This week, Angus Deaton will receive the Nobel Memorial Prize in Economics “for his analysis of consumption, poverty, and welfare.†Deservedly so. Indeed, soon after the award was announced in October, Deaton published some startling work with Ann Case in the “Proceedings of the National Academy of Sciences†— research that is at least as newsworthy as the Nobel ceremony.
Analyzing a vast amount of data about health and deaths among Americans, Case and Deaton showed declining life expectancy and health for middle-aged white Americans, especially those with a high school education or less. Among the causes were suicide, drugs, and alcoholism.
America prides itself on being one of the world’s most prosperous countries, and can boast that in every recent year except one (2009) per capita GDP has increased. And a sign of prosperity is supposed to be good health and longevity. But, while the U.S. spends more money per capita on medical care than almost any other country (and more as a percentage of GDP), it is far from topping the world in life expectancy. France, for example, spends less than 12 percent of its GDP on medical care, compared to 17 percent in the U.S.. Yet Americans can expect to live three full years less than the French.
The effects of lower income are exacerbated by the fact that the U.S. is the only advanced country not to recognize access to health care as a basic right.
For years, many Americans explained away this gap. The U.S. is a more heterogeneous society, they argued, and the gap supposedly reflected the huge difference in average life expectancy between African Americans and white Americans.
The racial gap in health is, of course, all too real. According to a study published in 2014, life expectancy for African Americans is some four years lower for women and more than five years lower for men, relative to whites. This disparity, however, is hardly just an innocuous result of a more heterogeneous society. It is a symptom of America’s disgrace: pervasive discrimination against African Americans, reflected in median household income that is less than 60 percent that of white households. The effects of lower income are exacerbated by the fact that the U.S. is the only advanced country not to recognize access to health care as a basic right.
Some white Americans, however, have attempted to shift the blame for dying younger to African Americans themselves, citing their “lifestyles.†It is perhaps true that unhealthy habits are more concentrated among poor Americans, a disproportionate number of whom are black. But these habits themselves are a consequence of economic conditions, not to mention the stresses of racism.
The Case-Deaton results show that such theories will no longer do. America is becoming a more divided society — divided not only between whites and African Americans, but also between the 1 percent and the rest, and between the highly educated and the less educated, regardless of race. And the gap can now be measured not just in wages, but also in early deaths. White Americans, too, are dying earlier as their incomes decline.
America is becoming a more divided society — divided not only between whites and African Americans, but also between the 1 percent and the rest, and between the highly educated and the less educated, regardless of race.
This evidence is hardly a shock to those of us studying inequality in America. The median income of a full-time male employee is lower than it was 40 years ago. Wages of male high school graduates have plummeted by some 19 percent in the period studied by Case and Deaton.
To stay above water, many Americans borrowed from banks at usurious interest rates. In 2005, President George W. Bush’s administration made it far more difficult for households to declare bankruptcy and write off debt. Then came the financial crisis, which cost millions of Americans their jobs and homes. When unemployment insurance, designed for short-term bouts of joblessness in a full-employment world, ran out, they were left to fend for themselves, with no safety net (beyond food stamps), while the government bailed out the banks that had caused the crisis.
The basic perquisites of a middle class life were increasingly beyond the reach of a growing share of Americans. The Great Recession had shown their vulnerability. Those who had invested in the stock market saw much of their wealth wiped out; those who had put their money in safe government bonds saw retirement income diminish to near zero, as the Fed relentlessly drove down both short- and long-term interest rates. With college tuition soaring, the only way their children could get the education that would provide a modicum of hope was to borrow; but, with education loans virtually never dischargeable, student debt seemed even worse than other forms of debt.
The world’s quintessential middle class society is on the way to becoming its first former middle class society.
There was no way that this mounting financial pressure could not have placed middle class Americans and their families under greater stress. And it is not surprising that this has been reflected in higher rates of drug abuse, alcoholism and suicide.
I was chief economist of the World Bank in the late 1990s, when we began to receive similarly depressing news from Russia. Our data showed that GDP had fallen some 30 percent since the collapse of the Soviet Union. But we weren’t confident in our measurements. Data showing that male life expectancy was declining, even as it was increasing in the rest of the world, confirmed the impression that things were not going very well in Russia, especially outside of the major cities.
