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Examining Black Income Inequality in the US

In this nation, the American dream is nonexistent. Over 18 million Americans are living in abject poverty as a result of America’s wildly unequal wealth distribution, while the middle class has all but vanished due to wage stagnation and inflation. Half of Americans are living paycheck to paycheck, still working 40 hours a week. We were directed to go to school and earn degrees to prepare for the new technological advancements of a fast-paced economy. But the ruling class in this country is directly invested in keeping wages low and maintaining this system of economic insanity.

Transformative technological change, led by digital technologies, has been reshaping markets, business models, and the nature of work in ways that can increase inequality within economies. This is happening in three main ways, which vary from country to country: a shift in income from labor to capital as automation grows and wages become less tied to how profitable a business is; a rise in wage inequality as technology changes the need for workers with low- to middle-level skills to those with new, higher-level skills; and a rise in income inequality for capital as market power rises. These dynamics are more evident in advanced economies but could increasingly impact developing economies as the new technologies favoring capital and higher-level skills make deeper inroads there.

Globalization, which encompasses international trade and outsourcing, has played a significant role in the increasing inequality within economies, particularly in advanced economies. This is mostly due to its adverse impact on the earnings and employment opportunities of people with lower skill levels in sectors involved in trade. These sectors are expanding beyond manufacturing due to the growth of digital globalization, which allows for the delivery of a wider range of goods and services across international borders. Technology is altering the impact of international trade on national inequality in developing countries. Emerging from developed economies, the latest technologies are causing a change in industry and global supply chains towards more reliance on capital and skilled labor. Manufacturing firms in emerging economies that export goods are adopting these technologies to stay competitive. However, this adoption is reducing job opportunities and wage growth for less-skilled workers in these economies. This limits the potential of international trade to reduce inequality by increasing demand for the more abundant factor of endowment, which is less-skilled workers in this case. Meanwhile, smaller companies that hire the majority of these people in these economies continue to be involved in low-productivity tasks, with many operating in the informal economy and in small-scale service industries. 

The Shareholder primacy model of corporate governance has dominated US corporations and swayed decision making in favor of enriching the top executives and shareholders over the past 50 years. Defined as “a legal and economic framework for corporate governance that claims that the sole purpose of corporate activity is to maximize wealth for shareholders; thus, executives and boards of directors prioritize increasing share prices over all else.” (Greenfield 2018; Lazonick 2014). Business leaders are increasingly using company profits to enrich shareholders, which favors executives who are rewarded similarly to shareholders. 

While corporate profits have increased for shareholders and executives, employees’ bargaining leverage has decreased and wages for nonsupervisory and manufacturing workers have remained stagnant. This ideology has shifted the balance of power in the biggest corporations towards shareholders and away from other corporate stakeholders, particularly employees, resulting in management increasingly prioritizing shareholder payments and decreasing labor costs. Wages and shareholder payouts are decided separately. Company management (not usually at the highest level) determines wages, which are a cost incurred from sales income. Boards of directors pay the value of top shareholder payouts via dividends and stock buybacks, which is considered to be money set aside from productive investment. The wage increases that the poorest workers deserve are present within the largest corporations, they are just hoarded by greedy executives who lobby politicians to suppress wages with their vast fortunes.

Exorbitant CEO pay is a key driver of economic inequality in the US. Over the period of 1978–2022, there has been a significant disparity in the growth of CEO remuneration compared to that of a regular worker. Specifically, CEO income has increased by 1,209.2%, while a typical worker’s compensation has only increased by 15.3%. By 2022, the compensation of CEOs had increased to 344 times that of an average worker, compared to 1965, when they were paid 21 times more than an average worker. To exemplify the extent to which CEO compensation hikes have become distorted: In 2021, the compensation of CEOs in the U.S. was roughly eight times more than that of the top 0.1% of wage earners. The egregious compensation of CEOs is not merely a symbolic matter; it has actively contributed to the escalation of inequality. The increased compensation of CEOs can be attributed to their influence over corporate boards of directors rather than their direct contributions to their companies. The increase in CEO compensation in recent decades has probably influenced the salaries of other high-earning individuals. This accumulation of profits at the highest level results in reduced financial benefits for regular employees. 

Implementing regulations that restrict CEOs’ ability to influence boards to obtain crazy compensation packages is imperative in order to redistribute the wealth accumulated at the top. These strategies may involve reestablishing elevated income tax rates for the wealthiest individuals, employing tax measures to encourage reduced CEO pay, granting shareholders the right to vote on CEO compensation, and implementing antitrust enforcement and regulations to curb the dominant market influence of the largest corporations. Richer Americans also own larger cash reserves. In 2019, the wealthiest 10% of families held 70% of the total stock value, with each invested household owning a median of $432,000 worth of stock. The average middle-class family with stock market investments held stocks valued at $15,000 In contrast, the lowest 60% of earners in that year owned just 7% of all stocks traded. In 2024, the top 10% of income earners now own 90% of all publicly traded stock.

