Janet Yellen's Speech and a Racial Comparison

The topic of income inequality has had many politicians and commentators talking about income and wealth for the past few years, but there has been no real effect to change any anything that causes this inequality. Earlier this month, however, Janet Yellen, the Chair of the Federal Reserve, gave a speech to an economic conference on the disparities recently, but Yellen is particularly important as a nonpartisan figure that is closely followed by investors around the globe. In addition, her powerful position allows her to make concrete economic changes, not just to discuss them.

                Yellen’s measures of inequality in the speech were stark. Income inequality has nearly reached its previous peak attained in 2007. Wealth was even more unequal: Last year, the richest five percent owned sixty-three per cent of all wealth in the United states. Meanwhile, the bottom fifty percent - not five percent - owned only one percent of all wealth. (Cassidy 2014) This means that the top half of the population owns approximately ninety-nine times as much in money and possessions as the bottom half does. This is a totally unsustainable class structure.

Fig. 1: The share of income and wealth of the one-percent. (Saez and Zucman 2014)

However, there was one thing Yellen did not mention in her speech: race. As stated in my last post, race is greatly correlated with differences in income. If income inequality increases, racial inequality is sure to increase in turn. This is even true at the top of the income distribution. “The one percent” is a common term used to denote the top 1% of household income earners. In 2012, this group earned 41.8% of all wealth. (Saez and Zucman 2014)

 

Fig. 2: The one-percent households, divided by race. (Brantley 2014)

According to an analysis from 2011 of data from 2007, the last peak of income inequality, 96.1% of the top one-percent household earners were white, and only 1.4% were black. Even within this division, white households had more income. White median household income in the one percent was $1,296,000, while black median income in the one percent was 823,000. (Brantley 2014)

Unfortunately, most discourse about income inequality is abstract and class-based, focusing on the rich and the poor.  Talking about race alone, however, also obscures the big picture. A fuller understanding of income inequality in this country is reached when it is understood to be based in race as well as class.

 

Works Cited:

Brantley, Shartia. " Who are the black ‘1 percent’? " theGrio, November 21, 2011. Accessed October 19, 2014. http://thegrio.com/2011/11/21/who-are-the-black-1-percent/

Cassidy, John. "Rising Inequality: Janet Yellen Tells It Like It Is." New Yorker, October 17, 2014. Accessed October 19, 2014. http://www.newyorker.com/news/john-cassidy/janet-yellen-tells

Saez, E., & Zucman, G. (2014). Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data. working paper. http://eml.berkeley.edu/~saez/saez-zucmanNBER14wealth.pdf