The Congressional Budget Office (CBO), the organization that provides Congress with nonpartisan analyses for economic and budgetary decisions, has released a report that includes absolutely staggering statistics. In 2013, the top 10 percent of American families controlled 76 percent of American family wealth — some $50 trillion of the $67 trillion pie (1).
The remaining $17 trillion is almost entirely captured by the other members of the top 50 percent. That means that the bottom 50 percent have nearly no savings or wealth. In fact, the study finds that the bottom 12 percent of Americans have negative wealth as credit card debt, student loan debt, and car loans continue to weigh heavily on those still struggling in the 21st century economy. It is no wonder then that 46 percent of Americans cannot cover a $400 emergency expense today (2).
But this story did not start in 2013 — it started in 1989. The CBO study found that the top 10 percent has had a 54 percent increase in wealth from 1989 to 2013. The wealth of the median household has increased just 4 percent, while the wealth of families at the 25th percentile was 6 percent less that it was in 1989. As the top 10 percent has managed to expound on their wealth substantially since 1989, those falling below the 50th percentile mark are actually losing wealth year by year.
(Source: Congressional Budget Office)
But to those who have studied the growth in wealth inequality over the past few decades, these numbers come as no surprise — just as a sobering reminder of the work left to do. It should come as no surprise that the top ten percent have managed to increase their wealth substantially over time as they tend to have higher wages — which, of course, allows for more disposable income that can be intelligently invested in stocks, bonds, real estate, or small businesses.
Furthermore the higher your family wealth, the better educated one tends to be, giving those individuals a better grasp of how financial markets fundamentally operate while simultaneously opening up better opportunities for investment. By no means is this article criticizing the actions of those in the top ten or even fifty percent — it is only logical to manage ones money in a way that benefits one the greatest; that is the quintessential utilitarian attitude that has made America the richest country in the world.
The problem is that those opportunities to own stock or investments are, in fact, nonexistent to those struggling to make ends meet via stagnant paychecks. If we want American wealth to increase, for consumer demand to grow, and for production to increase to meet that growth thus catalyzing the American economic engine, then America needs one of two things: a raise or a share.
One way to fight for higher paychecks for low and middle-income workers is via the collectivization of laborers — better known as unionizing. This allows for laborers to have a voice at the negotiation table to fight for higher wages, better benefits, working conditions, and opportunities. As this matter has already been extensively covered, I will instead turn to the other, more theoretical, option.
A Gallup poll has found that just over 50 percent of Americans own stock (3). Coincidently, or perhaps incidentally, that number is strikingly similar to the cited statistics above that 50 percent of American’s wealth increased from 1989 to 2013 while 50 percent have lost wealth. During that same period, the Dow Jones index has exploded from 4,447 points to 15,587 points (4) while the average wages for the bottom 90 percent have remained flat or even decreased (5). This trend has continued into 2017 following President Trump’s inauguration with the Dow Jones Index peaking at 21,115 points on March 1st (6).
It is only logical then to conclude that those Americans who own stock— more acutely, those who own a substantial portion of stock as an overall component of their wealth portfolio— have done significantly better over the decades than those relying on solely wages to create household wealth. Again, that makes sense; and surely, those managing their wealth responsibly is not at fault for the disparity in wealth between those who hold a substantial portion of their wealth in stocks, as opposed to those who doesn’t. However, America does better when everyone is doing well, so it is crucial for us to determine how we can help raise the family wealth of those in the bottom 50 percent — those who have significantly less, if any, disposable income to invest into stocks.
What I suggest, and what Ronald Reagan called for in 1987 (7), is that we must continue to push for a “future [in which] we will see in the United States and throughout the western world an increasing trend toward the next logical step, employee ownership. It is a path that befits a free people.” Reagan, a free-trade minded Republican who promoted globalism, understood the value of employee owned corporations.
This is not a call for nationalization of businesses, nor for forced stock handouts; however, it is a call for a moral capitalism (8), the auto-décrit Capitalism 2.0 that Senator Mark Warner (D-VA) espouses (9), that understands the advantages of having an engaged and a properly rewarded labor force.
Employees are more invested in their work when they know that their performance directly affects the outcome of their wealth — whether it is a CEO or a security officer, each will do their best to increase the value of the company knowing that such an increase will have a net increase on their own wealth. This is why the practice of stock options is widely used in the tech industry; it gets the best out of the employee while offering incentive for positive behavior and hard work — which both Republicans and Democrats can agree is the American ideal.
There are critics on both sides of the aisle for raising the minimum wage: it would kill jobs, it will stimulate growth, it is fair, it is robbery — the arguments are hurled back and forth with guttural ferocity. Perhaps stock options can be a compromise between the two sides. Stock options are not free handouts; this is not more money for the same work.
A nationwide effort to provide stock options for all employees, not just managers and shareholders, will create a more equitable workplace where everyone feels a responsibility for the business as a whole. It also help create the long-term wealth that each American family strives for and needs in order to leave a better life for their children. Businesses and employees would prosper under this plan and a more loyal, committed community would be built around shared values and work.
Certainly President Trump can agree with President Reagan that employee ownership is a future that befits the American ideals that our Founders enriched this country in.
Mercer May is a J.D. Candidate at the University of Richmond and has worked in numerous public policy and legislative rolls - including the Virginia House of Delegates, the Senate of Virginia, and the Office of the Attorney General of Virginia.
1. CBO. "Trends in Family Wealth, 1989 to 2013." Congressional Budget Office. N.p., 06 Oct. 2016. Web. 02 Apr. 2017.
2. Mui, Ylan Q. "The Shocking Number of Americans Who Can’t Cover a $400 Expense." The Washington Post. WP Company, 25 May 2016. Web. 02 Apr. 2017.
3. Gallup, Inc. "Little Change in Percentage of Americans Who Own Stocks." Gallup.com. Gallup, Inc., 22 Apr. 2015. Web. 02 Apr. 2017.
4. "Dow Jones - 100 Year Historical Chart." MacroTrends. MacroTrends LLC, n.d. Web. 02 Apr. 2017.
5. Mishel, Lawrence, Elise Gould, and Josh Bivens. "Wage Stagnation in Nine Charts." EPI. Economic Policy Institute, 06 Jan. 2015. Web. 02 Apr. 2017.
6. "Dow Jones Industrial Average | 1912-2017 | Data | Chart | Calendar." TradingEconomics. Trading Economics, 31 Mar. 2017. Web. 02 Apr. 2017.
7. "President Ronald Reagan's Speech on Project Economic Justice." CESJ.org. Center for Economic and Social Justice, n.d. Web. 02 Apr. 2017.
8. May, Mercer. "The Case for Moral Capitalism." The Hill. News Communications, Inc., 16 July 2016. Web. 02 Apr. 2017.
9. Fain, Travis. "Warner: Capitalism 2.0 ... or Else." Dailypress.com. The Daily Press Media Group, 18 Aug. 2016. Web. 02 Apr. 2017.