Canadians have been vaguely aware that their wages, like the Americans’, have stagnated for 40 years, with most of the wealth created since 1975 going to the top one per cent — and most of that going to our top 0.1 per cent. What we haven’t known, until now, is just how much this 45-year heist has cost us.
A U.S. think tank, the Rand Corp., has now answered this question. In a recent working paper titled “Trends in Income From 1975 to 2018,” Carter C. Price and Kathryn A. Edwards use French economist Thomas Piketty’s methods to analyze taxable income in the U.S. Their findings apply to us as well, with some variations.
“Trends in Income,” which hasn’t yet been peer reviewed, estimates what would have happened in the U.S. if the 1945-1975 tax regime had continued until 2018. This “counterfactual” America would have been dramatically different, an alternate universe: “From 1975 to 2018,” Price and Edwards write, “the difference between the aggregate taxable income for those below the 90th percentile and the equitable growth counterfactual totals $47 trillion.”
In other words, hundreds of millions of Americans, and tens of millions of Canadians, have been discreetly robbed blind for 45 years by a few very rich people who are now at least $47 trillion richer. To divert that sum from the 99 per cent to themselves, they spent billions on think tanks, journalists and politicians who all said for years that government was the problem, not the solution. Then the politicians rolled back taxes on the rich and paid for it by cutting the social programs they’d supported.
The Rand report breaks down the U.S. demographically by race, gender, education and urban/rural location. It finds we almost all got screwed, but some got more screwed than others.
For example, if you were making the median American income in 1975, you made $26,000 (in 2018 dollars). By 2000, you were making just $32,000, rising in 2018 to $36,000. If the tax system and pay raises of 1945-75 had continued, you’d have earned $57,000 in 2018.
At the 95th percentile, making more money than almost everyone else, you earned $80,000 in 1975. By 2018 you were making $164,000 — but even then you got screwed out of $10,000 that year. Only at the 99th percentile did you really make money, going from $162,000 in 1975 to $491,000 in 2018. Under 1945-75 taxation, you would have earned only $353,000 that year.
Men in the bottom quarter of the workforce saw their wages stagnate, or rise only because they worked more hours. That’s a big reason why women started looking for work (and going back to school to upgrade their skills, as I saw in the early 1980s at Capilano College).
But while women’s pay rose slightly compared to men’s, they got robbed too, even in higher income brackets: in the 75th percentile, white women making $54,000 in 2018 would have earned $59,000. (White men made $79,000; they would have earned $124,000 under 1945-75 rules.)
Black men and women at the 75th percentile were robbed as well: a Black man would generally earn three-quarters of what his white colleague earned, and would end up in 2018 making $60,000 when his colleague would have earned $92,000. Black women at this percentile kept pace with white women, ending up in 2018 with $50,000 compared to white women’s $54,000. But under 1945-75 rules, Black women would have made $61,000 and white women $59,000.
Education? No big deal
Education has made surprisingly little difference, according to the report. Discussing the 25th percentile, it says: “By 2018, high-school graduates and those with some college had essentially the same income level as each other and as in 1975. Those with a college degree had substantially higher incomes than other education levels; this gap didn’t change much since 1975.” Even so, 25th-percentile college grads in 2018 made just $55,000 in 2018 when they would have earned $92,000 under 1945-75 rules.
Similarly, at the 90th percentile, those with less than high school were still making $112,000 in 2018, suggesting that their parents’ connections served them better than their own educations. And college grads, making $169,000 in 2018, were still $40,000 poorer than they’d have been under 1945-75 rules.
And as for the top one per cent, their 1975 income — educated or not — was $252,000 and reached $1,160,000 in 2018. Under the old tax regime, they’d have had to scrape by on a mere $549,000.
No reward for productivity
So even though everyone’s per capita productivity rose over the last 40 or 45 years, only the top one per cent were actually rewarded for it. As Price and Edwards write, “Fundamentally, the majority of workers did not share in the benefits of economic growth to any significant degree.”
OK, we all got robbed, including our kids. As a science fiction writer I’m very fond of alternate histories, but I don’t kid myself that the Rand report’s “counterfactual” describes a paradise lost. If Ayn Rand had never written, and the “Austrian” economists had been routine Keynesians, American and Canadian big business and right-wing ideologues would still have tried to roll back working-class gains and high taxes on their own incomes.
Working-class and lower middle-class Canadians would not have enjoyed an endless golden age. Income disparities would still have led to problems in health, education and social well-being. But we would have seen better programs funded out of higher taxes on the rich to help us deal with such problems.
We would not have seen the neurotic, every-man-for-himself individualism that developed in North America after 1975, when collective political action became less and less rewarding and more and more people ended up dying of despair from booze or opioids. A strong union movement might have discouraged free trade, with consequences for China and Europe as well as ourselves. Steve Jobs might have given us the iPhone, but manufactured in Little Rock or Oshawa, it would have been an expensive toy for the 75th percentile and above — not for the rest of us.
Then again, millions of working-class kids with cheap college educations could have started their careers without being thousands of dollars in debt, and might have invented whole new industries or transformed old ones. We might have taken more effective steps on slowing climate change; the evil geniuses who took over after 1975 were the same people who’ve defended fossil fuels with such success.
Could we ask for our $47 trillion back? Not directly, but we could certainly tax the 1 per cent at 90 per cent or higher for the next century or two, and not feel guilty about it. Their wealth came from us, not their own brains and hard work. We might remind them that the Saudis cut off pickpockets’ right hands, and billionaires in China who get out of line get serious jail time.
Sure, let the billionaires go on making money; that’s how they keep score. But let’s treat them as cash cows, not sacred cows, and build a better, fairer society on their taxes.