Feeling We're In This Together

Income Inequality, part 2

There are a lot of different ways to measure inequality: the top X percent versus the bottom Y percent. But any X or Y we might choose reveals about the same trends, and about the same differences between nations. One measure is called "the 20:20 ratio" -- it's the ratio of the income of the top 20 percent to the income of the bottom 20 percent. It's a very common metric, and the UN uses it, so let’s look at that one.

Update: Not much change. Data from the OECD (HERE) indicate the 20:20 ratio for the US staying about the same for the most recent years for which data is available.
2013: 8.6
2014: 8.7
2015: 8.3

When the ratio of the top quintile to the bottom quintile is less than 5, then we find a society generally maintaining some shared assumptions about wealth and about each other.

Roughly, when that ratio is about 5 or less, the attitude of the populace will look resemble something like this:
“If there are somewhat wealthier folks among us, that’s OK. I can accept that some people are luckier, or more skillful at work that society prizes, or they’re more driven to work hard, and they end up wealthier. That’s fine – and as it should be. The relatively wealthy serve as a reminder to me of what good schooling and hard work and a little luck might make available to my children. If the town doctor has a big house on a hill, that’s OK – he’s smart and had a lot of training, and he’s using that to help us when we get sick, so more power to him. Maybe my kid can get a scholarship and be a doctor.”
That kind of thinking was still pretty much the largely-unspoken norm on the day 37 years ago when I first held my newborn daughter in my arms.

But that attitude loses purchase, begins to slip away, if the rich-poor gap grows too large. That outlook that prevailed through my life and my parents life up until 1980, has now come to seem quaint -- an echo of a bygone time. Few, it seems, think like that anymore.

The two key features of that outlook were: (1) that the higher levels of wealth were attainable by those who weren't already rich; and (2) those who had wealth deserved it. These two features are connected, for when upper-class wealth seems attainable – when the perception of most people is that anyone with the right combination of talent, drive, and luck can become upper-class – then those who do make it to society’s top wealth echelons are presumed to deserve it. But when the gap becomes as enormous as it has in the US, the folks at the bottom and middle can no longer see the wealth of the ones at the top as either attainable or deserved.

By the time my little girl was graduating from college in 2000, the world she was commencing into had become profoundly different from the one she was born into. The country had become a place where we could no longer feel we were all in this together.

Now, I know that the idea that there once was, up until about 37 years ago, a halcyon time of general social solidarity overlooks the deep racism that has divided our country throughout its history, and that given the reality of the deep and hostile racial divide, gauzy nostalgic impressions of togetherness are delusional. Very true. Even so, whites could see rich whites as attainable, and black could see wealthier blacks as attainable. But for the last 15 years or so, even that has fallen apart.

A relatively equal society – where the ratio of top quintile to bottom quintile is less than 5 (as it is in places like Japan, Scandinavia) -- can sustain a shared understanding among its members. But if, as in the U.S., that ratio is 8 or 9, there’s a disconnect. We lose the shared understanding of the legitimacy of things. The wealthy are beyond attainability, beyond any credible story of deservingness. We lose the sense that we’re in this together. The wealthy become “them.” And "they" don’t care about "us" -- so we don’t care about them. Anomie and division set in; anger and alienation become the social mood.

Sensing the resentment of most of society, the wealthy, in turn, retreat behind gated communities, which further increases the disconnect. We begin to believe the game is rigged; we don’t have a chance. When we believe that, we become more likely to behave in ways that make that a self-fulfilling prophecy.

Rich and poor alike feel the division, the disconnect. The result is that phenomenon I mentioned: everything that’s tough about modern life is exacerbated. Higher levels of depression, higher levels of consuming things that aren’t good for us: from drugs to alcohol to junk food to mindless TV shows to mindless consumer products.

When you compare nation to nation, there’s no correlation between wealth and life expectancy or mortality. No correlation. Rich countries have about the same life expectancies and mortality rates as relatively poor countries, until you get into the really poor end of the spectrum. As long as a nation has per-person income above about $9,000 a year, further increases do nothing to increase life expectancy. That’s the nation-to-nation comparison.

But when we do a zip-code-to-zip-code comparison, we get a different picture. The poorer zip codes have higher mortality than the richer zip codes. If you took several of the poorest zip codes, created a new island in the Pacific, put them all there, maintained their per-person incomes as they were, made a new island nation of them, they’d have decreased mortality. They’d be fine. But because they live near the wealthier areas, they perceive that difference. They see all around them the inescapable fact that they live in a society that is set up to work for others, but not for them. They are reminded daily that they are not in a society of mutual care. And that wears them down much more than relative material deprivation.

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This is part 2 of 3 of "Income Inequality"
See also
Part 1: Modern Life Made Tougher

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