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Backgrounder The U.S. Inequality Debate Public policy experts call income and wealth inequality one of the defining challenges of this century. Recent crises have accelerated these divisions, and the COVID-19 pandemic has deepened them further. Summary Income and wealth inequality is higher in the United States than in almost any other developed country, and it is rising. There are large wealth and income gaps across racial groups, which many experts attribute to the country’s legacy of slavery and racist economic policies. Proposals to reduce inequality include a more progressive income tax, a higher minimum wage, and expanded educational opportunities. Introduction Income and wealth inequality in the United States is substantially higher than in almost any other developed nation, and it is on the rise, sparking an intensifying national debate. The 2008 global financial crisis, the slow and uneven recovery, and the economic shock caused by the COVID-19 pandemic have deepened these trends and challenged policymakers to respond. Economists say the causes of worsening inequality are complex and include a failure to adapt to globalization and technological change, shifting tax policy, reduced bargaining power among workers, and long-standing racial and gender discrimination. The effects of inequality are similarly varied, and they have exacerbated crises such as the pandemic and deepened societal divisions. Inequality can also weaken democracy and give rise to authoritarian movements. President Joe Biden has pledged to reduce economic inequality with new social spending financed by higher taxes on the wealthy and corporations, but he faces opposition from those who say his plans go too far. How unequal is the United States? According to the nonpartisan Congressional Budget Office [PDF], income inequality in the United States has been rising for decades, with the incomes of the highest echelon of earners rapidly outpacing the rest of the population. Even among high earners, income gains have been heavily skewed toward the top of that bracket. The growth of CEO pay is illustrative of this trend. In 1965, a typical corporate CEO earned about twenty times that earned by a typical worker; by 2018, the ratio was 278:1, according to the Economic Policy Institute, a progressive think tank. Between 1978 and 2018, CEO compensation increased by more than 900 percent while worker compensation increased by just 11.9 percent. U.S. Income Distribution Weighted Toward the Top Average household income after taxes and transfers, 2018 A bar chart of the U.S. income distribution, showing that it is heavily weighted toward the top The picture is much the same when looking at wealth—that is, total net worth rather than yearly income. In 2021, the top 10 percent of Americans held nearly 70 percent of U.S. wealth, up from about 61 percent at the end of 1989. The share held by the next 40 percent fell correspondingly over that period. The bottom 50 percent (roughly sixty-three million families) owned about 2.5 percent of wealth in 2021. Moreover, inequality in the United States outpaces that of other rich nations. This is captured by the steady rise in the U.S. Gini coefficient, a measure of a country’s economic inequality that ranges from zero (completely equal) to one hundred (completely unequal). The United States’ Gini coefficient was forty in 2019—the same as Bulgaria’s and Turkey’s, and significantly higher than that of Canada, France, and Germany—according to the Organization for Economic Cooperation and Development (OECD), a group of advanced economies. Recent economic shocks have deepened these trends. The so-called Great Recession from 2007 to 2009 caused incomes to fall, and even when they recovered to pre-recession levels in 2015, the median income was the same as it was in 2000: $70,200. The recovery was also unequal: by 2016, the top 10 percent had more wealth than they did in 2007 while the bottom 90 percent had less. Experts say the economic turmoil caused by the COVID-19 pandemic, including the largest spike in unemployment in modern history, will similarly exacerbate inequality. Low-wage workers were far more likely to be laid off and less likely to be rehired, though massive government stimulus helped blunt the impact. Meanwhile, a boom in stock and home prices primarily benefited wealthy Americans, who own more of these assets. Though wages rose at the fastest pace in decades, so did prices, and this inflation effectively canceled out wage gains.

[Jhumpa, “Exploring Guaranteed Income Through A Racial And Gender Justice Lens,” Roosevelt Institute, June 2019 https://rooseveltinstitute.org/wp-content/uploads/2020/07/RI_UBI-Racial-Gender-Justice-brief-201906.pdf, accessed June 26, 2023, GDS-LL]

How Wealth Is Extracted through the Criminal Justice System

[Jhumpa, “Exploring Guaranteed Income Through A Racial And Gender Justice Lens,” Roosevelt Institute, June 2019 https://rooseveltinstitute.org/wp-content/uploads/2020/07/RI_UBI-Racial-Gender-Justice-brief-201906.pdf, accessed June 26, 2023, GDS-LL]

The New Deal era greatly expanded pathways to economic mobility and security for white Americans, but it also erected more barriers for people of color. During the early days of New Deal negotiations, FDR made a political comprise to appease Southern Democrats and agreed to exclude agricultural and domestic workers—who were predominantly Black and Latinx—from being eligible for a range of benefits.