Since emancipation, Black Americans have been subjected to a role of super exploitation, mass incarceration, and repression of dissent that has generated a swathe of health crises within. Epidemics of drug addiction, gun violence, child poverty, maternal deaths, and a worsening mental health crisis continue to plague our communities. The economic conditions of today’s world drive a general hopelessness for the future, but generations prior could really support a family on a single income. Most workers’ hourly wages increased by 91% in the three decades after World War II, nearly in tandem with a 97% increase in production. However, pay for the vast majority of the previous generation fell steadily behind total output, except for a brief time in the late 1990s. 

A typical production or non-supervisory worker’s hourly wage climbed by just 9% between 1973 and 2013, despite a 74% rise in productivity. The previous ten years have seen a particularly noticeable breakdown of pay growth, impacting both blue-collar and white-collar professionals, as well as those with and without college degrees. This indicates that employees have been creating significantly more value than companies are paying in salaries and wages. 

Educational attainment is a key factor in worker compensation, as are the gendered and racial disparities present. A 2022 study from the Bureau of Labor Statistics shows that of the entire labor force, only 34 percent of black Americans have at least a bachelor’s degree, in contrast to 68% total for Asian Americans and 44% for white Americans. One would assume that equal educational attainment would provide some parity over income, and it does. However, a stark racial income divide occurs even for highly educated workers. Table 17 from this study shows us that black men 25 years of age and older with a degree earn $1,452 weekly. In comparison to white men earning $1,800 weekly and Asian men earning $1,983 weekly. These weekly earnings show about $475 less earned before taxes for formally educated black males. These are the incomes we have today that once could sustain an entire household while saving for vacations and retirement. Applied annually, black men as a group take home $22,800 less than equally educated male peers. That missing income deprives families of affording basic necessities, purchasing assets, building savings, or investing to increase income, as well as circulating within the local economy. 

To supplement incomes lost in the job market, working-class people provide a variety of goods and services to each other through mutual aid and thrifting second-hand items, and many make the sacrifice of going without. But a considerable portion of the exploited working class takes to criminal activity as a means to provide for their families, and it is understood why. Poverty drives you to take risks you otherwise would not. Poverty has propelled generations of men and women alike to turn nothing into something in exchange for their freedom. Poverty has turned so many civilians to a life of crime while seeking financial freedom, leading to an even earlier grave. Poverty has also driven many of us to believe that our community is a place to escape, when it is a community that needs to be liberated. Poverty is traumatizing, dehumanizing, and hard to get out of with no help. 

We are told that we need to increase our financial literacy and invest in assets that can provide passive income, like real estate. Or that we need to read up on the tax codes used by the wealthy, which contribute directly to the issue of income inequality. Stocks, bonds, and mutual funds are also another popular suggestion given to exploited workers to increase income. These investments are viable options when you are paid fairly and your basic necessities are taken care of. When you have money leftover after you pay bills, you can invest in speculative assets. But without disposable income, those suggestions are useless.

Increased corporate and political representation won’t be able to solve this problem. Redistributive policies like increasing the marginal tax rates for the top income earners, caps on CEO compensation, a modern minimum adjusted for inflation and a Universal Basic Income are all steps in the right direction towards sharing the economic prosperity of our diverse nation. The majority of industries already have whales that consume the lion’s share of the market, and most small businesses never even reach profitability. So, what do you do? The only way that we can escape from a system that requires us to sell more and more of ourselves is to politically educate and organize around the policies we need to improve our lives.

References

Bivens, J., & Kandra, J. (2023, September 21). CEO pay slightly declined in 2022, But it has soared 1,209.2% since 1978 compared with a 15.3% rise in typical workers’ pay. Economic Policy Institute. https://www.epi.org/publication/ceo-pay-in-2022/

Palladino, L. (2019). Ending Shareholder Primacy in Corporate Governance. https://rooseveltinstitute.org/wp-content/uploads/2020/07/RI_EndingShareholderPrimacy_workingpaper_201902.pdf

Census Bureau, U. S. (2021). Explore Census Data. Data.census.gov. https://data.census.gov/table/ACSST1Y2021.S1501?t=Educational+Attainment&g=010XX00US

Mishel, L., Gould, E., & Bivens, J. (2015, January 6). Wage Stagnation in Nine Charts. Economic Policy Institute. https://www.epi.org/publication/charting-wage-stagnation/

Talbott, T. (2023, August 12). The Percentage of Americans with College Degrees in 2023. College Transitions. https://www.collegetransitions.com/blog/percentage-of-americans-with-college-degrees/

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