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United States one dollar bills are curled and inspected.

Today’s post is on income inequality. Since we’re heating up in election season, candidates are pushing forth their economic plans for America.

The dangerous separation of the American upper middle class

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“The American upper middle class is separating, slowly but surely, from the rest of society. This separation is most obvious in terms of income—where the top fifth have been prospering while the majority lags behind. But the separation is not just economic. Gaps are growing on a whole range of dimensions, including family structure, education, lifestyle, and geography. Indeed, these dimensions of advantage appear to be clustering more tightly together, each thereby amplifying the effect of the other.

For many, the most attractive class dividing line is the one between those at the very, very top and everybody else.  It is true that the top 1 percent is pulling away very dramatically from the bottom 99 percent. But the top 1 percent is by definition a small group. It is not plausible to claim that the individual or family in the 95th or 99th percentile are in any way part of mainstream America, even if many of them think so: over a third of the demonstrators on the May Day ‘Occupy’ march in 2011 had annual earnings of more than $100,000.

For others, the most important division is at the other end of the spectrum: the poverty line. The poor have not fallen behind the middle class in recent decades. But they have not caught up either. There is a case to be made that whatever is happening towards the top of the distribution, the gap we should care most about is between families struggling to put food on the table and those with adequate, middling incomes.”

Senator Bernie Sanders has made addressing income inequality one of the principle components of his campaign, and even other populist candidates like Donald Trump have called for raising taxes on the rich, or at least certain groups of wealthy Americans. Most voters, particularly Republican voters, oppose raising taxes on the rich, but here’s the question:

Is income inequality a problem in America?

The answer is, it could be: One of the ways America has been able to become the most powerful nation on earth in such a short period of time is because we are one of the few societies where economic mobility is possible. Someone born poor, even without tremendous musical, athletic, dancing, or tech genius talent can still earn a solid living and move from the bottom 10% to the top 1%. Herman Cain and Ben Carson are two such examples. Abraham Lincoln went from being born in a one-room cabin to President of the United States. That gives people hope that they too can achieve the “American Dream”, however it is defined for them. For some, earning a salary of $250,000 or more per year is unrealistic. But they may find happiness moving from $20,000 a year to $60,000 a year.

However, the American Dream only works if people believe economic mobility is feasible for them. And right now, many Americans do not believe it’s possible, or at least is becoming more difficult. Some Conservatives and “1%ers” will just say those people don’t work hard enough, or make poor decisions which cause them to stumble. Those may be true for some people, but not for all.

And that’s not the point of this discussion. It’s ‘do you believe you can move up the economic ladder’? And if people are answering no, then the question is, ‘why?’ and if people think the system is rigged against them, populist candidates like Sanders and Trump will absolutely win because the “hard work+perseverance=success” mantra will ring hollow to people who believe we are slowly moving away from an economically mobile society to one based primarily on who your parents are or who believe some people are ‘privileged’. That’s part of the reason entrepreneurship activity is down overall. Onerous government does hamper economic activity, but if people do not believe they can succeed, most will not even try.

This is something both major political parties will have to come to terms with. Certainly no productive society can function under Communism, where everyone (except the Party leaders) is equally poor and miserable. But too much inequality fuels populist and radical candidates who promise to fix the problem.

So take a look at the above graphic and try to answer for yourself, “is income inequality a problem in America”?

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