‘We Were Shocked’: Rand Study Uncovers Massive Income Shift To The Top 1%

from Fast Company

Just how far has the working class been left behind by the winner-take-all economy? A new analysis by the RAND Corporation examines what rising inequality has cost Americans in lost income—and the results are stunning.

A full-time worker whose taxable income is at the median—with half the population making more and half making less—now pulls in about $50,000 a year. Yet had the fruits of the nation’s economic output been shared over the past 45 years as broadly as they were from the end of World War II until the early 1970s, that worker would instead be making $92,000 to $102,000. (The exact figures vary slightly depending on how inflation is calculated.)

The findings, which land amid a global pandemic, help to illuminate the paradoxes of an economy in which so-called essential workers are struggling to make ends meet while the rich keep getting richer.

“We were shocked by the numbers,” says Nick Hanauer, a venture capitalist who came up with the idea for the research along with David Rolf, founder of Local 775 of the Service Employees International Union and president of the Fair Work Center in Seattle. “It explains almost everything. It explains why people are so pissed off. It explains why they are so economically precarious.”

More here.

Posted in Future Thinking, Ideas and tagged , , .


  1. As someone who hopes to enter the workforce within the next few years, this data is extremely scary. The most startling data point is that somebody who makes $50,000 a year should be making around $102,000 if wages grew along with GDP. I constantly hear horror stories from friends and family who are drowning in college debt and I cannot help but think about how much easier it would be to dig yourself out of that hole with a 100% increase in future salary. I also work at a grocery store where a surprising number of my coworkers are adults compared to stories I have heard from my parent’s childhood. It is baffling to think that a few policy changes could see people working jobs like mine living a much more comfortable life, just as those working similar jobs 70 years ago did. With numbers as stark as the ones mentioned in the article, it is hard to believe that I am only hearing about this now. I constantly see stories on the news about some irrelevant statement a politician said coupled with a 30-minute discussion on said topic, all while stories like this are left out of the spotlight. Is hard not to think that this is by design, at least to some degree. Another important aspect of this story is that everyone outside of the 1% is suffering from this. That includes me and practically everyone I have ever encountered throughout my entire life. I have heard the argument that the reason something like a 15-dollar minimum wage would have negative repercussions is because corporations couldn’t afford the higher costs of labor and would therefore have to fire a large portion of their employees, however when put into the context of a GDP to wage ratio, it only seems logical that employees would see a wage increase in proportion to GDP increase. The fact that 99% of the population in a democratic country can be negatively impacted by something, and nothing is being done about it, is also extremely concerning. Based on this information alone, it becomes evident that one of two things are true. The American people are largely ignorant of one of the most pressing issues of our time, or the people do not have as much of an impact on our government as we would like to think we do. In either case, I agree with Mr.Wartzman that this issue must be debated during the presidential debates. It seems that solving this issue could consequently solve many others.

  2. From an economics standpoint, it could be argued that a minimum wage has increased the rate of unemployment, rupturing an already-fragile system in which a strict imbalance storms across. While inflation has judged the median household income to be much higher than it actually is, there is something to be said about a common issue among American households, often coined ‘lifestyle inflation.’ This is when the income of a household rises, but so does the spending within that home, adjusting to the increase in its wages. For example, if a man who once made $25,000 per year now makes $50,000 per year, he may lease a newer model of car for $30,000 and eat out at restaurants more, thus rendering his increase of wages worthless, as it is spent entirely

    If Americans spent more time focusing on living below their means, saving for a starter emergency fund of $1,000, then saving for another emergency fund which contains 3-6 months of income, they may be in a better position. For example, the advantage of falling into a lower tax bracket in today’s society is reaping the benefits of a Roth IRA. When you invest within this retirement account, you contribute post-tax dollars which, although not tax-deductible, accrue interest and can be withdrawn ‘tax-free’ at age 59.5. This may not be utilized by someone with an annual income that exceeds a certain amount, which is really unfortunate. However, I am not trying to belittle the concern of income not growing alongside GDP, but I think it is very essential that I mention better ways of spending income.