The international Commission on the Measurement of Economic Performance and Social Progress, which I co-chaired and on which Deaton served, had earlier emphasized that GDP often is not a good measure of a society’s wellbeing. These new data on white Americans’ declining health status confirms this conclusion. The world’s quintessential middle class society is on the way to becoming its first former middle class society.
© Project Syndicate
Earlier on WorldPost:
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Gini Coefficient: 0.468
Median Income: $59,373 (8th Highest)
Households Earning $200,000+: 6.56% (4th Highest)
Population Living Below Poverty Line: 10.30% (7th Lowest)
Massachusetts has the fourth-greatest percentage of wealthy residents among all the states and the seventh-lowest percentage of people living below the poverty line. However, according to The Massachusetts Budget and Policy Center, “incomes for the highest income families in Massachusetts have grown almost five times as fast as those for low-income families and nearly twice as fast as those for middle-income families,†over the past two decades. According to the organization, the inequality gap has increased more during this time in Massachusetts than in 47 of the other states.
See more information at 24/7 Wall Street.
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Gini Coefficient: 0.469
Median Income: $52,870 (14th Highest)
Households Earning $200,000+: 4.47% (10th Highest)
Population Living Below Poverty Line: 13.30% (24th Lowest)
Illinois has a relatively large percentage of households earning $200,000 or more each year, 4.47% – the tenth greatest amount in the country. The state has the 24th smallest percentage of residents living below the poverty line, in comparison, with 13.3%. This may be due to the state’s policies which may be seen as giving preference to the wealthy. This year the state increased its flat income tax from 3% to 5%. According to John Tillman, chief executive of the Illinois Policy Institute, quoted in the State-Journal Register, the tax increase is “especially going to hurt lower-income folks — those who are just starting out in careers or are struggling for whatever reason, who have incomes in the $20,000-$40,000 range.†Worst still, average personal income has decreased 3.2% for the bottom 60% of Illinois wage earners over the past 40 years, according to the Center for Tax and Budget Accountability.
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Gini Coefficient: 0.469
Median Income: $43,340 (10th Lowest)
Households Earning $200,000+: 3.43% (19th Highest)
Population Living Below Poverty Line: 16.50% (12th Highest)
According to the non-profit research organization Institute on Taxation and Economic Policy (ITEP), Georgia’s tax system is regressive. This means that low-income families pay more of their income in state and local taxes than upper-income families do. The poorest 20% of Georgians have 3.2% of statewide personal income before taxes, but their share of after-tax income is just 3.1%. The best-off 1% of residents enjoys 16.7% of pretax Georgia income, and 17.2% of after-tax income. More than 20% of Georgians are living below the poverty line.
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Gini Coefficient: 0.469
Median Income: $45,631 (15th Lowest)
Households Earning $200,000+: 3.08% (20th Highest)
Population Living Below Poverty Line: 14.90% (18th Highest)
Although Florida has only the 18th-largest percentage of its population living in poverty in the country, that share is growing quickly. From 2007 to 2009, the poverty rate increased from 12.1% to 14.9%, a growth of 550,000 people. In comparison, the national rate increased from 12.5% to 14.3% over the same period. Additionally, almost 1.2 million of the 2.7 million impoverished Florida residents live in “deep poverty,†defined by the US Census Bureau as households with incomes of 50% or less of the federal poverty level. That amounts to $5,478 a year for an individual. Recent tax breaks have been aimed at the wealthy, however. In 2007, both the state’s annual intangibles tax and the estate tax were eliminated. “Florida is a low tax state, but not for those living in poverty,†reports the Institute on Taxation and Economic Policy.
See more information at 24/7 Wall Street.
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Gini Coefficient: 0.470
Median Income: $35,078 (Lowest)
Households Earning $200,000+: 1.54% (Lowest)
Population Living Below Poverty Line: 21.90% (Highest)
Mississippi has the greatest percentage of poor people in the nation, 21.9%. The state has the greatest percentage of households making below $30,000 a year, 42.53%, and the smallest percentage of households making $200,000 or more, 1.54%. Suffice it to say, poverty is a major issue in Mississippi and it is getting worse. From 2007 to 2009, the state’s poverty rate increased from 20.6% to 21.9%.