[Danyelle, Connor Maxwell, Abril Castro, “Systematic Inequality and Economic Opportunity,” CAP – Center for American Progress, August 7, 2019, https://www.americanprogress.org/article/systematic-inequality-economic-opportunity/, accessed July 7, 2023, GDS-LL]

New Deal programs helped institutionalize racial disparities in wages and benefits

[Jhumpa, “Exploring Guaranteed Income Through A Racial And Gender Justice Lens,” Roosevelt Institute, June 2019 https://rooseveltinstitute.org/wp-content/uploads/2020/07/RI_UBI-Racial-Gender-Justice-brief-201906.pdf, accessed June 26, 2023, GDS-LL]

THE DRIVERS OF WEALTH INEQUITIES BY RACE AND GENDER

The ongoing coronavirus pandemic shed a stark light on the legacy of racism in the United States. Ongoing focus has primarily centered on health disparities between white Americans and Black Americans in particular – and rightly so. Black (and Latino) Americans were disproportionately affected by the pandemic, with Black citizens being three times more likely to get infected with the virus than white Americans.1 Black and Latino patients were also dying at higher rates than white patients.2 In fact, the pandemic shaved off three years of the average life expectancy of Black men, compared to eight-tenths of a year for white men.3

The disproportionate impact of the pandemic on non-white communities is a direct health outcome of embedded structural racism. Black Americans are more likely than White Americans to be employed in essential customer-facing fields and unable to work safely from home; work-from-home jobs are generally white-collar positions requiring higher education, another structural barrier. After work, non-white Americans are more likely to be boxed in overcrowded zip codes due to redlining, exposed to and exposing others. Despite the risks, there are few alternatives. The existing racial wealth gap limits the monetary padding afforded to Black and Latino Americans, compared to white counterparts. Black Americans were already economically vulnerable going into the pandemic, with only 40 percent of Black households saying they could canvass $3,000 in emergency funds from family and friends compared to 72 percent of white households.4 The past year has exacerbated the racial wealth gap, with a higher proportion of Black families dipping into their retirement funds to pay for food and housing compared to white families.4 Black Americans were also more likely to be laid-off during the pandemic and less likely to get hired back, intensifying economic disparities.5 Without proper intervention, the pandemic will compound an already racialized economic structure for generations to come. To address and rectify systemic economic racism and prevent further generational inequities, universal basic income (UBI) measures must be implemented in the United States.

[Raymond J., “Addressing structural violence: Reforming our perspectives,” International Academy of Practical Theology, 2019, https://iapt-cs.org/ojs/index.php/iaptcs/article/view/53/52, accessed July 1, 2023, GDS-LL]

Structural violence, a most serious type of social injustice, is a condition in which groups of persons and even nations are harmed by ongoing general sit- uations not of their own choosing, from which most have no real way of escaping. It is like having one’s foot stuck in a tar pit; one can be fed but one cannot escape. People are simply trapped in the shadowy life-shortening convergences of negativity, living fewer years, with worse health, and not achieving reasonable fulfillment of their human potential. Most simply put, structural violence is 1) harmful, often lethal, 2) not immediately obvious, 3) involun- tary, 4) generally unavoidable in its effects, 5) severe- ly diminishing of the potential of certain groups of persons, and 6) often longstanding (cf. Ho 2007).

[Richard, “The unseen 'slow violence' that affects millions,” BBC Future, January 31, 2021, https://www.bbc.com/future/article/20210127-the-invisible-impact-of-slow-violence, accessed July 1, 2023, GDS-LL]

A key point about this category of harm is that it is rooted in inequality. When Galtung was writing in the 1960s, he pointed out that such violence represented a curtailing of potential, where somebody is prevented from living a better life. The point is that it affects some, but not all, communities. Those with more privilege can escape it.

Structural violence refers to a form of violence wherein social structures or social institutions harm people by preventing them from meeting their basic needs. Although less visible, it is by far the most lethal form of violence, through causing excess deaths—deaths that would not occur in more equal societies. Not only is it the deadliest violence, greater in scope and in implication than any other type of violence, it grows exponentially as unequal power differentials are used to create more unequal structures. Yet, because these limitations are embedded within social structures, people tend to overlook them as nothing more than the ordinary difficulties of life. Examples of structural violence include health, economic, gender, and racial disparities. Derivative forms include cultural, political, symbolic, and everyday violence. Structural violence is also the most potent stimulant of behavioral violence in the form of homicides, suicides, mass murders, and war. It is therefore one of the most critical areas of violence studies to examine in our time. Conceptualizing structural violence can help guide peace research through the consideration of conditions that might add positively to peace, rather than merely aid the cause of peace in the negative way of reducing violence and war.