    Absolving oneself from all forms of debt is the truest way of accumulating wealth. Paying off all student loans, auto loans, mortgage loans, credit card debt, etc. is the surest way of eliminating compounded interest from stripping you from your chances at becoming wealthy one day. A common misconception is that Americans have to be making six-figure salaries, or even seven-figure salaries, in order to become a millionaire. However, with simply investing $6,000 per year into index funds across a 41-year period will, historically, grow into over a million dollars at an average 7% interest rate (adjusted to inflation). In fact, investing a little more than that may, in the long-run, make one become a multi-millionaire.

    Lastly, casting blame upon the top 1% is a mistake made all too often. I believe this happens when the lower-income bracket portion of Americans judge the wealthy far too harshly, envying the rich’s success whilst resenting their own lack of knowledge on how to grow wealth to become wealthy. We should not divide Americans by their income. We should encourage to overstep these boundaries and help educate those who wish to one day be wealthy live out their dreams. The missing half of income that the middle-class lacks does not go directly into the pockets of the blue-collar or, even, the white-collar millionaire. In most instances, we now have more opportunity than any foresaw by past generations. It all lies in utilizing it, properly. If, one day, you want to be rich, start by knowing you can, if you really want to. First, teach yourself the basics and work you way backwards from your goal. It is a waste of time to imagine what could be. See what can and could be.

  3. I feel that this kind of strategy of inflating a minimum wage during a pandemic, is not a good strategy from an economist’s standpoint. This would help to present the problem of increasing unemployment rate and less business activity in today’s economy. After reading the article, I feel that there needs to be a plan put in place and further discussed during the 2020 Presidential Election that could further help people to get jobs, reduce the minimum wage, and to promote a better economy and country.

  4. The rich keep getting richer while the poor continue to get poorer. This is a saying that I believe is the truth. The top 1% will continue to reap financial rewards at the expense of the middle and lower class. This has been going on for decades and has gotten worse during the pandemic. You need to have money to make money. The top 1% can make investments that lower income people cannot afford to do. When it comes to taxes, they can afford to hire the best legal and financial advisors to avoid paying their fair share. Even when they are taxed, it does not make a dent in their earnings.
    Recently, NJ announced that they would pass new legislation to increase “the millionaires tax.” While the people in this financial bracket may pay more in taxes to offer a $500 rebate to the middle class, my property taxes have increased double that amount at the same time. I feel as if the millionaire’s will not have to alter their lifestyle at all while paying the extra tax and that the rebate I will receive is not enough, and my lifestyle will have to be altered in order to live in my home.
    Additionally, during the pandemic many small businesses have suffered, as well as the economy. Restaurants are closing down, people are collecting unemployment and fighting to keep their homes or apartments. Yet, the 1% are still making money. As people are struggling to eat, the price of food is rising. This has a lot to do with supply chains increasing the cost of goods and services. But in the end it is all so that the top 1% can still continue to keep the profits flowing. Things are also a buzz in the stock market right now and if you have the knowledge or a good financial advisor, you can profit very well. However, not many in the working class can afford to take the gamble of the stock market, so again it puts them at a disadvantage. I am not sure what the answer is or where went awry since the 1950’s, however if we continue on this path, we may get to the point that we become the country of either being ultra-rich or ultra-poor.

  5. I recently decided to further explore this topic by listening to the full interview between Nick Hanauer and Carter Price, co-author of this shocking study and senior mathematician at RAND. An analysis of Price’s findings was discussed on Hanauer’s podcast, “Pitchfork Economics.” Quite honestly, the conclusions of this RAND study may certainly help Hanauer’s podcast live up to its name, as findings of income inequality of this magnitude could certainly cause a riot. Rick Wartzman sums this phenomenon up in his article “RAND Study Uncovers Massive Income Shift to the Top 1%” saying, “Tally it all up, according to RAND, and the bottom 90% of American workers would be bringing home an additional $2.5 trillion in total annual income if economic gains were as equitably divided as they’d been in the past.”

