Let’s say, for argument’s sake, that you have a job.
First of all, congratulations! Because nearly 10 million Americans who had one in February don’t have one today.
Now, what if you wanted to buy some stock? You know, outside of that retirement account that you almost surely don’t have if you’re a lower-income American.
Note in the figure (above) that just 14% of lower-income Americans own stocks outside of a retirement account. The comparable number for the middle-class is pretty low too. The data is from a Pew study conducted in September of 2019, which showed, among other things, that just one-third of US adults (35%) personally owned stocks, bonds, or mutual funds outside of retirement accounts.
Although there a number of factors that explain why lower- and middle-income Americans are less likely to own financial assets compared to the rich, the variable with the most explanatory power is almost surely just the fact that the rich have extra money laying around. So, they invest it. If the rate of return on that invested capital exceeds the rate of economic growth, you’re likely to find yourself on the “right” side of the inequality equation.
Let’s say you’re not a manager, let alone one of America’s “super-managers,” but you want to get in on this seemingly guaranteed path to economic prosperity. How much is a ticket?
Well, the bad news for you is that ticket prices are more expensive than ever when denominated in your literal sweat. In fact, in order to “buy” the S&P 500, the average nonsupervisory worker in America would need to toil for nearly 146 hours.
That figure was as low as 14 in 1982 which, incidentally, was the year jobless claims hit an all-time record high. That record stood until the pandemic. The last time jobless claims were near 700,000 (around where they are today), you would have needed to work just 16 hours to “buy” the S&P.
Alternatively, you can conceptualize this by doing the same math using SPY. You’d have to work 15 hours to buy one share.
Needless to say, if you’re any everyday American working an average job and trying to support a family, there likely won’t be too many opportunities in a given month to simply take two days worth of pay and plow it into an ETF — even with zero commissions.
And, so, the concentration of these assets ends up being disproportionate. The top 10% of American families own nearly 90% of the stocks.
This is why the benefits of an ever rising stock market serve to perpetuate inequality, and it’s also why Fed critics charge the central bank with being part of the problem. When you resort to policies that inflate the value of the assets disproportionately concentrated in the hands of the wealthy, the wealth divide expands exponentially — it isn’t linear.
Of course, if you raised wages, or compelled companies to offer more benefits to employees, or otherwise instituted fiscal policies that helped average people attain a level of economic well-being that afforded them the luxury of owning stocks, then the problem would be less acute.
But what do I know, right?
Americans Don’t Really Care About The Stock Market. But You Can Sure Fool Them
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Besides spending more on military might than the next 10 or so countries, America also has the biggest economy, but a majority of citizens can’t invest in it being relegated only to providing labor at a rate that keeps their heads just above the poverty level. Now what could go wrong in a country where most citizens can’t share in the profits. If you are surrounded by bounty, but it’s always just out of reach, you might be tempted into believing conspiracies to explain your predicament.
Why do you want to subsidize the losers? Why do you hate America?
/snark.
Google the “Mayflower Compact.” the agreement all the Pilgrims created jointly and signed before disembarking their ship on the shore of what eventually became Plymouth, MAS. Essentially, as Godfearing Christians, they jointly agreed to work together to support one another and share the fruits of their labors. Oh wait, don’t some of call that attitude “socialism ” these days? It’s not, folks, it’s what Christians do. No human, weak or strong, is a “loser” in God’s eyes and as the Bible says, only He can judge.
I’ve been thinking a lot lately about “how we got here”. Being in my early 40’s I’ve seen the decline of American workers rights and benefits first hand. I’ve heard the tales about how, when my parents were young, all you needed to pay for college was a part time job. And I’ve read ad nauseum about the glory days of the American worker starting out as an apprentice, staying with a company for their entire working life, and being able to retire comfortably on the company provided pension.
At this point, I think there is no way to blame one party for what has occurred. This is corruption, plain and simple, that has propagated in all levels of government for several generations. When you can get elected to the Senate, buy and sell stocks for companies you personally benefit with policy, and have the best health care plan in the country for free. I think we have created a system of government where the elected live in a different world from their constituents. Being in that bubble enables ambitious politicians to be easily corrupted and to grow incredibly wealthy in the process.
I also don’t know that you can fix a government as corrupt as ours is. I’m not an anarchist but, when something is so obviously broken, I don’t think there is any other remedy but to tear the whole damn thing down and start all over again.
America’s best hope is a move to a multiparty political system. The two party system has been coopted by the corporations who prioritize their own profits and needs, and control the mass media. The everyday citizen is so disenfranchised that voting participation or lack thereof is reflected every 2-4 years. The outdated electoral college and lifetime judicial appointments also need to go but that would involve the few in control to nobly relinquish their power and greed, extremely unlikely to happen currently but perhaps after the next economic devastation occurs a positive transformational leader will arise. One can hope.