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New Rand study quantifies cost of rising U.S. inequality

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People wait in line to receive food at a food bank on April 28, 2020 in the Brooklyn borough of New York City.

From the mid-1970s on, while the U.S. economy has grown, fewer people have reaped the benefits. Spencer Platt/Getty Images

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Inequality in the United States has been quantified in many ways before, but a recent study from the Rand Corp. has put hard numbers to just how severe that inequality is for average wage-earners in the U.S.

“Trends in Income From 1975 to 2018” looked at inequality in two ways: income distribution over a 45-year period and income growth in relation to broader economic growth, to see if a rising overall tide did indeed lift all boats.

After 1975, the study suggests that’s far from the case, according to Carter Price, senior mathematician at RAND and co-author of the study.

Carter Price, senior mathematician at the Rand Corp. (Diane Baldwin)

“The gains of economic growth have been primarily going to the top,” Price told “Marketplace Morning Report” host David Brancaccio. “And for some segments of the population, there have been no gains whatsoever.”

The Rand study suggests that has cost the bottom 90% of the workers about $2.5 trillion, according to Price.

Price also said that, controlling for inflation, per capita GDP more or less doubled from 1975 to 2018. Incomes, on the other hand, did not — “at least not at the median and really at any point below the top 95th or even higher percentile.”

“And so the economy doubled, but people’s incomes didn’t double,” Price said.

Click the audio player here to listen to more of Price’s interview on the “Marketplace Morning Report.”

Nick Hanauer, a venture capitalist and host of the podcast “Pitchfork Economics,” suggested the original idea of the study to Rand along with David Rolf, president of the Fair Work Center, and helped fund it. He believes the results could be some of the most important socioeconomic work of our time.

Nick Hanauer, venture capitalist. (John Vicory via Seattle Business Magazine)

“The median full-time worker in America today earns about $50,000 a year. If they had been held harmless by the last 45 years of neoliberal economic policy … instead of earning $50,000 a year, they would earn between $92,000 and $100,000 a year,” Hanauer told Brancaccio in a separate interview.

This difference, Hanauer said, “explains not every pathology in our society, but a huge proportion of them, from our budget deficits to our surreally polarized politics.”

Click the audio player here to listen to more of Hanauer’s interview on the “Marketplace Morning Report.”

Click on the audio players above to hear more from David Brancaccio’s conversations with Carter Price and Nick Hanauer about the study, its implications and what possible solutions we might need in a post-COVID economy.

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