By Shimmy Blum. When the Declaration of Independence referred to all men being created equal, it certainly wasn’t referring to how much money people could make. There have always been the wealthy, the poor, and those in between, but never have those disparities entered the political discourse as they have today. Is there really a 1 percent versus the 99 percent? Is the $100,000-a-year salary a fantasy for this generation, or is there still an abundance of high-income opportunities? 

For several decades, Dovid, a father of a large, Orthodox New York family, seemed to be living the “American Dream.” A graduate of one of the country’s most prestigious universities, Dovid worked his way up the ranks, becoming a senior manager and department head at several multinational corporations. His compensation package reflected his hard work, talent, and the appreciation of his higher-ups.

Along came the recession. Dovid’s superiors notified him that his entire unit was being dismantled. Suddenly bereft of a livelihood in a market where new jobs were scarce, Dovid upgraded his expertise by learning some new skills in an “up and coming” field, where he eventually found a job. However, even when totaling his experience and new skills, he is now earning less than he did decades ago as a rookie in his previous field.

Dovid is thankful for being a breadwinner once again, but can barely hide his mistrust of the corporate world that callously cut him down in his prime. “The official reason we were given for the layoffs was ‘the economic downturn,’” he says, “but I have no doubt that it was simply a ruse to siphon off money from our department and transfer it to another part of the company that some executive preferred.”

Others involved in the corporate world report a better and different experience.

Shortly after leaving kollel in the 1990s, Moshe landed an entry-level job at a major New York firm. Despite subsequent economic turmoil, Moshe has quickly risen through the ranks and now holds a respectable and lucrative managerial position. He admits that the job market is tougher than it was when he entered, and employees often grumble about executive decisions; but by and large, he says, employees still have bright prospects when they perform well.

“We shouldn’t paint all corporate executives with the same brush,” he says. “They are mostly hardworking individuals looking to get ahead in a grueling climate and fulfilling their duties to shareholders.”
 
Us and Them Whether caused by rabble-rousing jealousy, an unfair societal trend, or tax cuts that favor the wealthy, income disparity between America’s various classes has increasingly come under scrutiny.

The nationwide Occupy Wall Street protests have garnered extensive attention. President Obama recently delivered a high-profile speech highlighting income inequality in the country. Even Republican presidential front-runner Mitt Romney finds himself fending off harsh attacks about his role in the venture capital firm Bain Capital, where he often maximized corporate profits by laying off workers.

The “1 percent versus the 99 percent” has become a catchphrase in the American discourse, highlighting the vast disparity between the highest income earners and the masses. Are the good fortunes of the few leaving the rest of us behind?

Judging by the numbers, those crying foul have a sound argument.
According to the nonpartisan Congressional Budget Office, after-tax real household income from 1979 to 2007, adjusted for inflation, grew 15 times faster for the nation’s top 1 percent of earners than for the bottom 20 percent. When taking overall wealth into account, the disparity becomes greater. According to a New York Times report from last year, the wealthiest 1 percent owns about one-third of the nation’s wealth, and the top 20 percent owns more than 80 percent of US wealth.

When ranked by the “Gini Coefficient” (a measure of a nation’s income inequality; the higher the score, the greater the inequality), the US score of 45 eclipses nations such as China, Iran, and Russia, which are notorious for their class disparities, and is nearly double the score of many Western countries, such as Norway and Sweden.

Although these figures seem nefarious against a backdrop of everyday Americans struggling in a down economy, Dr. Peter Morici, an economist at the University of Maryland’s Robert H. Smith School of Business, suggests that the increasing income disparity is largely a product of the double-edged sword of globalization. “There is no conspiracy here,” he says. “America’s greatest resources are executive talent and creativity. Top corporate officers get to serve a global market and earn more. On the other hand, globalization drives down the value of ordinary American workers competing with workers in countries such as China and India, which have protectionist policies that limit their consumption of US exports.”

“I find the sudden attention to income inequality and redistribution a bit of a puzzle,” says John Cochrane, professor of finance at the University of Chicago’s Booth School of Business.

Cochrane says the rise in income inequality is a phenomenon economists have been tracking for 30 years. Just because it makes good political campaign fodder does not mean it is a new or particularly pressing economic issue.

“It’s not that the rich are getting richer,” says Professor Cochrane. “This is a phenomenon that started in the late 1980s as America moved to a service and information economy, creating a skills- and knowledge-based economy that rewards entrepreneurship. Steve Jobs and Bill Gates are not scions of great wealth. They are people who learned how to design new companies and make products that sell and make a lot of money from them.”

Professor Cochrane contends that the wealth disparity issue is also spurious. “The numbers can get pretty confused, and quickly politicized. Warren Buffet’s ‘income’ is a factor of how much capital gains he chooses to realize in a certain year.”
 
Getting Ahead Most people will never make it into the entrepreneurial class, and even among those who do, most will never graduate to the top of the class, as did Steve Jobs, Bill Gates, or Warren Buffet. As a result, there are nationally recognized labor experts who advocate government investment to bolster opportunities for lower- and middle-class wage earners.

Dr. William Rodgers, chief economist at Rutgers University’s John J. Heldrich Center for Workforce Development, notes that companies with the greatest global reach are the least likely to contribute to the American workforce. “I’m surprised that more people haven’t pointed out that the bulk of recently created US jobs came from small and midsize businesses, while companies with over 500 employees are not adding jobs,” he says.

Dr. Rodgers points to another study by the National Employment Law Project that found that between 2010 and early 2011, jobs that pay $7 to $13 an hour, such as retail sales and office clerks, cashiers and food preparers, grew by 3.2 percent; occupations paying $13 to $20 an hour grew by only 1.2 percent; and jobs paying $20 to $53 an hour actually declined by 1.2 percent.

As lower-wage jobs grow and middle- and upper-income jobs lag, the income inequality gap widens. Dr. Rodgers says that projections point to a similar trend in future years.

Dovid needs no statistics; he has seen it all. While at a career fair, he proudly showed his glowing résumé to a counselor, only to have her profess ignorance about all the skills mentioned. “She said, ‘Sorry, sir, we only have jobs available for secretaries and receptionists,’” he wryly recounts. “Another career expert told me that I must dumb down my résumé to have any chance at landing a job.” [Read more in this week’s Mishpacha Magazine].