Despite the US’s economic success, income inequality remains breathtaking. But this is no glitch – it’s the system.
The Chinese did rather well in the age of globalization. In 1990, 943 million people there lived on less than $3 a day measured in 2021 dollars – 83% of the population, according to the World Bank. By 2019, the number was brought down to zero. Unfortunately, the United States was not as successful. More than 4 million Americans – 1.25% of the population – must make ends meet with less than $3 a day, more than three times as many as 35 years ago.
But this story ignores how the US chooses to spend its riches. It seems reasonable that the success of a society and its system of government, the morality of its political compromises and agreements, would be determined to an important degree by how it chooses to deploy the fruits of its accomplishments and how it apportions the costs of its failures. Unlike China, the US did not offer much to the people eking out a living around the poverty line. Per head, the US’s economic output is six times China’s, and yet, inexplicably, there seem to be more abjectly poor Americans than Chinese.
The story of US inequality is known by now. It is nonetheless breathtaking how its lopsided distribution of income keeps getting worse. In 1980, the income of Americans in the middle of the income distribution added up to a bit more than 52.5% of the income of those perched at the top 90th percentile. At the turn of the century, it was 48%. By 2023, it had slipped further, to 42.5%.
The poor’s share of the US economic pie is shrinking to developing-world levels. The income of Americans in the top 90th percentile of wealth grew more than twice as fast between 2000 and 2023 as that of Americans in the bottom 10th percentile. These days, Americans in the poorest 10th of the population draw about 1.8% of the nation’s income, about the same as poor Bolivians. In Nigeria, they reap 3%, in China 3.1%, in Bangladesh 3.7%.
It would be comfortable to blame market forces. They have played a critical role in shaping the US’s distribution of success. Globalization and technology have not only contributed to reduce the share of national income that is spent on labor. They have also exacerbated inequalities among the working class, rewarding the most educated workers while replacing the less skilled with robots.
