Working Class w/ No Living Wage: The Absurd Math of US Income

Inequality Under CapitalismAs the stock market gleefully claws its way to more record-breaking highs, Forbes reports a full 56% of US Americans now have less than $1,000 to their names — and 25% have less than $100. But the economy, as they say, is booming. Even with 165 million on the breadline and an hourly minimum wage of only $7.25 nationally, surging Amazon share prices have added $13 billion to Jeff Bezos’ net-worth since mid-September. For perspective, $13 billion is enough to pay the student-loan debts of 432,000 millennials. It’s also plenty to end world hunger for a year, according to the International Institute for Sustainable Development. And Bezos — now the world’s richest man — smashes a bottle of organic champagne to celebrate his new wind-farm. The question is — how do markets grow as the wealth of the people shrinks and wages fall? What do the commentariat mean by “economic growth” when the nation’s income can hardly keep half of its people’s heads above water?

The National Income:
How Much Value is Created by the US Economy?

There are a lot of ways to measure economies — for example, gross domestic product or GDP is the value of everything a country produces ( minus the cost to produce it ) and the employment-rate measures the number of paying jobs. The gross national income or GNI is what you get after adding up all of the income earned by everyone. GNI includes every citizen ( even in other countries ) and every kind of income from wages or salaries to social security and unemployment benefits, investment returns, or the sale of assets like houses and cars.

US Income: What 1 Trillion Dollars Looks Like GraphicGNI is basically the total value of all money paid to everyone, minus the expenses of doing the business everyone is getting paid for. According to the macroeconomic accounts on the Federal Reserve’s website, the GNI was about $18.7 trillion dollars in 2016 for the US.

Gross National Wages:
Every Paycheck Combined

Now, how much of America’s multi-trillion-dollar paycheck ends up in the pockets of people who work in the US? Since the “gross national wage” is apparently not as important to US media-outlets as Jeff Bezos’ latest earnings or the many triumphs of the Dow Jones, this number is a bit more camouflaged. Luckily, the total number who are employed by all industries and their average wages or salaries can be found in the bowels of the Bureau of Labor Statistics’ website. Multiplying these two numbers — the total employed by all industries and their mean-average yearly wages — gives the combined wages and salaries of everyone with a job in the US, from the clerks and mechanics to the brain-surgeons and corporate executives.

(total employed) × (mean-average wages per-year) =
140,400,040 × $49,630 = $6,968,053,985,200 or ~$7 trillion

Cartoon, Workers' Wages & the CEO$7 trillion dollars to split between all employed people in the United States. Everyone who built everything and provided every service — managers, janitors, lawyers, nurses, librarians, bartenders, and everyone else who had a job in 2016 — collectively earned about $7 trillion of the $18.7 trillion national paycheck. [Note: The estimated $6.96 trillion above is further supported by cross-checking it against the 2016 IRS income-tax data which estimates total wages + salaries at ~$7.11 trillion. The relatively negligible difference of ±0.16 trillion may be due to over-reported income, different methodologies used in BLS and IRS estimates, or both.]

But who gets the remaining $11,781,946,014,800?

Federal Benefits & Social Welfare

The national income also includes money received from government benefits, such as disability, retirement, and social security. The Bureau of Labor Statistics lists the 2016 total federal benefits received at $2.0393 trillion.

Total US Income = $18,750,000,000,000
Combined Wages & Salaries of All Employed Folks = $6,968,053,985,200
Income from Federal Social Benefits = $2,039,300,000,000

Total Income – (Wages & Salaries + Benefits) = $9,763,546,014,800

And about $9.8 trillion is still missing.

Literally All Working People Combined
Earn Less Than Half of American Income

According to the BLS data, there are an estimated 146 million people who hold some sort of job in the US. These 146 million workers create every commodity, serve every meal, harvest every last grain, empty every waste bin, teach every student, build every house, and pour milk into every single cappuccino in the nation. And together they take about 37.2% of the American pie. All of the so-called “handouts” from the federal government — social security, retirement, disability, and other benefits — only amount to another 10.8% of the GNI.

The combined income from all employment and federal benefits still only adds up to 48% of America’s paycheck. And that means that the other 52% must be paid to someone — or something — without a job.

Unearned Income:
Landlords, Industrial Capitalists, & Wall Street Investors

Property income — or, as the classical economists knew it, unearned income — is earned through ownership ( rather than wages, which are earned by time spent working ). There are three basic types of unearned income. Rent is paid to owners of land or other natural resources, profit is paid to owners of capital ( like factories, equipment, machines, etc. ), and interest is paid to owners of financial assets ( like stocks, securities, debt, etc. ). The $13 billion Jeff Bezos made when Amazon share prices increased, for example, was “earned” by owning something rather than creating something or providing some service.

Income Inequality, 1% Class Warfare Vs. the 99%This type of income is a bit harder to keep track of — especially considering that the wealthy seem to be in the habit of using offshore tax-havens and shell companies ( like those revealed in the Panama and Paradise Papers ) to stash their fortunes. With that being said, the US Department of Commerce’s accounts show nearly $7 trillion — or about the same as 146 million working people made combined — paid out for interest, rent, and corporate profits. Another trillion and a half or so was paid to “proprietors” or, more colloquially, the owners.

And now we have a rough sketch of the great American paycheck:

US Income Distribution, Wages, Salaries, and Social Welfare Federal Benefits vs Property Income and all Unearned Income

Are Workers Worthy of Their Wages?
Not in the United States of America!

There are two basic components to the whole economic activity and wealth of human civilization — capital and labor. On one hand there is capital — all of the natural resources, materials, lands, machines, and everything that everything is made of and made with — and, on the other hand, there are the countless workers whose labor-power transforms that stuff into the societies we live in.

Without the time, energy, creativity, and sacrifices made by the 146 million human beings who make everything and offer every service, the wealth of people like Jeff Bezos would not exist. Business magnates like Jeff Bezos, Warren Buffet, and Bill Gates need working classes — working classes do not need them. And yet Bezos, Buffet, and Gates now possess more wealth than the bottom 50% of the nation combined. Through the prism of the American economy, people like Bezos, Buffet, and Gates are just as valuable as the poorest 160 million of the working classes who collectively labor billions of hours each week.

And that is unfair — that doesn’t add up. The “American Dream” — the whole idea about how anyone willing to work hard should be able to prosper or, at the very least, make ends meet — is objectively untrue. The truth is — if you want to earn wealth in the US or even if you only want to earn enough to pay the bills on time — honest work is not a very good strategy.

In solidarity,
John Laurits

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Brenda Schouten Beckett
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Brenda Schouten Beckett

John, I am so relieved to see your work again. I have gotten this excellent essay out to all my contacts.

BillP
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BillP
And the solution to this horrendous misallocation of earnings is………… Employee Ownership of all Companies/Corporations. Or if that is too drastic, then making sure that the Board of Directors of all Corporations is composed of 55% workers of the company. These BoD workers would be elected by the rank and file and limited to no more than 1 year on the BoD. Why? Well when it comes time to decide what to do with those hundreds of millions in net profits, the workers on the Board might want to insure that there buds in the rank and file get the lions share, instead of giving it to a… Read more »
C.A. Matthews
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Thank you for doing the math for us all. You make the oligarchs’ plundering of our world all the more apparent. It’s time for the ordinary people to wake up and seize the means of production and pay themselves a “living wage.”