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Our youth face a rigged economy

If young people today were entering an economy where incomes rose the way incomes for their grandparents did, salaries would be almost twice as much as they actually are.

Photo by Daniel Norris on Unsplash

“Trump got 5.7 million votes to win Florida, but do you know what got 6.4 million?” The question was directed at me by a man shortly after the November election, and I couldn’t answer. He said, “Changing minimum wage to $15 per hour.”

The conversation had started on the subject of inequality and the growing belief of young people — his generation — that the economy is rigged against them no matter who is in the White House. Indeed, as numbers for the last four decades show, they’re probably right.

Measuring changes since 1975

A study out last fall from the RAND Corporation points up the dramatic rise of income inequality in the U.S. by looking at how incomes have changed since 1975. (Note: RAND is a nonpartisan research organization.) The primary measuring stick for the study was gross domestic product (GDP). It was chosen because in the first three post-World War II decades, incomes for all participants in the economy rose proportionally to GDP. Starting in 1975 that changed.

Here are a few examples by percentiles of income distribution.

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Workers in the 25th percentile in 1975 earned $28,000 per year. By 2018 they earned $33,000. However, had income risen in step with GDP, 2018 income would have been $61,000. In the same way, income at the 50th percentile in 1975 was $42,000; by 2018 actual income rose to $50,000. But rising with GDP, it would have been $92,000.

In other words, if young people today were entering an economy where incomes rose the way incomes for their grandparents did, salaries would be almost twice as much as they actually are.

A different story for the top 1%

Contrast those numbers to income for the top 1 percent, which in 1975 averaged $289,000. By 2018 that number rose to $1,384,000. Here’s the clinker: If income for the top 1 percent had risen with GDP — as it had for 30 years after World War II — the 2018 number would have been $630,000.

Jane Ahlin
Jane Ahlin
You don’t have to be a math whiz to see the top 1 percent more than doubled their income proportionally to GDP while people in the 50th percentile got about half.

What happened? Should we blame the decimation of labor unions? Was it women going to work in droves, making two-income households the norm, thus lessening the blow of stagnant individual wages and salaries? Have government policies increasingly favored the rich and stymied everyone else?

Greatest impediment: government policy

How about all of the above, although it’s important to be clear that the greatest impediment by far has been government policy that increasingly (relentlessly) favors the richest Americans. In fact, government policies have so depressed wages, people in low-wage jobs cannot make a living.

In 2020 the federal poverty level was $26,200 for a family of four ($12.60 per hour) while the median necessary living wage for that family was $67,690 (for rural states like North Dakota and rural areas of Minnesota, it was about $50,000, which equates to $24 per hour). As we know, actual federal minimum wage was $7.25 per hour or $15,000 per year.

The reason young people think the system is rigged against them is because it is. And nothing short of a paradigm shift in government policies can change the unfair world of income inequality they face.

A writer and retired columnist from Fargo, North Dakota, Jane Ahlin also taught English at Minnesota State University Moorhead for many years.

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