U.S. Ranks 23rd Out of 30 Developed Countries for Inequality
A comprehensive index from the World Economic Forum finds that for such a rich country, America isn't doing all that well at creating prosperity.
The United States is one of the richest countries in the world. It is also one of the most unequal. As a report released today shows, the U.S. ranks 23 out of 30 developed nations in a measure known as the “inclusive development index,” which factors in data on income, health, poverty, and sustainability.
The index comes from the World Economic Forum, whose annual summit is taking place in Davos this week. It is a rather comprehensive measure of inequality, and the fact that the U.S. ranks so poorly is a sign of the country’s dramatic wealth concentration.Of all the factors in the index, the U.S. performed worst in what the WEF calls the inclusion category, which measures the distribution of income and wealth, and the level of poverty. Additionally, the country received particularly low marks in the areas of social protection—defined as efficiency of public goods and services and robustness of social safety nets—and employment and labor compensation. The U.S. joins Brazil, Ireland, Japan, Mexico, Nigeria, and South Africa as countries with inclusive-development rankings that fall below their GDP per capita rankings, a sign that their economic growth is not being shared, the report says. The U.S. had the largest gap between the two measures.
That economic inequality characterizes the American economy is no surprise. Study after study shows that America has more wealth concentration than most other developed nations. But WEF’s findings about how poorly the U.S. performs when it comes to wages and social safety nets is particularly notable since legislation intended to address those disparities are set to undergo significant changes in the early years of the Trump administration.
In the U.S., wage growth has been non-existent for much of the post-recession era. That only changed this past year, when wages grew by around 2 percent. While that small bump is progress in the right direction, it is not enough to bring Americans financial security. The political parties are divided on why this is the case and what should be done about it.. Republicans tend to look at paltry wage gains and blame regulations that they say hinder business growth. That growth, they contend, would trickle down to workers’ paychecks. Additionally, as of late Republicans are also arguing that globalization has diminished the number of well-paying middle-class jobs. The solutions many conservatives support include tightening trade and loosening regulations and taxes on American businesses. Democrats however, point to structural issues such as shareholder pressure on companies to produce stellar quarterly earnings, which often means boosting profits by cutting labor costs, or the decline in union power, which hinders the ability of workers to negotiate for higher salaries and better benefits. The answer, they generally argue, is to increase legislative protections for workers, including raising the minimum wage or strengthening safety-net programs that provide for the very poor.
The GOP will soon get its chance to test their ideas. As my colleagues Adam Chandler and Alexia Campbell have both written, perhaps the clearest indication of what the Trump administration has in mind for wage protections is the choice of Andrew Puzder for secretary of the Department of Labor. Puzder, the CEO of a fast-food company, has been outspoken about his disdain for federally mandated minimum-wage increases and new overtime rules that would result in either raises or additional pay for millions of workers. Conservatives have said that these rules place an undue burden on business owners, which could result in hiring fewer works, or giving them fewer hours—which would ultimately hurt the labor force. Advocates of these federal initiatives say that, without them, workers—especially low-income workers—will remain underpaid, overworked, and without enough consistent income to access basic necessities.
The WEF report argues that the U.S.’s striking inequality likely influences a variety of other disparities, including political and social polarization. The report suggests that while dangerous, the current problem can be improved through policies that, among other things, promote parity in wages regardless of gender, race or ethnicity; educational opportunities; and access to jobs.