    Though there may be an immediate urge to let blame seethe toward only the top one percent, there are many underlying factors that have disadvantaged the American people. There is no doubt that the hoarding of generational wealth has helped to further this mess. In this article Hanauer also brings to light several other points which may have aided the growth of income inequality, including minimum wage deterioration, labor law effectiveness and corporate culture. I was specifically interested at the mention of Milton Friedman’s essay and the lasting impact that it has had on the business world, even fifty years later. An article published by the New York Times titled, “Greed Is Good. Except When It’s Bad” offers various opinions of economists, CEOs, and even Nobel laureates in regard to Friedman’s ideology. To no surprise and more often than not, heated responses and disagreeing rationales were a common theme throughout the article. While there is no “right answer,” one thing is for certain: prioritizing profit over people has helped to create a corporate culture that feeds into the massive income inequality that the vast majority of Americans are facing.

    We are living in a polarizing political climate where fact may not be accepted as truth, and false narratives are easily created and accepted, both by politicians and the every-day American. Due to the impartial reputation of the RAND Corporation, I have the highest hopes that these findings will not be contorted to make yet another dividing partisan issue within our country. This should be a call to action, spurring reform to help lessen the blow of American income inequality. Though discrepancies surrounding this study are sure to arise, one aspect is indisputable according to Price: “There is no way of slicing the numbers where people come out ahead.”



  6. The income inequality in America has hopefully come to a breaking point brought on by the pandemic. It has become more clear than ever that the middle class and bottom 25% have not been adequately compensated for decades. The middle class has seen just a 19% increase in income since 1975 while the top 1%’s income has tripled. With a capitalist economy, it takes money to make money and the exponential growth of the 1% shows just how that has worked out for the other 99% of citizens. I live in Pennsylvania where the minimum wage is still at the federal level of $7.25, which would put someone who works 40 hours a week at $15,000. This is not enough money to live on, nor is the median salary of $50,000. Most middle and lower-class families live paycheck to paycheck with weeks off from work making money incredibly tight and forcing families out of their homes. An unexpected illness can cripple a family’s life savings in weeks, while the rich are unscathed by missing weeks of income. Wealth accumulated over generations will exponentially grow while there is little to no opportunity for someone living paycheck to paycheck to make money outside of their job. Someone working 40 hours a week, no matter the job, should not have to give up their life savings for their health or risk their health just to make ends meet. While inflation has continued rising, wages have remained stagnant, especially the $7.25 minimum wage that has been in effect since 2009. With many states and companies raising their own minimum wages it is troubling why the government does not feel responsible to raise it to a livable wage. Workers in today’s economy have very little leverage in raising their wages and salaries. As mentioned in the article, worker’s unions are dying out, labor laws are effectively declining which leaves no route for fighting for fair pay. As long as money controls politics and workers are suppressed from fighting back, there is no clear path on how to make the rich guys care enough about the poor guys to start fixing the injustices done to the middle and lower class.

  7. When I first read the title the article I expected it to be similar to other articles that cover this same topic and that the title itself was a bit of a hyperbole to attract readers. However, upon reading this article and seeing the numbers, I think this title very accurately states the content and conclusions that can be drawn from this publication.

    It is astounding to see the numbers demonstrating the skewed growth in the top percentiles as GCP grows, especially in comparison to the income growth in the mid-20th century. I think the article is correct in drawing the conclusion that these income gaps are the reason for so much of the frustration in the workplace.

    I would also surmise that this may also be the reason we see the younger generations struggling to move out, buy homes and be independent much to the bewilderment of the older generations. Median salaries are no longer representative of economic success so it is crippling the buying power of younger generations which in turn can have long term ramifications on the economy if spending trends continue to go down.

    This growing income gap could eventually dissolve the middle class in the US which is disconcerting. As mentioned in another article published by the OECD and linked below, “The presence of a strong and prosperous middle class supports healthy economies and societies. Through their actions and activities, they improve not only their own position, but also that of others. The investment of the middle class in education, health, and housing, their support for good quality public services, their intolerance of corruption, and their trust in others and in democratic institutions, are the very foundations of inclusive growth.” To see the diminishing middle class over these years would have already made me feel uncertain about our economic future but now with the pandemic closing businesses, it makes me feel even more uneasy.

    I think the article is correct that federal and state governments need to take action to correct this and not just a ‘drop in the ocean’ as stated in the article but an actual long term plan that can set the US back on track towards a more stable, economic growth and distribution.


