Coming to Grips with America’s Two-Tiered Economy

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Coming to Grips with America’s Two-Tiered Economy

To understand the crisis currently facing the U. S. economy, it is a serious mistake to rely upon “averages.”  To do so, implies that Americans still live and work in the mass market of the Mass Production era. 

Today, wealth and income are so greatly skewed that average statistics no longer reflect the conditions of the typical person. For example, as shown graphically in this month’s printable edition of Trends, the wealth of the top one-tenth of 1% of the population is about equal to that of the bottom 90% of the population.  The remaining 55% of wealth belongs to the 9.9% of Americans in the upper middle class, who haven’t made it into the top one-tenth of 1%.  This is the sort of wealth gap that existed at the peak of the last techno-economic transition in 1935-to-1940.  

As billionaire Ray Dalio, Chairman & Chief Investment Officer at Bridgewater Associates recently explained via an in-depth analysis on his LinkedIn page, “America now has two economies.“

As he observed, conditions for the majority of Americans, defined as those with the bottom 60% of incomes, are different from the conditions for those of the top 40%. And both are different from the picture conveyed by averages. 

The analysis by Bridgewater Associates focuses on the bottom 60%, not simply because that’s where the majority of American consumers and voters are, but because the realities facing “the bottom 60% economy” are not apparent to most people in “the top 40% economy.” 

So, how does the bottom 60% compare with the top 40% and to the “averages?”

Let’s start off looking at ten key features of the income and economic pictures; then, we’ll examine some related lifestyle and political differences.

  • First, there has been no growth in earned income for the Bottom 60% leading to huge and growing income and wealth gaps.  
    • Since 1980, median household real incomes have been nearly flat. Today, the average household in the top 40% earns four times more than the average household in the bottom 60%. 
    • While they’ve experienced some growth recently, real incomes have been flat-to-down slightly for the average household in the bottom 60% since 1980.  Meanwhile, incomes have been up for the top 40%...

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