Could America's Wealth Gap Lead To A Revolt?

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Forbes
By: Dr. Dale Archer
September 4, 2013

All the talk about income and wealth inequality over the last couple of years begs the question: Could the wealth gap lead to a revolt?

In some ways, last week's fast food worker strikes and rallies affecting businesses like McDonald's, Wendy's, Burger King, and Yum Brand's Taco Bell, Pizza Hut, and KFC, demonstrate it already has. In 60 cities across the country, they were protesting the federal minimum wage of $7.25 an hour that keeps them in a chronic state of poverty, and demanding "a living wage" of twice that.

It's extremely difficult to organize workers in such a fragmented service industry, so the fact that these demonstrations have taken place on this scale is a sign of their determination. These demands have been brewing for the past year, and are likely to spread to other industries unless the government steps in to raise the minimum wage which, given the current state of Congress, is unlikely.

Regardless of your personal views on the minimum wage, the protesters may have a point. The disparity between the nation's top earners and the bottom 80 percent has grown exponentially over the past three decades, and it's been exacerbated by the Great Recession.

For all the employment growth and claims by many that our economy is in recovery, most of those new jobs - six out of ten according to the Labor Department - are on the low end of the pay scale, which is already much lower than other first world countries. Meanwhile, the top executives of the fast food companies at the center of this storm are among the highest paid in the nation.

A recent YouTube video that went viral brings home just how stark the wealth gap in America has become. According to the video, almost all of us perceive the wealth distribution as unfair, and 92% of the 5,000 Americans polled think that it should be more equitable - Republicans and Democrats alike. That's nothing new.

However, what is striking is the vast disparity between what the average American believes the wealth gap to be, and what it actually is. The reality in graphic form shows that the bottom 40% barely register, and the top 1 percent already own more of the wealth than most Americans think the top 20% should own in a fair society.

Of course, we need to differentiate between wealth and income disparity. While the top 1 percent own more than 40% of the nation's approximately $54 trillion in wealth, they earn about 19% of the income. In other words, the rich get richer via stocks, bonds, real estate, etc. which partially accounts for the wealth gap being almost double the income gap. So an increase in the minimum wage being called for now will barely make a dent in this disparity as it stands.

That leaves the bottom 80 percent with a meager 7 percent of the wealth, or, to look at it another way, the wealthiest 400 Americans have the same combined wealth of the nation's poorest - more than 150 million people, which is almost half the population. So, no matter how you slice it, when it comes to income and wealth in America, the rich get most of the pie and the rest get the crumbs.

As more Americans are confronted with evidence of this stark reality, the chances of social unrest increase. In my last blog I analyzed the protests in Brazil through the lens of human behavior, and an offshoot of equity theory I call "perceived fairness". In essence, people are willing to make financial decisions that are not in their own best interest in order to correct an unfair situation with another person. But that is in a one on one situation. Throw in the psychology of mob mentality and it gets much worse.

So what does this say about the current economic reality of our own American pie? And how much more inequity do we need to see before the nation's poorest, which is the vast majority, really revolt?

Aristotle was the first to state that inequality triggers a revolution and that was certainly the case during the French Revolution, when onerous taxes on the lower and middle classes enhanced the lives of the wealthiest aristocrats. The American Revolution was also abName

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This page contains a single entry by CFED published on September 9, 2013 4:09 PM.

1 missed paycheck from disaster was the previous entry in this blog.

Higher education's biggest challenge is income inequality is the next entry in this blog.

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