  8. This article does a great job of clarifying the hot-button issue of economic inequality. We often hear the talking point among our politicians that economic (and more specifically income) inequality is serious, yet we never get an explanation as to how it got to be this bad. In this article, RAND uses its research to argue that incomes have not “expanded roughly in line with GDP” and that the “fruits of the economic output” are not being shared as evenly as they were from the end of WWII to the 1970s (Wartzman). It’s interesting to note that workers in all economic groups have been affected, and would be making more money if the trends of the post-war period were to continue. Also, the RAND research suggests that the top 1% have benefited the most, a point that many Democratic politicians have used as a rallying point for increased taxes on the ultra-wealthy.

    Not only is the data from the RAND report critically of free-market capitalism, but it also suggests that another cause of blame for economic inequality is “decades of failed federal policy decisions—allowing the minimum wage to deteriorate, overtime coverage to dwindle, and the effectiveness of labor law to decline, undermining union power” (Wartzman). I know recently, there have been laws passed in New Jersey to raise the minimum wage to $15 an hour (of course this needs to be done progressively over the years), but I think this is a perfect example of what the RAND study means when it says that federal policies have let minimum wage stagnant for years. The current push to raise it will certainly have positive statistical impacts on a societal level, but this won’t be observable until far in the future. The RAND researchers would likely argue that the effects of economic inequality have been exacerbated due to inaction and this example of New Jersey shows that legislators feel the need to make drastic changes now, to remedy past inaction.

    On a similar note, the researchers suggest that the economic gap, or 2.5 trillion dollar theft as the researchers call it, is due to “a shift in the corporate culture that has elevated the interests of shareholders over those of workers” (Wartzman). This brings up an interesting debate on business ethics and the responsibility of large corporations when it comes to valuing the economic stability of their workers. One may argue that under the profit maximization theory, companies jeopardize the interests of workers by cutting costs and appeasing shareholders, a truly frightening tactic for many workers who have no alternative but to adapt to the will of their employer. The more human side of this argument and some may say the idealist view, is that companies should empathize with their workers and ensure that their financial struggles are not ignored. In essence, the central problem here is that businesses, and federal government policies, have failed to replicate the broad sharing of economic output from the post-war period up until 1970. And the problem has now grown so out of control that it plays a large influence in our politics, society, and economic system. Many politicians have used economic inequality as a means to advocate wealth taxes and universal basic income, ideas that would seem, in theory, reduce this drastic gap. Theories like Universal Basic Income argue that by providing every American with a basic income, there will be more money that is going to not only supporting everyday Americans but also this money will be spent in support of small businesses (further methods for reducing the economic inequality).

    Lastly, although RAND does not mention this, I am curious to know the impact of regulatory agencies on allowing economic inequality to fester. The researchers have claimed that decades of failed policy and greedy corporate practices have had a significant impact on inequality; so I wonder if administrative laws had been more restrictive and regulatory, would this economic inequality be as severe? Again, one might reason that it theoretically it wouldn’t be, but it is something that would be interesting to observe from a historical perspective.

    Personally, I think wealth taxes are an interesting approach to solving economic inequality. Some argue that this approach is anti-capitalist, but I would counter that changes to the tax code could be made in a way to have those who make millions and billions pay more, while still not discouraging capitalism and entrepreneurship. I think a more progressive tax system, with possibly more tax brackets (to tax richer Americans at higher rates), would be a meaningful way to fund welfare programs and educational initiatives.

