Americans are getting poorer – wage growth isn’t keeping up with inflation – but federal employees are getting richer. Particularly those working in the Washington DC area.
And the redistribution of wealth from young to old is creating inequality, too.
For instance, in terms of total compensation (salary plus benefits), federal workers earn 16 percent more on average than private-sector workers with the same experience, education, and responsibilities. They are paid out of your current and future taxes, not corporate profits. In what some have seen as an echo of the setting for The Hunger Games, the growing power of the federal government to dispense favors and direct whole industries has transformed the Washington, D.C., metro area into the nation’s wealthiest, boasting 10 of the top 20 counties for median household income.
Then there is generational inequality, which is also goosed by government policy. The Pew Research Center finds that in 1984, households headed by someone 65 years or older possessed on average10 times the wealth of a household led by someone under 35. By 2010 that gap had widened to 22 times. Part of that disparity is the result of payroll taxes that take about 12.4 percent (half from the worker, half from the employer) of every dollar of earned income up to $110,000 to pay for Social Security (for the past two years, the worker’s share of Social Security taxes has been reduced by 2 percentage points, a break that will expire at year’s end). Another 2.9 percent of all wages ‑ again split between employee and employer ‑ goes to Medicare.
Payroll taxes take a relatively bigger bite out of the paychecks of younger and poorer Americans even as old-age benefits are disbursed generally without regard to need. To add insult to the situation, Social Security will be paying out fewer dollars than new and future retirees will have put into the system. So at the very time when younger Americans have lost ground to their elders, they are compelled to pay into a fund that will shortchange them when they become eligible for it.
The American dream, or part of the American dream, is the idea that the next generation of Americans will do better than the last. And, throughout most of the nation’s history, that’s been true. In the aggregate, and despite some detours into economic depression and other problems, the trend for American prosperity has been upward for each successive generation.
Except, it seems, this one. Between the heavy weight of an enormous welfare and entitlement state, not to mention the cost of an expansive and increasingly intrusive government, America’s younger generations are set to get a pretty raw deal.