January 21, 2014
(Mark Rosenman, professor emeritus, Union Institute & University, is a frequent contributor to PhilanTopic. In his previous post, he argued that the rush by many to embrace social impact bonds is another example of private profit crowding out a public good.)
In the battle to stem and reverse widening economic inequality in the United States, too many tax-exempt organizations are either missing from action or are part of the problem. While charities and foundations in general do much to help the poor and indigent, some organizations and institutions actually make the problem worse through their own compensation practices. At the same time, these organizations and others often go out of their way to disassociate themselves from policy debates on a host of related issues, from increasing the minimum wage to preserving government programs for needy families.
The good news is that both Democrats and Republicans in Congress have started to pay more attention to poverty and economic inequality. Given the profound ideological differences between the parties, however, there is a great deal of disagreement about how government ought to address these problems and what kind of nonprofit programs it ought to support. Unfortunately, charities and foundations cannot truly serve the public interest unless they engage in these debates — today and into the future.
First, though, let's consider the deteriorating economic circumstances of many Americans. While most of the 15 percent of Americans living in poverty are children or adults who do not participate in the labor market, close to 1 in 4 of the 46.5 million people in the United States who are poor do work; that's 7 percent of the country's total workforce, and among other things it means the poverty rate today is as high as it has been since 1965.
What's more, income inequality in the U.S. has reached historic levels. Based on something called the Gini coefficient, the United States now ranks 32 out of 34 OECD member countries in terms of inequality; in fact, we haven't seen these levels of inequality since the 1920s, just before the onset of the Great Depression.
It gets worse. In the three decades prior to 2010, the top 1 percent of Americans increased their share of the national income by 66 percent, while those at the bottom of the economic ladder actually lost ground. Meanwhile, 95 percent of income gains since 2009 have gone to the top 1 percent, who now claim 22 percent of the national income, while the richest 5 percent of American households control more than 60 percent of the country's wealth.