  9. The economy has been at its worst point as of right now. This is majority because of the pandemic. The pandemic has put many people’s jobs at hold , which also made people lose a lot of money and had to sign up for unemployment. Also many people who had small businesses had to either close down or shut down for the moment due to the virus. So what that means, many people when they lose their business or have it shut down ? Where do they get their money from ? How do they pay rent & the whole business went to nothing because theres no money to live off of. This was a very tough time and still is . NYC was at a hault, it was at a shock, everything was closed, and usually everything is open and NYC is never asleep. This article also speaks about inequality which is also a huge problem at this time during a pandemic. African Americans are getting shot and getting treated very terribly by police. We had many deaths of African Americans which is not acceptable at any point of action. We need to fight for whats right and never forget to vote and we need change in this world and all be treated equally and we all have the same rights so it shouldn’t be based on hate or color of your race. Based on this pandemic I dont know what we have in store next because we don’t know if we’ll have a second wave and the second wave may be worse than the first one and that means we can be even at a lower point than we were between march and june. This would really be a disaster because were going through many things all at once. We are trying to continue to fight for social justice & dealing with a pandemic & also we are going to be voting hopefully for a new president. So if a second wave hits I think many people will also lose their jobs or jobs will be closed down & people wont have money to pay rent or even to live off of. The unemployment money is not enough for paying rent and paying all the other bills , so we can’t really afford a second wave. Also that means people wont have the money to invest in property or buy houses and that means selling houses will really be at a low due to the very high cost of rent or buying the house in total. It’s very good for people who have jobs now and also but some jobs dont give a higher pay even though when they should but they don’t really have the money to raise your salaries & in the article it talked about how unions arent really good or they’re dying out. So it doesn’t look good right now , so we shall see what is in store. This also has to do with the republican party so as long as money has to be involved we won’t really be getting the things we should or getting credited for our hard work . This is why we need to get the republicans out & make sure we are at a good stake and ready to improve the economy.

  10. Reading this article highlighted some key issues surrounding economic anxiety in the American economy. Tensions in our country have been fraught for over a decade, and the COVID-19 pandemic paired with nationwide racial grievance has only exacerbated matters. At the root of the devastation behind both of these issues is systematic inequality that has pervaded American society since its existence. It must also be chiefly understood that race is virtually inextricable from issues relating to poverty in American society.

    Foremost, there is an obvious racial disparity in both health and economic outcomes. With respect to the coronavirus, black Americans are consistently more likely than white Americans to die from COVID-19. Experts like Dr. Anthony Fauci are attributing this to two factors: poor access to healthcare and a higher likelihood of having pre-existing conditions that exacerbate COVID-19.

    There is also a significant wealth gap between black Americans and their white counterparts. On average, white families have a net worth of $171,000, nearly ten times the average net worth ($17,150) of the African-American family. It’s worth noting that the measure used in this article is an average and not a median, which could reduce the apparent disparity. For instance, the average for white families could have several white, male billionaires serving as outliers. However, the average measure portrays in a raw sense that the African-American family is far less likely to achieve economic success (let alone become billionaires) compared to white families.


    Taking these factors into account, the article can be read more critically. The article mentions the median earnings of a worker, which stands at about $50,000. Considering the serious racial disparities that exist throughout society, the reality of the matter is that Black and Latino families are hit hardest by societal inequity. For example, a black American need earn only $60,000 annually to reach the top 10% of African-American earners. Latinos also have a fairly low threshold for top 10% status, needing to earn just over $78,000 per year. Comparatively, the top 10% of white families earn at least $117,986, nearly double the threshold for the richest black families. Furthermore, the median weekly earnings of Black and Latino workers are $756 and $712 respectively, quite low compared to the $967 weekly earnings of their White counterparts.

    This is not to suggest that every white person is bigoted simply because they earn more on average than minorities. It is merely important to highly societal inequality in the context of our the United States’ history of institutional racism. Only when we are all in agreement that there is a serious systemic problem can we adequately address serious gaps in income, wealth, and quality of life between certain racial/ethnic groups.

  11. The study shown in this article is very interesting to me. It seems like a no brainer that it is a better thing that people making $50 thousand would be making $100 thousand instead. Surprisingly, I feel like the majority of America will disagree with that statement. This is because of the toxic idea of American Capitalism. I am all for Capitalism, but this country has made it out to be that anything other than full capitalism is communism and socialist behaviors. I am all for a free market, and corporations being able to make as much money as they can. I am all for the idea that its every person for themselves and you have to create your own path to be successful. However, I feel like capitalism is a flawed concept because it does not account for the top 1% of people. America feels like it should let people fall and everyone’s misfortunes are their own fault. Humans are greedy by design, but capitalism helps to fuel that greed. People in power have been pushing the idea of a nationalistic capitalism for years to make people think anything else is evil. There are many countries around the world that provide services for its people without being a communist country. That is the problem, Americans think that helping the general public is a sign of communism and weakness. That has to change, the article clearly shows that an equal distribution of resources would leave the average American much more well off than they are now. Especially with the economic hit of the pandemic, this would have helped people out a lot. Even though inflation may have been different, and the whole price market could be different if resources were evenly distributed, but that statistic shows that we are a flawed country. However, I do not agree with evenly distributed resources. I still believe in making your own path, and they everyone should not be bailed out for being lazy. I think that there should still be capitalism, but more money can go towards things that matter like healthcare and education costs.

