THE GREAT DIVIDE: UNEQUAL WEALTH DISTRIBUTION IN THE

UNITED STATES OF AMERICA

By Kelly Brinkmoeller

Over the past several years, researchers have found that there has been an
ever increasing divide in wealth between the rich and the poor citizens of the
United States. In 2007, what is known as the Great Recession hit the U.S. The
housing market plummeted and affected millions of Americans across all different
income brackets. Stocks fell and to make matters worse, unemployment rates
doubled from 5 to 10 percent between December 2007 and October 2009. There
has always been a fairly unequal division of wealth in America, but it is what
happened after the economic collapse where this division became more and more
worrisome.
Before we can see why there is such a divide, we must first ask how it came
to be. There are varying opinions when it comes to the debate on what caused the
recession. In an Op-ed piece in the Wall Street Journal, secretary of the U.S.
Treasury Tim Geithner writes, The failure to modernize the financial oversight
system sooner is the most important reason why this crisis was more severe than
any since the Great Depression, and why it was so hard to put out the fires of the
crisis. The failure to reform sooner is why the crisis caused gross domestic product
to fall at an annual rate of 9% in the last quarter of 2008; why millions of
Americans lost their jobs, homes, businesses and savings; why the housing market
is still so far from recovery; and why our national debt has grown so significantly.
This means Geithner is warning, and reminding us that the reasons this happened
in the first place is we allowed banks and Wall Street to make risky investments
and decisions with the economy, and the only safe bet to make sure something like
this doesnt happen again is to regulate these institutions. Others opposed to
reform have differing ideas as to why the market fell. Contributor to Forbes
magazine Brian Domitrovic points his finger at the weak dollar and blames the
government. The government in its role of guarantor of the currency caused this
crisis, and the crisis turned out to be a major one. So we hear from public officials
that it was lack of regulation, the rise of income inequality, Ronald Reagans tax
cuts of thirty years ago (!) that cased the crisis. Whichever side youre on, there
is no denying the significant impact this recession had on splitting up the nations
wealth.
Even before the economy took a turn for the worse, we can see a gradual
increase in wealth disparity. In order to see that, lets take a look at some of the
numbers right before the recession hit. If you look at the graph below, there are
several things to take note of. From 2003 to 2007, American households in the 50
th

percentile grew from 87,992 to 98,872. During that same time, people in the 95
th

percentile went from 1,192,639 to 1,629,133. If we take each of those increases as
a percentage, for the 50
th
percentile we get a 12.4% growth, but with the 95
th

percentile we get a staggering growth of 36.3%!

We can also see, as the above table points out, that from the years 2007 to 2013,
everyone took an economic hit. But, it was the 90
th
and 95
th
percentile that had
even more wealth in 2013 than they did ten years prior. On average, most people
in the higher margins of income in our society are able to invest in stocks and
bonds. That market was the first to bump back up to pre-recession levels at a
quicker rate than, say, the housing market, which remained unstable for a longer
period of time.
Professor of Economics at UC Berkeley, Emmanuel Saez found this in his
research: From 2009 to 2012, average real income per family grew modestly by
6.0% (Table 1) but the gains were very uneven. Top 1% incomes grew by 31.4%
while bottom 99% incomes grew only by 0.4%. Hence, the top 1% captured 95%
of the income gains in the first two years of the recovery. From 2009 to 2010, top
1% grew fast and then stagnated from 2010 to 2011. Bottom 99% stagnated both
from 2009 to 2010 and from 2010 to 2011. Preliminary statistics for year 2012
show that top 1% incomes increased sharply from 2011 to 2012 while bottom 99%
incomes grew only modestly. Reference the graph below. Saez eloquently
described this phenomenon as the rich get richer.


In a healthy capitalistic society, people who work hard eventually get their dues.
All it takes is a little smarts and a good work ethic. But, what about the people
who work hard and are still in debt? There are hard-working individuals
throughout the country that will never be in the 1%, its statistically impossible. If
there existed a smaller gap between the haves and the have-nots, one may think
that the possibility to achieve success may be spread across a wider number of
people. As Benjamin Franklin was quoted in saying, I am for doing good to the
poor, but I differ in opinion about the means. I think the best way of doing good to
the poor is not making them easy in poverty, but leading or driving them out of it.


SOURCES

Saez, Emmanuel. "Striking It Richer: The Evolution of Top Incomes in The
United States." Striking It Richer: The Evolution of Top Incomes in the United
States (Updated with 2012 Preliminary Estimates) (2013): n. pag. Web.
Pfeffer, Fabian T., Sheldon Danziger, and Robert F. Schoeni. Rep. N.p.: n.p.,
n.d.Wealth Levels, Wealth Inequality, and the Great Recession. Web.
<http://www.thestreet.com/story/12823121/1/wealth-inequality-roughly-doubled-
from-great-recession.html>.
Domitrovic, Brian. "The Weak Dollar Caused the Great Recession." Forbes.
Forbes Magazine, 13 Mar. 2012. Web. 31 July 2014.
<http://www.forbes.com/sites/briandomitrovic/2012/03/13/the-weak-dollar-
caused-the-great-recession/>.
Geithner, Tim. "Financial Crisis Amnesia." The Wall Street Journal. Dow
Jones & Company, n.d. Web. 31 July 2014.
<http://online.wsj.com/news/articles/SB1000142405297020398660457725327204
2239982>.