How Inequalities Reduced the Ability of Even the Biggest Economy to Meet the Needs of Its People

Problems of the bottom half of the population in the USA are much more serious than is commonly realized

homeless USA

In the midst of increasing distress of common people, some leading opposition leaders in some important developing countries like India are increasingly drawing attention to accentuating economic inequalities as the most crucial reason for the distress of people. In this context the experience of the world’s biggest economy of the USA is a very important learning experience as despite being the dominant world power and having a very plentiful natural resource base, increase of economic inequalities has led to a situation in which even in this extremely rich country the bottom half is finding it difficult to meet its basic needs.

The USA poverty level has often stated to be around 11 per cent of the population, but several independent and credible studies indicate much higher levels of economic distress.A widely quoted study by the Urban Institute (UI) in 2018 found that nearly 40 per cent of non-elderly adults and their families struggled to afford at least one basic need for health care, housing, utilities or food in 2017.

Some basic statistics in this context relate to inequalties. According to the World Inequality report 2022 the bottom 50% of the USA population has only 1.5% of its wealth and only 13% of its income. This bottom half of the population, or a little less than this, appears to face some economic distress or the other, particularly so in difficult times like the recent COVID phase.

According to the Organization of Economic Cooperation and Development, the USA has the highest inequality in G7 countries— the USA has gini coefficient of 0. 434 while for the remaining six countries this ranges between 0.326(France) and 0.392(UK). According to an inclusive development index prepared by the World Economic Forum the USA appeared at number 23 in a total of 30 rich countries. According to Stanford University’s State of the Union—The Poverty and Inequality Report (2016) the USA is ranked at the bottom in an index of 10 rich countries. When this index was widened to include some of the less rich countries, the USA appeared at number 18 in a total of 21 countries.

Perhaps the most devastating indicator of inequality in the USA, as shown in the statistics of the World Inequality Report 2022, is that the share of wealth held by the top 1% ( 35%) is 23 times higher than the share (1.5%) by the bottom 50%! What is more, inequality here has been increasing steadily, not just in terms of wealth but also income. In 1968 the top 20 per cent of US households accounted for 43% of income but in 2018 they took away 52% of the income, more than the bottom 80% who got a share of only 48%.

It is this inequality which leads to deprivation suffered by a very large number of people in the middle of plenty.Thus while an important study of UI reported about 40%, or more precisely 39.4% to be suffering some difficulty in meeting basic needs in normal economic conditions of good employment levels, in April 2020, after the advent of COVID, UI reported in a new paper that 41% adults had reported loss of at least one job in family and 31% had been forced to reduce spending on food. Nearly 26 million had applied for unemployment insurance in the preceding month. One can imagine to what extent the figure of 40% who struggle to meet basic needs went up in such times.

The 2018 study of UI was based on a well-being and basic needs survey of non-elderly adults in the age-group 18-64. While 40% struggled to access at least one basic need, within this group 60% struggled to meet two basic needs and 34% struggled to meet three needs.

As many as 23% said that they were food insecure in the last 12 months. 18% struggled to pay medical bills while almost the same number (17.8%) decided to go without some required medical treatment due to costs. Deprivation levels were found to be higher among younger adults, women, households with children, blacks and Hispanics. Those struggling to meet basic needs included several of those who were regarded not as poor but as middle-class.

This data is from a study of 18-64 age group. However in 2020 it was reported that child poverty levels ( under 18 age group) have been found to be 1.5 times higher than adult poverty levels.

On the other hand, despite social security payments, a large number of the elderly persons are also unable to meet their basic needs. The Gerontology Institute at the University of Massachusetts Boston has prepared the Elderly Economic Security Standard Index which found that in 2016 a majority of seniors lacked the “financial resources required to meet basic needs.” Conditions in nursing homes have been often found to be precarious, as has also been revealed in the shockingly high number of deaths in nursing homes during the days of the pandemic.

These disturbing trends have persisted despite reforms in social security and health care. Thus despite Obamacare a Gallup poll in December 2019 found  25% of persons contacted saying that they or a member of their family had   delayed treatment for an illness due to cost factors.

The number of homeless persons has been generally mentioned to be over half a million, around 550,000 or so, but this is being increasingly questioned and several accounts mention that the number may be higher. The official estimates may miss several homeless persons, and it is easy to miss the homeless unless very careful efforts are made. Due to this reason, the number of homeless persons in most countries is under-estimated.

As evictions are quite high in the USA, those evicted and homeless for some time in a year may be missed in a one-time count. Then there are those individuals or even households doubling up in a small cramped place, due to lack of separate housing space for them, who would not be counted in a census of the homeless. While coping with such estimates in India I came upon so many people on the verge of homelessness , or on the margins of slum housing, that I pleaded for a new category of the precariously housed to be created. There are quite a few of these precariously housed in the USA too, it appears.

One threat appears more and more frequently in the form of eviction notices. The Eviction Lab , Princeton University,  has estimated that there are 3.7 million eviction notices or cases in the USA in a typical year. The landlords have legal counsel in over 90% of cases; the tenants rarely have such help.

This amounts to about 10,000 eviction notices in a single day, a shocking figure surely, or 416 per hour, or 7 per minute. During 2000-2016 as many as 61 million eviction cases were filed. When the pandemic struck, signs appeared at an early stage that this may aggravate further, with many more failing to pay rents in conditions of very high unemployment rates and loss of income. Government intervention came in the form of a number of moratoriums on evictions, extended from time to time with a few gaps. This did not entirely stop evictions, but kept them at significantly lower than normal levels instead of the feared hike. However these are more or less ending now, although local moratariums may still exist or be introduced in areas very badly affected by the pandemic.

The rent relief announced by the government if distributed promptly and fairly would have prepared for this difficult time of the end of moratarium , but its distribution  was very flawed, and so as the moratariums end,the same threat of the aggravation of evictions seen at the beginning of the pandemic has returned to haunt millions of precariously housed people. The number of precariously housed people in the USA who are just one economic or medical ( or other) crisis away from experiencing homelessness, and so live in dread of this possibility, is very high. It is several times higher than the official numbers of homeless persons.

The Washington Post recently published a profile of a police constable whose job it is to evict families or persons who have lagged behind in rent payments ( The return of the 10-minute evictions, December 15, 2021, by Eli Saslow). He has evicted 20 thousand families in 2 decades! His typical job is to go from house to house following a list handed to him. He arrives unannounced, with a revolver and handcuffs in pockets, and gives 10 minutes to the family concerned to evict, regardless of whether they have small children or not!

The USA has been wonderfully endowed with natural resources and faces several advantages as world leader in several contexts. Its foreign aggression and wars have been widely indicted for plunder and exploitation of other countries.  So when despite this so many people here have to live in want and in constant tensions regarding housing and other basic needs, then very important questions of justice and equality must be raised. After all almost all of those who suffer belong to the bottom 50% who have only 1.5% of the country’s wealth.

This is a very important learning experience for developing countries like India where the resource constraints are very severe and the needs of a much larger number of people have to be met. If high levels of inequalities have made it so difficult to meet the needs of the bottom half of the population in the case of a superpower like the USA, surely inequalities are likely to increase the problems of ordinry people to a much greater extent in developing countries like India with severe resource constraints and several additional problems as well. Hence reduction of inequalities should be a very important part of development path everywhere.

Bharat Dogra is Convener, Campaign to Save Earth. His recent books include Protecting Earth for Children and Man Over Machine.

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