  12. The arguments over “Toxic Capitalism” are quite frankly absurd to me. While the 1% holds an vast majority of the money in America, I believe that to be ok. While this may come as a bias, I do not think lowering the wage gap is a good idea. The ideals that capitalism instills are healthy for a functioning economy. Work harder and produce more and you will make more. However some fail to understand it is not a one generation fix, building wealth takes many generations. Closing the wage gap essentially tears down the fabric of the idea of capitalism. While the pandemic has hit many hard, several programs and projects were introduced to keep people afloat. The stimulus checks along with the unemployment insurance provided millions of people with money to live. While capitalism fuels greed which some would consider evil, it is what produces success in all industries. If one is not motivated to work, then the desire of the fruits of their labor vanish, then the fabric of America is destroyed. The one percent of Americans should be viewed as goals for those who wish to become successful, unfortunately, they have been viewed as greedy and unwilling to share their own wealth. America already has many socialistic aspects such as government funded programs like welfare and public schools, the country cannot get rid of what makes it successful, greed.

  13. The RAND Corporation is an American nonprofit global policy think tank created in 1948 by Douglas Aircraft Company to offer research and analysis to the United States Armed Forces. It is financed by the United States government and private endowment, corporations, universities, and private individuals. Their study about the economy exposes a lot of flaws within the system and provides facts to back it up. As a child, I did not understand what people meant when they talked about the concept of the rich keep getting richer, but now that I am older and have been able to read books my understanding is different. We live in an economy that is extremely narcissistic and greedy. Capitalism and materialism are not always the best thing for a specific society. One thing from the table that sticks out to me is the huge differential between the median and the top 1%. The median price should be higher, in my opinion. Especially when you look at the growth of the top 1% versus the growth of the other ones. Another thing was the drop from 2007-2018, but not in any other category. I wonder why it was like that only for that category. Another interesting statistic that stuck out to me was that worker’s incomes were not aligning with the GDP. That makes me wonder about why it is that way and where is that money that would make the salaries equivalent. I agree with the article that $70,000 would be a good median point for the salaries. Once again, this article proves how important this upcoming election is and that people go out and vote.

  14. The rich keep getting richer while the poor continue to get poorer. This is a honestly this is a fact, not a just saying. The top 10% will continue to benefit from financial rewards at the expense of the middle and lower class. This has been going on for hundreds of years and has gotten particularly worse during the pandemic. The fact that stuck out to me the most was: The median worker should be making as much as $102,000 annually—if some $2.5 trillion was not being “reverse distributed” every year away from the working class. The article explains this whole ordeal with the $2.5 trillion that has disappeared from the lower and middle class. “Tally it all up, according to RAND, and the bottom 90% of American workers would be bringing home an additional $2.5 trillion in total annual income if economic gains were as equitably divided as they’d been in the past—leading Rolf to dub the phenomenon “the $2.5 trillion theft.” I personally think that this shows the true colors of our country. People are so invested and worried about making money, they forget how to be a human. They have little compassion, because if they had any the amount of money would not be so one sided. I was shocked to see that so many mathematicians thought that the data they found was unbelievable, which really shows how blind we really are to the situation. We have been the sheep of the upper class for too long, and change must come. I do think that there will always be a significant gap between the rich and the poor, but it should be much closer than it currently is. Lastly, a powerful quote from Nick Hanauer that pretty much sums it up: “I want Joe Biden and Donald Trump to have to wrestle with this,” he says, adding that they should “look at their constituents in the eye and explain, ‘Here’s what I’m going to do to get you from the $50,000 you make today to the $100,000 you deserve. “If you’re not addressing the problem at that scale,” Hanauer asserts, “then you’re not addressing the problem. You’re just pretending.” I think that Hanauer is spot on, neither candidate has talked too much about this topic. And that if they do not do anything about it then they are part of the problem as well.

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