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David Leonhardt: Trend toward inequality means America will struggle after the coronavirus

(Craig Ruttle | AP file photo) In this March 16 photo, trader Gregory Rowe works on the floor of the New York Stock Exchange at the end of the trading day.

America’s economy has almost doubled in size over the past four decades, but broad measures of the nation’s economic health conceal the unequal distribution of gains. A small portion of the population has pocketed most of the new wealth, and the coronavirus pandemic is laying bare the consequences.
Consider first the most commonly quoted measure of the nation’s success — gross domestic product, which measures a country’s total output — in the first chart below.
In the United States, GDP has risen 79% since 1980, after adjusting for inflation and population growth. For the bottom half of earners, incomes have risen much more slowly over the same period — only 20%. For the very wealthy, incomes have risen much faster — 420%.
Inequality didn’t cause the coronavirus crisis. But it is making the crisis much worse, having created an economy in which many Americans are struggling to get by and are vulnerable to any interruption of work or income and any illness.
On related charts, we present ways to look at American life that together provide a more meaningful picture than GDP. And there is reason to believe that many of these indicators are already deteriorating further, as the country grapples with both a pandemic and a recession. Together, the charts also help show the areas in which Americans will struggle to recover from this crisis.
The stagnation of income for most Americans has caused a sharp decline in arguably the most salient measure of economic progress: Do you earn more than your parents did at the same age?
The answer was yes for 92% of Americans born in 1940. Even if they had to cope with unemployment, divorce, illness or another financial challenge, almost all grew up to out-earn their parents (controlling for inflation). Among Americans born in 1980, however, the share was only 50%. Living the American dream is now akin to a coin flip.
The trends on wealth are, if anything, starker than the income trends.
In 2016 the median U.S. household had a lower net worth — about 30% lower — than the median household in 2007. How could this be, given the bull market during much of that period? The answer is that most Americans own little or no stock. Their main asset is their home.
The affluent, of course, do tend to own stock, and the median net worth of the richest 10% of households rose 13% from 2007 to 2016 (the last year for which the Fed has released data).

The wealth trends have been especially hard on younger Americans. The median net worth of Americans younger than 35 — who started off substantially poorer on average than older Americans — is 40% lower than the net worth of Americans in that age bracket was in 2004. The net worth of Americans older than 65, by contrast, has risen 9% over the same period.
The boomers, in short, are richer than their predecessors, and millennials and Generation X are poorer than their predecessors.
Racial inequities have also widened. The median wealth of white households is now 10 times higher than the median wealth of black households. In 1992, the multiple was seven to one.
The radical levels of American inequality are also evident in the trends involving health and life expectancy.
Rich and poor Americans used to have fairly similar life spans. Now, however, Americans in the bottom fourth of the income distribution die about 13 years younger on average than those in the top fourth.
No other rich country has suffered such slow growth in life expectancy. In 1980, Americans lived roughly as long as the British and French. Not anymore: Those countries, and others, have pulled away.
One cause of Americans’ uneven health: Our uniquely expensive and inefficient medical system. Treatments, procedures and drugs all cost more than in other countries. Those premiums lift the incomes of companies and people in the health care sector, but they come at the expense of other Americans.
Given all of this, it makes sense that so many Americans have soured on their own country. For almost 20 years, through economic booms and busts and through presidencies of both parties, most Americans have said the country was headed in the wrong direction.
They’re right about that.

David Leonhardt

David Leonhardt is an Op-Ed columnist for The New York Times.
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