Over the past several decades, income inequality in the United States has ballooned, representing a staggering cost to its workforce and potentially exacerbating the impacts of crises such as the COVID-19 pandemic.
A recent analysis by the RAND Corporation, highlighted in a study supported by the Fair Work Center, reveals the vast sums of money that have been siphoned from the American workers’ paychecks—a total that reached an estimated $50 trillion by the early 2020s. This income shift upward has profound implications for the wellbeing and resilience of the American populous.
According to researchers Carter C. Price and Kathryn Edwards, if income distribution patterns from the post-World War II era up until the mid-1970s had continued, the combined yearly income for Americans under the 90th percentile could have been $2.5 trillion greater just in 2018. This shortfall is akin to about 12 percent of the United States’ GDP for that year.
The consequences of this disparate growth in earnings are immense, with evidence suggesting that this widespread inequality may be hindering overall economic prosperity. While the richest have seen substantial gains, this wealth has not trickled down; the promised benefits of a growing economy have remained out of reach for the majority.
Had the growth since the mid-1970s been more equitably shared, common working Americans might have seen their financial and health situations considerably improved. Such improvement could have delivered more robust economic foundations, empowering them to cope more effectively with the disruptions caused by the pandemic.
It’s becoming increasingly clear that the persistent and growing divide is not only a matter of social justice but also a drag on potential economic growth, resulting in a less prosperous economy for everyone. The findings presented in the RAND Corporation’s paper issue a clarion call to address the widening chasm that lies at the heart of American economic discourse.