Confronting Poverty Through Philanthropy: Washington Center Study Offers Insights

The Washington Center for Equitable Growth has published a working paper on the distribution of wealth in America, revealing several stark observations in regards to poverty and inequality. Authored by professors Thomas Picketty (Paris School of Economics), Emmanuel Saez (UC Berkeley), and Gabriel Zucman (UC Berkeley), the study uses data from taxes, surveys, and national accounts to provide a comprehensive picture of national income distribution since 1913. Their key findings, listed below, hold implications for both policy makers and philanthropists working to confront poverty in the United States.

• Over the past forty years, the bottom 50% of earners have seen their income increase by only 2.6%, reaching an average income of $16,179 in 2014.

• Government spending (on Medicare, Medicaid, food stamps, infrastructure, defense, and education) provides some degree of benefits to lower income earners, although it may have marginal effects. In 2014, the average income of the bottom 50% ($16,179) was augmented to $25,045 if one considers the benefits of direct and indirect spending.

• However, these benefits are disproportionately awarded to individuals older than 65. After-tax income for seniors in the bottom half of earners increased by more than 70% in the past 35 years, while after-tax income for adults between 20 and 45 has remained stagnant.

• The top 1% and the bottom 50% of earners have swapped their share of total national income in over the past forty years. Between 1974 and 2014, the top one percent has gone from holding 10% of national income to 20%, while the bottom half has dropped from 20% to 12.5%.

• The tax gap between top and bottom income earners has decreased significantly in the past century. Between 1944 and 2014, the tax rate for the top 1% decreased from 45% to 36%, while taxes for the bottom 50% increased from 15% to 24%.

• Women’s growth in the American workforce has counteracted overall measures of inequality. However, women comprise only 27% of the top 10% of earners, and only 16% of the top 1%.

• Even for the upper-middle-class (those making between the bottom 50% and top 10% of earners), pre-tax income has remained stagnant over the past fifteen years.

• The redistributive effects of government spending provides greater financial benefits to the upper-middle-class than to the bottom 50%. In 2014, 14% of income was transferred to the upper-middle class, while 10% was transferred to the bottom half of earners.

Moving forward, the authors conclude that future efforts to combat poverty and inequality ought to focus primarily on raising Americans’ primary income through education, job training, and equalizing the distribution of financial capital.

Read more at The New York Times. The full report can be found at the Washington Center for Equitable Growth.