San José, CA – On Tuesday, Sept. 16, the Census Bureau released their annual report on income and poverty for 2013. The report showed that the typical household had a small gain in their income for the first time since 2007. The median household income, at $51,939 was still below that of 1996, when adjusted for inflation. It is still down 8% from 2007 and 8.7% less than its peak in 1999.

A typical household in the lowest one-fifth of the population, making less $22,778 last year, has lost 5.9% of their purchasing power since 1990. On the other hand, the a typical household in the highest one-fifth of the population, making more than $110,000 in 2013, saw a gain of 23% in purchasing power since 1990. And the top 5% of the population saw their typical income gain by 34.5% since 1990.

The Gini index, a standard measure of economic inequality, stayed at a high at 0.476, where zero is perfect equality and one is perfect inequality. This measure has gone up from a low of 0.351 in 1968, for a rise of more than one-third. Actual inequality is probably greater, as the Census Bureau does not count capital gains, which mainly goes to the highest income households, and about half goes to the top 1% who own the majority of corporate stock and privately-held businesses.

The earnings of men working year-round and full-time is still below that of 1973, when adjusted for inflation. While women working full-time and year-round have seen their earnings rise since then, their incomes are still below their 2007 high before the recession started.

The median income for an African American household was only $34,775 last year, or less than 60% of a typical white household. This is about 4% lower than the Black/White income ratio in 2007, showing that African Americans have been hit harder by the recession than whites.

While the official poverty rate did fall slightly in 2013, at 14.5% it is still much higher than the 12.5% count before the recession started in 2007. Over the last three years the poverty rate has been the highest since 1993 when it spiked after the 1991 recession. Before then, poverty has not been as high as it was last year since 1965, almost 50 years ago.

The official poverty rate for African Americans in 2013, at 27.1%, was almost three times as high as the poverty rate for whites, which was only 9.6%. Children continued to have the highest official rate of poverty, which at 19.9% is more than twice as high as the poverty rate for seniors, which was only 9.5%. But this low poverty rate for the elderly is because of Social Security – without Social Security benefits the poverty rate for the elderly would be over 40%, or four times as high! Social Security is even more important for elderly women, whose poverty rate would jump to almost 50% without Social Security benefits.

Because the official poverty measure was developed almost 50 years ago based on data from the 1950s, it undercounts the number of poor. The official poverty line for a family of three (one adult and two children) was only $18,769, or about $1500 per month, not nearly enough to survive on. A relative poverty measurement of households with less than half of the median income would increase the incidence of poverty from by about 50%, to almost 23% of the population.

#SanJoséCA #Unemployment #Capitalism #economy #IncomeInequality

Year after year, the gap between the rich and almost everyone else continues to grow. One common measure of income inequality, called the Gini index, has been rising since 1974, showing that inequality of income rose more than 30% by 2012. In the last 15 years, the growing inequality has meant that the median, or typical, household income has fallen from a peak of $56,080 in 1999 to only $51,017 in 2012, a decline of more than 9%, even though the economy grew 28% during this period. During this same period the number of Americans who fell below the official poverty line (which, at $18,500 for a family of three, is way too low) rose from less than 12% to 15% of the population.

Liberal economists have a number of explanations of why income inequality has increased, pointing to the decline in unionization, corporations exporting jobs to other countries and cutting pensions and health benefits for their remaining workers here, the impact of technology in substituting machinery and computers for human workers, the increase in part-time and temporary jobs, and a drop in the purchasing power of the minimum wage. Indeed, all of these have contributed to growing income inequality.

But behind these trends lies the relentless pursuit of profit by business. While the value of output, or productivity, of U.S. workers grew 80% between 1979 and 2009, the median wage grew only 10%, with all of this growth coming from the economic boom in the 1990s. Where did the difference go? To profits, with after-tax corporate profits hitting an all-time high of $1.7 trillion last year, or about 10% of Gross Domestic Product (GDP – a measure of the total output of goods and services). This is even higher than the boom year of 1929 which ended the Roaring Twenties with the stock market crash that ushered in the Great Depression. With corporate profits at a record high, it is no surprise that total wages and salaries hit a record low of only 42.5% of GDP in 2013.

While corporate profits were higher in 1942 as the economy roared back from the Depression with the entry of the U.S. into World War II, corporate taxes took 55% of profits that year, as compared to less than 20% today – the lowest rate since Herbert Hoover was president. The drop in corporate taxes has been matched by increases in payroll taxes for Social Security which mainly fall on workers, as salaries above $117,000 and income from interest, dividends, and capital gains (which mainly go to the 1% who own half of all stocks, bonds, and private businesses), are not taxed at all.

Here in the U.S., we live under an economic system of capitalism. The vast majority of us, who do not have wealth enough to live on, have to work for others. The 1% who own the majority of wealth and whom we work for, do not pay us the full value of what our labor creates – this is the source of their profits. This is the fundamental force between the growing income inequality: on one hand are the workers whose income is squeezed by low pay and the rising prices that monopolistic corporations charge. On the other is a tiny number of billionaires who own the giant corporations that dominate the economy and reap the rewards of the record corporate profits.

Our government claims to be a democracy, with regular elections. But most of the members of Congress are millionaires and almost all the rest rely on the donations from the rich to win elections and even write laws for them. Both parties, the Democrats and the Republicans, represent the interests of the 1%. From the bail out of Wall Street to the passage of free trade agreements, there is a bipartisan consensus to do what aids the wealth of the 1% at the expense of working people.

Only a socialist economy, one where working people control the economy and the government, can end the economic inequality inherent to capitalism. Only a socialist economy can end poverty and economic insecurity that is all too common in one of the wealthiest countries in world.

#UnitedStates #IncomeInequality