The Inequality Gap: How Wealth of the Top 1 Has Grown 100 Times Faster Than Bottom 50 Since 1970

Understanding the stark contrast between the wealth accumulation of the top 1 percent and the stagnation or decline in the wealth of the bottom 50 percent in America is crucial. A top business owner or CEO often ascends to their position through relentless hard work and tenacity. However, as they scale and expand their business, their wealth expands exponentially. Conversely, many individuals in the bottom 50 percent are simply earning paychecks, some barely making it to work, while others may not work at all. This article explores the reasons behind this significant wealth disparity and the systemic factors contributing to it.

Defining Wealth

The concept of wealth is broader than just income. Wealth includes assets such as property, investments, and financial capital that can appreciate in value over time. For instance, homeowners witness their assets growing in value annually, without necessarily needing to take any action. This factor underscores the inequality gap, where the wealth of one group grows exponentially while the other stagnates.

Historical Context and Data

Data from 1970 to 2018 illustrates the stark contrast in income and wealth growth between the top 1 percent and the bottom 50 percent. In 1970, the income levels for the top 5 percent were significantly higher, with a lower limit of $31,000, while the third quintile's upper limit was just $11,826. By 2018, the third quintile's income levels had increased slightly, yet the disparity between the top and bottom quintiles remained pronounced.

One of the key factors contributing to this wealth gap is the ability of the wealthy to use their wealth to create even more. In the United States, the legal and political landscape often favors the already wealthy, allowing them to write laws and policies that further their interests. This perpetuates and widens the wealth gap, as the rich get richer more quickly than the poor.

Systemic Factors Favoring Wealth Accumulation

Several systemic factors explain the growing disparity in wealth between high earners and the bottom 50 percent:

Entrepreneurship vs. Employment

Business owners generally have a much better opportunity to generate significant wealth compared to employees. When a business succeeds, the profits of the business owner can increase dramatically. In contrast, the pay for employees typically remains stable or barely increases. Therefore, individuals with the capital to invest in their own businesses are in a far superior position to accumulate wealth compared to those who are forced to sell their labor. Additionally, in recent decades, corporate profits have surged, while wages have stagnated. This means that a larger proportion of new wealth is captured by business owners, leaving workers with a smaller share.

Access to Resources and Opportunities

Those with wealth have greater access to resources and opportunities than those without. Wealthy individuals tend to network with other wealthy people, have better access to investment opportunities, and have more support networks to help them grow their wealth. They can afford to hire professionals to manage their finances and assets, minimizing their taxes and protecting their wealth from threats. In contrast, those with fewer resources are often at a disadvantage, with limited opportunities for wealth growth and fewer resources to invest in personal development and education.

Debt and Financial Leverage

The ability to take on and effectively manage debt plays a crucial role in wealth accumulation. Wealthy individuals often have access to low-interest loans, allowing them to leverage capital to generate significant returns. In contrast, those with limited financial resources often rely on debt just to survive from one month to the next, leading to a debt spiral that further erodes their financial stability. The ability to manage debt effectively is crucial for those looking to grow their wealth.

Conclusively, the growing wealth gap between the top 1 percent and the bottom 50 percent in the United States is a multifaceted issue rooted in systemic advantages. Addressing this disparity requires a comprehensive approach, including policies to promote equal access to resources and opportunities, ensuring fair and equitable systems, and reducing barriers to economic mobility.