In my face to face classes, we spend quite a bit of time discussing “POWER” as the key explanatory variable in political science. (See slides) In other words, if we want to know WHY something happened the way it did, we would look at the actors in terms of their relative power positions.  We find the powerful do things because they CAN.  The powerless because it is the least-worst option.

Instead of doing different discussions on race, or recent police events, or efforts to prevent minorities from voting, or efforts to Kill health care, or ban abortions and access to contraceptives, or have abstinence only sex education, or efforts to undermine unions and education (thus ensuring a subservient – powerless working class just happy to have a new video game to play), we are going to look at some fairly general examinations on the current socioeconomic structure of the US.

I am going to post this entire article from UC-Santa Cruz Professor G. William Domhoff.  I don’t necessarily expect you to read every word, but at least scan the entire document and focus on charts and topics that interest you.  This is a good sample for what I want in your research project – graph/chart driven, fact based discussion.  (The difference is I do expect you to make a specific policy proposal based on your findings.)  The one section YOU MUST READ and RESPOND TO (in Domhoff) IS “Do Americans Know Their Wealth Distribution?“ Note the gap between Ideal, Estimated and Actual Wealth distribution. Thoughts? Implications?

The data does lag a little date-wise, but generally has continued in the directions suggested here consistent with trends that have been ongoing since the Reagan administration.  SO, analyze, synthesize, evaluate, weigh and conclude. Try to make CONNECTIONS between the articles to a bigger theme. Does this information MATTER?  What are the implications?

Optional: You may also review this article for extra points:  The Case for Reparations (Links to an external site.)Links to an external site.

and/or:  Adam Smith (Links to an external site.)Links to an external site.

Who Rules America? (Links to an external site.)Links to an external site.

If you go to the main site linked above you will see links to other related issues if you are interested… Charts/graphs may be easier to read on the original site.

Wealth, Income, and Power (Links to an external site.)Links to an external site.

by G. William Domhoff

This document presents details on the wealth and income distributions in the United States, and explains how we use these two distributions as power indicators. The most striking numbers on income inequality will come last, showing the dramatic change in the ratio of the average CEO’s paycheck to that of the average factory worker over the past 40 years.

First, though, some definitions. Generally speaking, wealth is the value of everything a person or family owns, minus any debts. However, for purposes of studying the wealth distribution, economists define wealth in terms of marketable assets, such as real estate, stocks, and bonds, leaving aside consumer durables like cars and household items because they are not as readily converted into cash and are more valuable to their owners for use purposes than they are for resale (see Wolff, 2004, p. 4, for a full discussion of these issues). Once the value of all marketable assets is determined, then all debts, such as home mortgages and credit card debts, are subtracted, which yields a person’s net worth. In addition, economists use the concept of financial wealth — also referred to in this document as “non-home wealth” — which is defined as net worth minus net equity in owner-occupied housing. As Wolff (2004, p. 5) explains, “Financial wealth is a more ‘liquid’ concept than marketable wealth, since one’s home is difficult to convert into cash in the short term. It thus reflects the resources that may be immediately available for consumption or various forms of investments.”

We also need to distinguish wealth from income. Income is what people earn from work, but also from dividends, interest, and any rents or royalties that are paid to them on properties they own. In theory, those who own a great deal of wealth may or may not have high incomes, depending on the returns they receive from their wealth, but in reality those at the very top of the wealth distribution usually have the most income. (But it’s important to note that for the rich, most of that income does not come from “working”: in 2008, only 19% of the income reported by the 13,480 individuals or families making over $10 million came from wages and salaries. See Norris, 2010, for more details.)

This document focuses on the “Top 1%” as a whole because that’s been the traditional cut-off point for “the top” in academic studies, and because it’s easy for us to keep in mind that we are talking about one in a hundred. But it is also important to realize that the lower half of that top 1% has far less than those in the top half; in fact, both wealth and income are super-concentrated in the top 0.1%, which is just one in a thousand. (To get an idea of the differences, take a look at an insider account by a long-time investment manager (Links to an external site.)Links to an external site. who works for the well-to-do and very rich. It nicely explains what the different levels have — and how they got it. Also, David Cay Johnston (2011) has written a column about the differences among the top 1% (Links to an external site.)Links to an external site., based on 2009 IRS information.)

As you read through the facts and figures that follow, please keep in mind that they are usually two or three years out of date because it takes time for one set of experts to collect the basic information and make sure it is accurate, and then still more time for another set of experts to analyze it and write their reports. It’s also the case that the infamous housing bubble of the first eight years of the 21st century inflated some of the wealth numbers.

There’s also some general information available on median income and percentage of people below the poverty line in 2010. As might be expected, most of the new information shows declines; in fact, a report from the Center for Economic and Policy Research (2011) concludes that the decade from 2000 to 2010 was a “lost decade (Links to an external site.)Links to an external site.” for most Americans.

One final general point before turning to the specifics. People who have looked at this document in the past often asked whether progressive taxation reduces some of the income inequality that exists before taxes are paid. The answer: not by much, if we count all of the taxes that people pay, from sales taxes to property taxes to payroll taxes (in other words, not just income taxes). And the top 1% of income earners actually pay a smaller percentage of their incomes to taxes than the 9% just below them. These findings are discussed in detail near the end of this document.

Exactly how rich are the Top 1%?

People often wonder exactly how much income and/or wealth someone needs to have to be included in the Top 1% or the Top 20%; Table 1 below lists some absolute dollar amounts associated with various income and wealth classes in 2013, but the important point to keep in mind is that for the most part, it’s the relative positions of wealth holders and income earners that we are trying to comprehend in this document.

Table 1: Income and net worth in the U.S. by class, 2013

Wealth or income class	Mean household income	Mean household net worth
Top 1 percent	$1,679,000	$18,623,400
Top 20 percent	$257,200	$2,260,300
60th-80th percentile	$76,500	$236,400
40th-60th percentile	$46,000	$68,100
Bottom 40 percent	$20,300	-$10,800

From Wolff (2014); only mean figures are available, not medians.  Note that income and wealth are separate measures; so, for example, the top 1% of income-earners is not exactly the same group of people as the top 1% of wealth-holders, although there is considerable overlap.

The Wealth Distribution

In the United States, wealth is highly concentrated in relatively few hands. As of 2013, the top 1% of households (the upper class) owned 36.7% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 52.2%, which means that just 20% of the people owned a remarkable 89%, leaving only 11% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one’s home), the top 1% of households had an even greater share: 42.8%. Table 2 and Figure 1 present further details, drawn from the careful work of economist Edward N. Wolff at New York University (2017).

Table 2: Distribution of net worth and financial wealth in the United States, 1983-2013