Posted on Aug 24, 2022

Last Wednesday we enjoyed another timely and informative presentation from a CSU faculty. CSU Associate Professor Anders Fremstad’s talk was entitled Economic Inequality.

The first slide included a QR code which allows users to see where they are in income and wealth distribution.  The next slide showed the Fremstad’s location based on their income of $200,000)/year (likely a relatable level to many of our members). This puts them in an enviable position - in the 90 percentile nationally and the top 2% worldwide. This level in the USA is 2.8% less than the top 1% and worldwide 0.9% lower than the top 1%.
Benefits to the “wealthy” have increased since 1980 – the income growth of the 91st percentile has grown 93%.  Income shares of the top 1% and bottom 50% have diverged dramatically starting in the 1980s in the US (the working middle class hasn’t got a real raise in the last 40 years). However, worldwide economic inequality has decreased as the economies of developing nations have improved.
In the US the gross domestic product per capita has decreased from 2.4% (1950-1980) to 1.6% in the last 40 years.  Before WW2 the top 1% of the population earned 20% of the overall income. After the New Deal, the middle class increased their wealth, but this has declined since 2000. Home ownership in the US is defining for wealth and currently the amount of debt (instead of income) defines the lower 1/3 ‘s spreadsheet.
What about the effect of education? In the last 25 years those with a bachelor or associate degree have out earned those with only a high school degree. However, in the last 2 years the most dramatic increase in earned income has been among high school graduates. This likely reflect  the increasing need for, and the scarcity of those we now refer to as “essential workers”.
Most would accept that gross income inequality is bad, but some inequality likely has desirable effects - e.g., an incentive to work hard, to seek higher education or to start a business (with it’s associated risk). So, what is the optimal amount of inequality. Well, we spent the rest of the session looking at a somewhat complicated slide illustrating several points on an “inequality” curve from perverse inequality to no inequality (the communist ideal).
An active exchange occurred with the membership as Dr Fremstad asked us what is the ideal inequality and how can we get there? Suggestions and questions included
  • Improving education (especially early education)
  • What about gender inequality?
  • What is the role of we don’t wish to pay the “real” cost of products and services (think Big Mac and the poverty wage McDonalds provides)?
  • What’s up with the lower 10% - are they lazy or bad people?
  • Should we redefine success in non-economic terms?
  • Does Scandinavia have it right?
Finally, there may be some good news, because inequality may have plateaued or is starting to decrease. One thing our government could do is adjust the tax rates (tax the rich at higher rates). One suspects we will hear about this again in the upcoming election cycle. This was a great interactive session and made this writer feel like he was back in college again (I wish).