banks regularly engage in dishonest practices. Fractional reserve banking has indeed cost many to lose their savings, jobs, homes, and livelihoods. (Dayen) This cannot be solved by pushing economic and academic egalitarianism, but a thorough discussion of detrimental fractional reserve lending.

Finally, Mantsios makes an argument that sexism along racial lines has a profound role on economic disparity. This is commonplace among those who promote “social justice” narratives. Because of institutional oppression, sexism, classism, or racism, that women and minority classes are supposedly adversely effected by the American economy. While many statements in his essay are red hearings (“catcalls,” women face, for instance), Mantsios is partially correct. Unaccounted for occupation, hours worked, martial status, and other factors, women on the aggregate do earn less than men. However, the reason may not be “sexism” or “racism.” However, factors such as a shifting US economy must be accounted for. America was a heavily agricultural nation upon its inception. Early attitudes toward labor and lack of technology caused men work the farms and eventually machinery, while women remained caretakers and homemakers. The arrival of the service economy (EBSCOhost), changing attitudes toward women in the workplace, and other factors have expanded female opportunity. Women are now by many measures the majority in the college education system (Goldin). It is also important to factor in the occupational, educational, and personal choices and differences between the genders. First, women often choose similarly in college in men do, with slight variation in their majors. For instance, men tend to prefer engineering majors more so than women. Upon exiting college, women also tend to pick jobs with more flexibility and enjoyability. (Zafar) “College Major Choice and the Gender Gap” from a Federal Reserve of New York Staff report quotes:

“Males and females have similar preferences regarding choices at college, but differ in their tastes regarding the workplace; females mostly care about non-pecuniary outcomes (gaining approval of parents and enjoying work at jobs), while males value pecuniary outcomes (social status of the jobs, likelihood of finding a job, and earnings profiles at jobs) more.”

Additionally, women are more likely to work part time then are men, (Suh) because of family obligations. All of these factors account for many reasons that on average, women earn less than men in America.

“The American Dream” is widely held as a cornerstone American greatness. All things considered, a person can accomplish their dreams. Americans enjoy things like freedom of speech, private property, the right to self defense, that many cultures in history have not. More importantly, countries endure without running water, stable food, sanitation, and other necessities Americans take for granted. Americans are largely perceived as the global elite similarly to how some Americans view the wealthy within their society. However, America could become much less prosperous if it buys into the “fixed pie fallacy” presented by Mantsios. Economic growth and global expansion combined with technological advancement allow for more resources for everyone, even if it seems at time disproportionate. The idea of America isn’t one of jealousy, but of ambition. That’s the alive, healthy American dream.

Works Cited

Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, Employment by industry, 1910 and 2015 on the Internet at https://www.bls.gov/opub/ted/2016/employment-by-industry-1910-and-2015.htm  (visited July 01, 2018).

Burkhauser, Richard V, et al. “A ‘SECOND OPINION’ ON THE ECONOMIC HEALTH OF THE AMERICAN MIDDLE CLASS.” NBER.org, National Bureau of Economic Research ©, June 2011, www.nber.org/papers/w17164.pdf.

DAYEN, DAVID. “Jamie Dimon and Other People’s Money. (Cover Story).” Nation, vol. 305, no. 10, 23 Oct. 2017, pp. 12-20. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=125509293&site=ehost-live.

DeNavas-Walt, Carmen, and Bernadette D. Proctor. “Income and Poverty in the United States: 2013.” Census.Gov, US Census Bureau, Sept. 2014, www.census.gov/content/dam/Census/library/publications/2014/demo/p60-249.pdf.

Goldin, Claudia, et al. “THE HOMECOMING OF AMERICAN COLLEGE WOMEN: THE REVERSAL OF THE COLLEGE GENDER GAP.” Nber.org, National Bureau of Economic Research ©, Mar. 2006, www.nber.org/papers/w12139.pdf.

Mantsios, Gregory. Class in America. 2006.

“Money Income of Families-Percent Distribution by Income Level in Constant Dollars.” Census.Gov, US Census Bureau, 2012, www2.census.gov/library/publications/2011/compendia/statab/131ed/tables/12s0696.pdf.

“Portrait of Financial Security.” Pew Trusts, Pew Trusts, 7 Apr. 2017, www.pewtrusts.org/en/research-and-analysis/data-visualizations/2016/portrait-of-financial-security.

Reeves, Richard V., and Isabel v. Sawhill. “Equality of Opportunity: Definitions, Trends, and Interventions.” BostonFed.Org, Federal Reserve Bank of Boston, Oct. 2014, www.bostonfed.org/inequality2014/papers/reeves-sawhill.pdf.

Solis, Oscar and Ralph Ferguson. “The Relationship of Student Loan and Credit Card Debt on Financial Satisfaction of College Students.” College Student Journal, vol. 51, no. 3, Fal l2017, pp. 329-336. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=125256414&site=ehost-live.

Suh, Michael. “Women More Likely to Work Part Time.” Pew Research Center’s Social & Demographic Trends Project, Pew Research Center, 10 Dec. 2013, www.pewsocialtrends.org/2013/12/11/on-pay-gap-millennial-women-near-parity-for-now/sdt-gender-and-work-12-2013-1-05/.

Taylor, Chris. “70% Of Rich Families Lose Their Wealth by the Second Generation | Money.” Time, Time, 17 June 2015, time.com/money/3925308/rich-families-lose-wealth/.

“Where the Jobs Are: College Graduates and Job Prospects.” Change, vol. 26, no. 1, Jan/Feb94, p. 33. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=9402017569&site=ehost-live.

Wolff, Edward N., and Maury Gittleman. “Inheritances and the Distribution of Wealth Or Whatever Happened to the Great Inheritance Boom?” BLS.gov, Bureau of Labor Statistics, Jan. 2011, www.bls.gov/ore/pdf/ec110030.pdf.

Zafar, Basit. “College Major Choice and the Gender Gap.” Newyorkfed.org, Federal Reserve Bank of New York Staff Reports, Feb. 2009, www.newyorkfed.org/medialibrary/media/research/staff_reports/sr364.pdf.

IAncap
Managing Editor