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Aren't Sharing in Economic Boom
"Liberty cannot long endure in a country where the tendency is to concentrate wealth into the hands of a few."
The person who said that was no fire-breathing socialist or bleeding-heart liberal- unless that is how you describe Federalist-turned-Whig Daniel Webster. His sentiment need not be taken for ideology as much as pragmatism. In any case, if he were here now, Webster would worry about the fate of this nation in the twilight of the Twentieth Century.
And New Jersey would not be exempt from his concern. Although this is the second most affluent state in the US, income is distributed quite unequally. This was the key finding of Growing, or Growing Apart?, a new study by New Jersey Policy Perspective in which Judith M. Fields, an economist at Lehman College in New York, analyzed income in New Jersey.
Dr. Fields divided the state into five groups of equal population and then determined what percentage of total income each group during the period of 1995-97, based on the Census Bureau's Current Population Survey. The findings are sobering.
The richest 20 percent of New Jerseyans accounted for 53 percent of the state's total income. Put another way, for every dollar that people in this state made, 53 cents went to the top group. The second 20 percent got 25 cents. The next group got just under 15 cents. The group after that got not quite seven cents- and the 20 percent at the bottom got just over one penny.
The study compared these results to 1985-87, finding that over the course of the decade an unequal situation became more so. Indeed, the only major change from the 80s to the 90s was that the richest group saw their share of total income grow slightly. In the 1990s the richest made 50 times more than the poorest; in the 1980s they made "only" 47 times more.
What does it mean? Well, there might be no question more fundamental to the wellbeing of our economy, the security of our social structure and the state of our politics than: "Who gets what?"
We Americans traditionally resent and resist rigid class stratification. Far more than in other nations, we tend to identify ourselves as "middle class." And from the 1940s through the 1970s, those in the vast middle increased their share of income and wealth to where the ideal was the reality. Disparities that existed at the start of the Great Depression in 1929 seemed a thing of the past.
But in recent years there have been strong signals that something is changing. Whether the middle is seen as disappearing or merely under strain; and regardless of where blame is placed, it is becoming clear that the answer to the question of "who gets what" is starting to look more like what it did 70 years ago. Wealth inequality is back to Depression-era levels.
There is, of course, no universal standard for equality. If income were uniformly distributed, each 20 percent of the population would get 20 percent of the income. Is that a perfect world? Who defines "perfect?" But, one need not be a card-carrying utopian to be alarmed at such a highly imperfect distribution of income. One does not have to advocate abolishing all differences in order to see that differences of too great a magnitude are not good for anyone in the long run.
At the very least, then, the new income distribution data should serve as a baseline against which to gauge the years to come.
Should it be more than that? Where free enterprise reigns and no one seriously champions its demise, should we really care about how income is distributed? Yes, we should. Precisely because this nation is built on the belief- and the reality- that class barriers were made to be broken, it is up to us as a society to make sure walls that once existed do not reappear. It is up to us to advocate economic and social policies- and encourage political debate- challenging our progress against the ideal.
We need to know "who gets what." And if that knowledge tells us that things are headed in the wrong direction, we have to act on that knowledge.
Income distribution is no abstract economic concept. Any number of policy choices spring from understanding income distribution. For example, as New Jersey contemplates changes in the state and local tax system, it is important to explore the contribution this system makes to inequality. Cutting regressive taxes ought to take precedence over cutting progressive taxes. The state sales tax and local property taxes are regressive: they take a higher percentage of a lower- or middle-income person's resources than they do from those with higher incomes. The state income tax takes a higher percentage from those nearest the top; it is progressive.
At a time when the easy answer to questions about taxes is to say that raising them has inherently negative economic consequences, there is a need for fuller debate. And the distribution of income needs to be a part of that debate.
Big things are happening in the economy of our state and our nation. Restructuring of entire sectors threatens the security of those in the middle. A declining governmental role as an agent of public welfare frays the safety net for those nearest the bottom. These forces help make the distribution of income even less equal. Given this, at the very least it seems ill advised to make the tax system more regressive, less progressive. Nor is anything but an increase in our investment in upgrading workers' skills and improving education warranted.
Asking how income is divided among the people of New Jersey, then, is not an idle question. It is an inquiry into the status of the American Dream and, if used properly, a road map for a new century.
A version of this piece appeared March 16, 1999 in The Asbury Park Press.
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