The two wispy slips of paper were far more than just ATM receipts found at a bank in New York. They created a jarring yet simple mosaic of the sprawling gap between rich and poor in the United States.
“They show that someone recently withdrew $300 in cash on a balance of $1 million, just after someone else tried to withdraw $100 on an account that had insufficient funds,” Business Insider noted Tuesday. “Extreme, fixed, inequality is a recipe for disaster in a society that claims to be democratic and socially fluid.”
Putting Money on the Line
The starkest contrast in American income inequality could be right where those ATM receipts turned up, according to a study of U.S. Census Bureau data by The New Yorker. Any given subway commuter’s median household income is likely to drop precipitously once he or she has shuffled off Manhattan.
“If the borough of Manhattan were a country, the income gap between the richest 20 percent and the poorest 20 percent would be on par with countries like Sierra Leone, Namibia and Lesotho,” according to The New Yorker. “Along individual subway lines, earnings range from poverty to considerable wealth.”
|U.S. Census data indicates a tremendous disparity in median household income, as shown by The New Yorker.|
Line 2’s Park Place and Chambers Street stations cater to the most affluent commuters with $205,192 in median household income. Farther up that line, the Bronx’s E 180 Street station services commuters with a median household income of $13,750 — just $1,462 more than the station serving the city’s poorest commuters.
Households Still in Crisis
Such an income disparity may be tough to imagine this far out from the financial crisis. But households with less than $500,000 in net worth are still in the thick of recession, according to a recent study by the Pew Research Center.
These households lost almost 5 percent of their wealth between 2009 and 2011, while the wealth of those on the other side of $500,000 rose more than 20 percent, the Washington-based think tank’s study found. Stock and bond market rallies returned lost wealth to the top 13 percent of American households, and sinking home values continue to scuttle the rest.
“The results are entirely sensible, but depressing,” study co-author Richard Fry said. “It’s a stark story of two Americas.”
Facts and Fallacies
Of course, not everyone thinks that the people in either America are trapped, or “fixed,” in that position. Nor does everyone agree with the veracity of the figures.
“Almost invariably, such widely publicized statistics leave out both taxes on people in upper income brackets and transfers to people in lower income brackets,” Thomas Sowell wrote in Economic Facts and Fallacies. “When they fail to follow given individuals over time, they exaggerate lifetime inequality, as well as enabling observers to speak of people who are transiently in various income brackets as if they are enduring ‘classes.’”
But income inequality has surged dramatically over the last four decades, according to The New York Times on Sunday.
“In 1970, the richest 1 percent of Americans enjoyed 9 percent of total national pre-tax income,” NYT stated. “In 2011, by contrast, that share had risen to 19.8 percent.”
Meanwhile tax rates for the highest echelon of taxpayers have tumbled, and American voters have lost faith in partisan politicians’ ability to control the situation.
“It seems like a paradox,” NYT stated. “Americans are increasingly worried about the gap between rich and poor, but are hesitant to have the government do anything about it.”
But a wide gulf between dirt poor and filthy rich doesn’t benefit either party in the long run, according to Business Insider. That’s because meager wages are a recipe empty wallets — and people with empty wallets don’t spend a lot of money, which adversely affects rich people’s ability to get richer.
“The best way to fix inequality is to persuade the overlords that it is in their best interests to share more of their wealth by paying their employees more for their hard work (work that, not incidentally, is what makes the overlords rich),” BI’s Henry Blodget wrote. “Persuade companies that it’s better to focus on creating value rather than just profit.”
Follow Derek on Twitter: @DKlobucher
“ATM Receipt With $1 Million Balance Shows Tale Of 2 Cities In New York” on Business Insider
“Inequalityand New York’s Subway” in The New Yorker