The Inequality Effect

The old adage, “the rich get richer,” has never been more true for the United States since the onset of the Great Recession in 2007. We know that 90% of America’s publicly-traded shares are held by 10% of the population, we now have 1% of the population owning 40% of total wealth (rising to 54% if you go up to 3%), there is a huge cadre of unemployed who would love a job but have given up looking (and they just don’t show up in the unemployment statistics everyone is “bragging” about) and the majority of new jobs that have been created have fallen primarily into lower-paying, part-time and contract work.

And too much of the academic analysis has rested on looking at communities and comparing them based on “average” incomes. But when the University of Wisconsin looked beyond the averages and into the actual income diversity within the community, the statistics for those communities with large numbers of low income residents, regardless of the higher income minority that might raise that “average,” the painful numbers begin to appear.

“The report, from the University of Wisconsin Population Health Institute and the Robert Wood Johnson Foundation, ranks every county on a range of health-related factors, from behaviors like smoking and drinking to social issues like crime and unemployment and environmental problems like air pollution…

 “[P]eople are less healthy if they live in a community that has a big disparity between the richest and the rest of us. People in unequal communities were more likely to die before age 75 than people in more equal communities, even when the average overall income in the communities was virtually the same… It's called "the inequality effect," and several possible reasons for it are cited:

“• A community with a wide income disparity usually has a few very rich people, and many more poor people. Those numbers tilt the data towards risk factors that affect the poor, like inadequate health care and bad nutrition.

“• The very rich may not invest in the communities where they live. They send their children to private schools and travel for the best health care. That leaves the rest of us to support local schools, hospitals and other services that are critical to community health.

“• Life might just be more stressful in a community with a wide income inequality.

“In any case, poverty had a measurable impact on health. In every state, the poverty rate in the unhealthiest county was more than twice as high as in the healthiest county. The unemployment rate in the unhealthiest counties was 1.5 times higher than in the healthiest ones. The child poverty rate was more than twice as high in the unhealthiest county as in the healthiest.” Jobs.Aol.com, March 31^st.

The March 31^st New York Times writes about the underlying theories challenged by the Wisconsin study as well as the general assumptions and findings: “The research on inequality at the county level is new, but existing literature suggests there are relationships between income inequality and life expectancy among countries in the world. ‘Inequality effects, over and above average income, are pretty well established,’ said S.V. Subramanian, a professor of population health and geography at Harvard, who has studied the phenomenon. We know that inequality tends to concentrate income in fewer hands, creating more low-income households — and people in low-income households don’t live as long. But what causes the drop in life expectancy is debatable.

“One theory is that while money does tend to buy better health, it makes a bigger difference for people low on the income scale than those at the top. That means that having fewer very poor people in a community will improve average health more than having fewer very rich people will diminish it.

“But another, more sociological theory, has to do with the communities themselves. The researchers think that places where wealthy residents can essentially buy their way out of social services may have less cohesion and investment in things like education and public health that we know affect life span. There is also literature suggesting that it’s stressful to live among people who are wealthier than you. That stress may translate into mental health problems or cardiac disease for lower-income residents of unequal places.

“The researchers measured inequality by comparing the incomes of people in a given place who earned the 80th percentile in the county with the incomes of those in 20th percentile. Then they measured life expectancy using a custom measurement they developed — it counts the ‘potential life years lost’ in each community by measuring all those who died before the age of 75, and the age at which they died. So someone who died at age 70 would have five years of potential life lost. Then they adjusted the numbers according to how old people were in the county, so counties with more old people wouldn’t look sicker than counties that were younger. The study looked at only the average life span and not that of higher-income versus lower-income residents.

“For every one-point increase in the ratio between high and low earners in a county, there were about five years lost for every 1,000 people. That’s about the same difference they observed when a community’s smoking rate increased by 4 percent or its obesity rate rose by 3 percent. Researchers said that inequality effect persisted even when they compared communities of similar average income and racial composition.”

Income inequality is one of the biggest issues facing federal candidates in the 2016 elections. So far, the Republicans cling stubbornly to the rather thoroughly-disproven theory of trickle-down economics (give rich people extra cash with light regulations and low taxes, and great new jobs and commercial advantages will trickle down and be good for us all). Democrats propose to hit the rich with new income-leveling taxes and use that money to fund social programs and education, and perhaps some direct federally-subsidized jobs.

The contracting middle class, the falling standard of living and reduced average buying power hasn’t traditionally been much of an issue for American voters in the past, but as fewer people feel secure in their earning power, watching the playing field tilt wildly in favor of the rich, the issue today literally drowns out even such looming concerns like immigration reform and defense-spending. If income inequality is not balanced, there is an increasing consensus among sociologists and economists to begin to worry about the survivability of the United States itself.

I’m Peter Dekom, and we are rapidly running out of time for slogan-driven non-solutions that will impact whether the United States can continue as a single, unified political unit.