See more information at 24/7 Wall Street.
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Gini Coefficient: 0.471
Median Income: $39,980 (3rd Lowest)
Households Earning $200,000+: 2.13% (9th Lowest)
Population Living Below Poverty Line: 17.50% (6th Highest)
Alabama has the 5th largest percentage of households making less than $30,000 a year, and the tenth-highest percentage of households making above $100,000 a year. It also has the sixth-highest percentage of people living below the poverty line: 17.5%. From 2008 to 2009, the number of households making $200,000 or more a year fell from 2.3% to 2.1%. The number of households receiving food stamps, however, increased 26% from 2008 to 2009. “We’re seeing record numbers on food stamps and insurance programs, and there really is a direct correlation,†said Jim Carnes, spokesman for the anti-poverty advocacy group Alabama Arise, in The Birmingham News. “As the poverty rate increases, government services have a greater demand.â€
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Gini Coefficient: 0.473
Median Income: $45,433 (14th Lowest)
Households Earning $200,000+: 2.54% (24th Lowest)
Population Living Below Poverty Line: 17.30% (7th Highest)
Louisiana has the seventh-largest percentage of residents both making less than $30,000 a year and living below the poverty line. The bottom 25% of earners make only 4% of the state’s income. In comparison, the top 25% of earners enjoy 63% of the income, according to the Louisiana state government. The top 5% make 29% of the income. The good news is that personal income rose 3.1% in Louisiana in 2010, according to the US Bureau of Economic Analysis. This is slightly more than the national average of 3%, and raises Louisiana earnings above 2008 pre-recession levels.
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Gini Coefficient: 0.474
Median Income: $47,475 (22nd Lowest)
Households Earning $200,000+: 3.83% (16th Highest)
Population Living Below Poverty Line: 17.20% (8th Highest)
Texas has the largest percentage of its population falling either below the poverty line or making more than $200,000 a year, relative to the other states. Just over 21% of the state’s population falls into one of these two camps, although most fall into the former group. According to an article from the St. Petersburg Times’ PolitiFact.com, Texas had a GINI index of 0.37 in 1970, which increased to 0.42 in 1990, and is now 0.474, implying increasing long-term income inequality.
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Gini Coefficient: 0.480
Median Income: $63,851 (Highest)
Households Earning $200,000+: 7.87% (Highest)
Population Living Below Poverty Line: 9.40% (4th Lowest)
Connecticut is one of the wealthiest states in the country, with the greatest percentage of households earning $200,000 or more a year (7.87%). The disparity between the poor and wealthy is getting worse. According to a 2008 study from the Economic Policy Institute and the Center on Budget and Policy Priorities, income in Connecticut increased by $52,439, or 45%, to $169,378 for the top fifth of Connecticut households, while the bottom fifth’s income decreased $4,437, or 17%, to $21,133, from 1989 to 2006. The state has made efforts to begin correcting this issue by increasing the top income tax rate from 4.5% to 6.5%.
See more information at 24/7 Wall Street.
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Gini Coefficient: 0.502
Median Income: $50,216 (22nd Highest)
Households Earning $200,000+: 6.15% (5th Highest)
Population Living Below Poverty Line: 14.20% (25th Highest)
New York is a relatively wealthy state. It has the fifth-largest percentage of households earning $200,000 or more a year and has the 25th fewest people living below the poverty line. Regardless, the state has the most severe income inequality among all the states. According to the Fiscal Policy Institute, the top 1% of earners in New York State make about 35% of the state’s total income. This is up from 17% in 1990. The bottom 50% of earners, in comparison, make just 9.1% of total income, down from 13.9% in 1990. Inequality is even worse in New York City. According to the FPI report, “if New York City were a nation, it would rank 15th worst among 134 countries with respect to income concentration, between Chile and Honduras. Wall Street, with its stratospheric profits and bonuses, sits within 15 miles of the Bronx,†one of the nation’s poorest counties.
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