The Incredible Wealth Gap
The intergenerational wealth gap is big, but it’s nothing compared to the division between the “Haves” and the “Have-nots”
Many people have differing perspectives on what makes life challenging. For Baby Boomers (those born between 1946 and 1964), it was the thought of being drafted right out of high school and sent to die in a swamp in Vietnam. For Generation Xers (those born between 1965 and 1980), it was the idea of having to raise their kids and take care of their aging parents, all at the same time. For Millennials (born between 1981 and 1998), considerations of living without any wealth drive them crazy. The idea of being unable to have a “normal life” is what plagues many young adults these days, who wonder what it was like for previous generations as they aged.
An economist named Gray Kimbrough recently calculated the ownership of wealth by generational cohort’s median age — 35 years old — and then compared how much wealth generations owned at that age.
Wealth is what you own, minus what you owe. Houses’ values, minus the mortgages; automobiles minus the auto loans; whatever else you own, minus the debts. In total, wealth is your net worth, and it’s a big deal because it pertains to a family’s sense of security; and a country’s economic strength in the community of nations.
Acquiring wealth is tied into certain important events adults experience: buying your home, building a business, paying for a child’s education, and retiring comfortably.
As the chart above shows, Baby Boomers collectively owned 21 percent of the nation’s wealth by the time their generation hit the median age of 35 in 1990.
Generation X came of age when the era of wage stagnation and growing inequality arose in the 1970s and ’80s. When a typical Gen Xer reached 35 in 2008, his or her share of the nation’s wealth was just 9 percent, less than half that of Boomers when they reached 35.
Millennials haven’t reached the age-35 mark yet — that won’t happen until about three years from now — but their financial situation is relatively dire. They own just 3.2 percent of the nation’s wealth. To catch up to Gen Xers, they’d need to triple their wealth in just three years. To reach Boomers, their net worth would need to increase by sevenfold.
Why the Gap?
The differences in wealth arise from matters of financial discipline, lifestyle choices, and opportunities or lack thereof.
For Baby Boomers, they saved money and bought things that generated wealth: homes, businesses, stocks and bonds. They had jobs that gave them annual raises of 4–6%, and they often had pensions, especially in the unionized part of the work force.
For Gen Xers, when they started working in adult jobs in the late 1970s and early 1980s, wages started to flatline — and they haven’t recovered since. Adjusted for inflation, the actual purchasing power of a middle-class employee in 2018 is virtually identical to that of a similarly-employed worker in 1978.
For Millennials, they are dealing with flatlined wages and a crushing student loan burden that just doesn’t let them save, or at least not as much as they need to.
Now, you can argue that feeding their costly cell phone addiction; their penchant for using easily-available credit cards so they can enjoy their weekend “experiences”; and the fact that many spend money in other frivolous ways results in a comatose financial situation.
And if you made these arguments, you’d be somewhat right.
The Haves and the Have-Nots
But the real corker is not the intergenerational wealth gap: it’s the one between the “Haves” and the “Have-nots.” And that’s a disastrous phenomenon afflicting societies around the world.
These intergenerational differences do not clearly reflect a huge (and growing) divide between the wealthy/über-wealthy and those who lack the basics of life.
Based on the 2018 figures from the World Inequality Database (https://wid.world/), in the years from 1980 to 2018, the top 1% of wealth grew twice as much as the bottom 50%.
In those 38 years, there have been huge changes in the tax laws; changes in corporate and trust ownership laws; and offshore banking practices so that those with larger sums of money to begin with were able to form offshore corporations or trusts; take advantage of favorable tax laws here in the U.S. and elsewhere; and hide money in offshore bank accounts.
The net result is that fewer per capita tax dollars are collected, even though the profits are getting bigger and bigger.
Other changes in laws here in the United States and in countries around the world reflect the fact that many public lands (often rich in oil, gas, and other strategic minerals) have been transferred from public to private ownership. Here in the U.S., for example, millions of acres of land have been sold or leased on the cheap to well-to-do individuals and/or their companies. Natural resources have been extracted and sold (harming Mother Nature in the meantime) and lining the pockets of their new owners or long-term lessees.
In my lifetime, in Los Angeles, California, a gallon of gas went from $0.24/gallon to $4.59/gallon, an increase of 1,912.50%. The gas taxes had skyrocketed, but the roads remind me of those in Third World countries I used to see in South America and Asia.
So where are the enormous profits going?
Into the bank accounts and companies of the über-wealthy, and not helping the poor.
And why is the gap between the super-rich’s wealth and the wealth of the rest of us getting bigger and bigger? (And please don’t quote Matthew 26:11: “The poor you will always have with you….”) It’s because private money is being used to pay for politician’s elections/reelections, political favors, and the like. And why is this the case?
Because in America we have the tools of democracy, but we have been too lazy to use them properly. Many people could vote to get rid of private financing of public functions, but they believe the lies of the candidates who campaign before them. The public had a chance with the McCain-Feingold Campaign Finance Reform Act 18 years ago, but the U.S. Supreme Court struck it down in Citizens United.
Now, with Trump in the White House, and Senator Mitch McConnell (R-Ky) in charge of the Senate, it will be very difficult to see a clear path towards reducing the wealth gap in America. Instead, we have a Senate enthralled by the ultra-wealthy, and a court system, which is the last bastion of privilege.
Where do We Go From Here?
We’ve seen that the wealthy keep getting richer, and the poor keep getting poorer and poorer. Where do we go from here?
We have the tools to hold politicians accountable. We know (or should know) that 10 angry constituents confronting a councilperson in his/her office is far more effective in getting things done than a 1,000 protesters with picket signs and bull-horns in front of the state capitol, or a march of 100,000 people in front of the White House.
So the wisdom of the old saying holds true: “Think Globally, but Act Locally!” When we form communities of like-minded people to work purposefully together to hold our officials responsible for making the changes that we want, then we will have a chance to stop the ultra-wealthy’s Midas Touch and restore our democracy to one Of the People, By the People, and For the People.