Average inflation-adjusted annual earnings fell across the board in 2022, but the losses were far more difficult for Americans among the bottom 90% of wage earners.
The disproportionate losses for all but the highest earners—whose setbacks were driven by stock market declines—led to a compression in the overall wage distribution over the year.
Over the pandemic labor market, annual earnings growth was fairly consistent for high earners and the bottom 90%, averaging about 2.6% between 2019 and 2022.
Over the long run, however, earnings growth has been vastly unequal. From 1979 to 2022:
Wages for the top 1% and top 0.1% skyrocketed by 171.7% and 344.4%, respectively.
Wages for the bottom 90% grew just 32.9%.
The top 1% earned 12.9% of all wages in 2021—up from 7.3% in 1979. The bottom 90% received just 60.1% of all wages in 2022, far lower than their 69.8% share in 1979.
This is at a time that the five largest U.S. pharmaceutical companies by market cap — Eli Lilly, Johnson & Johnson, Merck, AbbVie, and Pfizer — reported combined earnings of $81.9 billion in 2022, an $8 billion increase from 2021.
Those firms’ combined stock buybacks increased by $4.4 billion from 2021 to 2022 and their dividends climbed by $2.5 billion.
The combined US federal tax payments for these five companies in 2022 should be as much as $24 billion, although they paid less than $2 billion in federal taxes on $110 billion of profit or an average effective tax rate of around 1.8%.
Throughout history, periods of extreme income inequality have triggered various consequences, ranging from social unrest and political instability to economic stagnation and even revolutions.
Historians point to such factors as excessive wealth concentration in the hands of a few and declining social mobility as contributing to the economic decline and eventual fall of the Roman Empire.
Neoliberal policies in Latin America during the 1980s, which aimed to reduce government intervention and promote free markets, are argued to have exacerbated income inequality and contributed to economic stagnation. In general, the Latin American “Lost Decade” crisis was composed of unpayable external debts, taxes, and volatile inflation and exchange rates, which in the majority of the countries in the region were fixed.
The vast wealth gap between the Tsarist elite and the impoverished peasantry, alongside political repression, fueled the Russian revolutions of 1917, leading to the rise of the Soviet Union.
While slavery and states’ rights were primary factors leading to the American Civil War, the economic disparities between the North and the South, with the South’s agrarian economy concentrated in the hands of wealthy landowners, played a significant role in the conflict that lasted from 1861 to 1865.
Growing disparities between the wealthy aristocracy and the impoverished masses, coupled with political and economic grievances, fueled the French Revolution, a violent 1789 uprising that toppled the monarchy and established a republic.
Widespread poverty and unemployment, alongside perceived corruption and a widening wealth gap, sparked the 2011 Arab Spring protests in Egypt, culminating in the overthrow of President Hosni Mubarak.
History offers stark examples of the consequences of extreme income inequality that should inform notions for promoting greater economic fairness and social stability in the United States right now. Unfortunately, our political system has been hijacked by the wealthy one percent and the oligarchs have used this control to aggravate the inequality and injustice.
The guillotine wasn’t designed to solve political problems, so America is sorely in need of a peaceful revolution because circumstances will not allow many more indignities to be thrust upon the working class American people.
Bernie Sanders built a large and enthusiastic base of supporters by advocating a political revolution that resonated with many Americans who felt disenfranchised and unheard by the existing political system.
Both major parties are beholden to special interests and unable to address the needs of ordinary Americans but policies like universal healthcare, free college tuition, and an increased minimum wage could create a more just and equitable society.
Voters failed to pay attention and make wise choices as the entire structure of government was incrementally recalibrated over four decades to benefit the wealthy and not the working class.