[Raymond J., “Addressing structural violence: Reforming our perspectives,” International Academy of Practical Theology, 2019, https://iapt-cs.org/ojs/index.php/iaptcs/article/view/53/52, accessed July 1, 2023, GDS-LL]

Violence

[Jhumpa, “Exploring Guaranteed Income Through A Racial And Gender Justice Lens,” Roosevelt Institute, June 2019 https://rooseveltinstitute.org/wp-content/uploads/2020/07/RI_UBI-Racial-Gender-Justice-brief-201906.pdf, accessed June 26, 2023, GDS-LL]

GUARANTEED INCOME MODELS

[William, “How a VAT could tax the rich and pay for universal basic income,” Brookings Institute, January 30, 2020, https://www.brookings.edu/articles/how-a-vat-could-tax-the-rich-and-pay-for-universal-basic-income/, accessed July 1, 2023, GDS-LL]

The plan would raise substantial net revenue, be very progressive, and be as conducive to economic growth as any other new tax. The VAT would complement, not replace, any new direct taxes on affluent households, such as a wealth tax or capital gains reforms.

[Jhumpa, “Exploring Guaranteed Income Through A Racial And Gender Justice Lens,” Roosevelt Institute, June 2019 https://rooseveltinstitute.org/wp-content/uploads/2020/07/RI_UBI-Racial-Gender-Justice-brief-201906.pdf, accessed June 26, 2023, GDS-LL]

Changing the Narrative

[Jhumpa, “Exploring Guaranteed Income Through A Racial And Gender Justice Lens,” Roosevelt Institute, June 2019 https://rooseveltinstitute.org/wp-content/uploads/2020/07/RI_UBI-Racial-Gender-Justice-brief-201906.pdf, accessed June 26, 2023, GDS-LL]

Universal + Basic Income Model

[Jhumpa, “EXPLORING GUARANTEED INCOME THROUGH A RACIAL AND GENDER JUSTICE LENS,” Roosevelt Institute, June 2019 https://rooseveltinstitute.org/wp-content/uploads/2020/07/RI_UBI-Racial-Gender-Justice-brief-201906.pdf, accessed June 26, 2023, GDS-LL]

With that context, this issue brief will explore to what extent and under what type of design a program that is usually discussed as a way to boost regular incomes could make a dent in racial and gender wealth inequities.

[Jhumpa, “Exploring Guaranteed Income Through A Racial And Gender Justice Lens,” Roosevelt Institute, June 2019 https://rooseveltinstitute.org/wp-content/uploads/2020/07/RI_UBI-Racial-Gender-Justice-brief-201906.pdf, accessed June 26, 2023, GDS-LL]

Eliminating State-Sponsored Wealth Extraction Policies That Are Executed through the Criminal Justice System

[Jhumpa, “EXPLORING GUARANTEED INCOME THROUGH A RACIAL AND GENDER JUSTICE LENS,” Roosevelt Institute, June 2019 https://rooseveltinstitute.org/wp-content/uploads/2020/07/RI_UBI-Racial-Gender-Justice-brief-201906.pdf, accessed June 26, 2023, GDS-LL]

Race- and gender-based wealth inequities are two of the greatest failures of the American economy. Economic policy choices and practices put forth by those in power, such as the GI Bill and redlining, created wealth-building opportunities for white men but established barriers for everyone else. Implemented in tandem with the rise of corporate power by which profit is revered over people, these racist policies have resulted in racial and gender economic stratification that have reached epic heights. Today, approximately 160,000 households in America own more wealth than the poorest 90 percent combined— the highest concentration of wealth since 1962 (Igraham 2017).

[Richard, “The unseen 'slow violence' that affects millions,” BBC Future, January 31, 2021, https://www.bbc.com/future/article/20210127-the-invisible-impact-of-slow-violence, accessed July 1, 2023, GDS-LL]

A key point about this category of harm is that it is rooted in inequality. When Galtung was writing in the 1960s, he pointed out that such violence represented a curtailing of potential, where somebody is prevented from living a better life. The point is that it affects some, but not all, communities. Those with more privilege can escape it.

[Liz, “Racial wealth gap may be a key to other inequities,” Harvard Gazette, June 3, 2021, https://news.harvard.edu/gazette/story/2021/06/racial-wealth-gap-may-be-a-key-to-other-inequities/, accessed July 1, 2023, GDS-LL]

The wealth gap between Black and white Americans has been persistent and extreme. It represents, scholars say, the accumulated effects of four centuries of institutional and systemic racism and bears major responsibility for disparities in income, health, education, and opportunity that continue to this day.

[Danyelle, Connor Maxwell, Abril Castro, “Systematic Inequality and Economic Opportunity,” CAP – Center for American Progress, August 7, 2019, https://www.americanprogress.org/article/systematic-inequality-economic-opportunity/, accessed July 7, 2023, GDS-LL]

The U.S. economy was built on the exploitation and occupational segregation of people of color. While many government policies and institutional practices helped create this system, the legacies of slavery, Jim Crow, and the New Deal—as well as the limited funding and scope of anti-discrimination agencies—are some of the biggest contributors to inequality in America. Together, these policy decisions concentrated workers of color in chronically undervalued occupations, institutionalized racial disparities in wages and benefits, and perpetuated employment discrimination. As a result, stark and persistent racial disparities exist in jobs, wages, benefits, and almost every other measure of economic well-being.