This post first appeared in my new column Inspired Protagonist on Greenbiz.com. http://www.greenbiz.com/article/trouble-inequality-sustainability
The Wall Street bonus pool for last year was roughly double the total earnings of all Americans who worked full time at the federal minimum wage.
The New York State Comptroller recently reported that the size of the bonus pool paid to securities industries employees in New York City was $28.5 billion. Dividing this total among 167,800 workers yields an average bonus of $172,860, which seems plausible enough. For sure, some received much, much bigger bonuses, and many received nothing.
What about the total earnings of full-time workers at the federal minimum wage? The Bureau of Labor Statistics reports that there are 1.03 million full-time workers paid an hourly wage of $7.25 or less. These people tend to work around 40 hours a week on average. If they all earn $7.25 per hour and work 50 weeks per year, the total earnings of this group come to nearly $15 billion.
Put another way, we now live in a society and participate in an economy where the total earnings of all full-time U.S. workers in earning the federal minimum wage, make only half of what 167,800 Masters of the Financial Universe earn in bonuses alone.
Bonuses are also just the tip of the iceberg when it comes to widening income inequality. The issue of grossly uneven economic opportunity underscores much more fundamental dysfunction in the status quo.
Even as cities across the country begin to undertake lofty debates over climate resilience and decoupling economic growth from environmental impacts, long-entrenched patterns of dire income disparities — along with glaring patterns of social injustice where poor people are hit hardest by pollution — make it clear that our society is far from sustainable in many respects.
Taking on the tax code
Just look at the issue of taxes. While tax season may seem like a distant memory, it’s worth examining the correlation between taxes and inequality in the US.
A recent piece in The New York Times explained that much of the federal spending channeled through the tax code disproportionately benefits the wealthiest taxpayers.
The article states: “According to an analysis of $340 billion in tax subsidies for housing, education, retirement and savings in 2013, the top 1 percent received about $95 billion, more than the $90 billion received by the bottom 80 percent combined.
Other benefits, such as tax deductions for mortgage interest payments, also help the wealthiest of families.
The mortgage interest payments and the property tax deduction combined cost the federal government $98.5 billion in 2014 and 70 percent of the benefits went to the top quintile of earners. The most shocking is the fact that the average gain for a household in the bottom 20 percent (those earning less than $21,000 a year) from these two deductions amounted to just $3.
So why is that? Well, that gets to the root of the systemic problem that we have gotten ourselves into.
The tax bracket structure has been carefully designed, through millions and millions of dollars of lobbying funds, so that wealthier households in the higher income brackets get disproportionately greater savings. They also have more assets to put into housing, retirement accounts and educational programs that are eligible for tax subsidies.
Those that fall into lower tax brackets do not receive nearly as many benefits from their taxes. In fact you could define what they receive as diddly-squat!
Our system of taxation is just one of the reasons why inequality is so engrained in our society, and why it’s proven so difficult to reverse.
It will take a complete overhaul of not only our tax code, but also many other social structures, to scratch the surface and begin to reverse the rampant inequality we have created this country.