I have been doing quite a bit of research regarding the business of higher education.  You know, exciting things like admission policies, financial aid packages, retention rates, student life and study abroad options, maintaining and creating academic majors, supporting alumni networks, et cetera. I have always enjoyed learning and since this is one of the next steps in our life with teen-aged children I thought it would be helpful to learn more about this ‘business.’  

The most interesting part so far has been learning about college endowments and their size.  Some schools, like the University of Michigan have a very large endowment estimated at $12.4 billion in 2019.  When spread over U of M’s student population of 47,000 at its Ann Arbor campus it yields about $264,000 per student.  At an annual return of 6% that’s about $15,800 of benefit per student.  Williams, a liberal arts college in western Massachusetts, has an endowment of approximately $2.9 billion with a student population of 2,100.  That yields roughly $1.38 million per student.  Again, with an annual return of 6% that is about $82,800 per student.       

Pretty amazing isn’t it?  I could continue sharing what I have learned about endowments and their benefits, but what it really made me do was pause for a moment, and think about  income and wealth.  As in, how did some people earn enough in their lifetime to give that much wealth to colleges and universities? (As well as keep enough for themselves and families too, plus set up private foundations, give money to non-profit and religious organizations, et cetera.)  The other thought I had was how can the stock market continue its historic rise in the midst of the COVID-19 pandemic, with so many people losing their jobs especially in the hospitality industry.     

So I did some more thinking, and kept peeling the onion back.  When that happens, it can get a bit overwhelming because I have a habit of thinking too much.  But bear with me – I hope you find it interesting.

My mind ended up at the Gilded Age which was the period between during the late 1800s thru the beginning of World War I. The industrial revolution was well underway and new technologies such as railroads and steel were leading significant growth and opportunity.  The western United States was opening and productivity was increasing rapidly due to new machines.  New immigrants were coming to our country from Europe for the opportunity to own land and break free from hierarchies of the church, royal blood, and rigid castes.  Large amounts of wealth were created and concentrated.  Names we know today like JP Morgan, Jacob Astor, James Duke, John D. Rockefeller, William Randolph Hearst, Leland Stanford, Andrew Carnegie, Andrew Mellon, and Cornelius Vanderbilt all made their fortunes during this time.  

Much of the excesses in the Gilded Age led to the rise of the labor movement.  There was violence due to the inequality of wages being paid to workers and the wealth being made by company owners.  There was discrimination against newly arriving immigrants by those that were already in the United States believing that immigrants would take their jobs and/or drive down wages.  And yes, our nation’s original sin of slavery had been eradicated, but Reconstruction had failed with former slaves losing land and voting rights due to political horsetrading with gains lost to white southern power.  

For some time now, I have wondered if there is a fair comparison between the Gilded Age and now.  And learning about these college endowments has only increased my curiosity about that time period and today.

Take a moment and think about the past twenty years.  Just like trains and steel then, new technologies and businesses have erupted in the past two decades due to the emergence of the Internet.  Facebook, Google, Apple, Twitter, Netflix and Amazon are all household names now, with billionaire founders, and equity rich workers.   But there are other major software companies like EPIC in healthcare; Salesforce in customer service; and ESRI in geographic information systems that have made hundreds of millions for original investors. Or what about Tesla in the electronification of cars? Or Comcast in the entertainment industry owning the distribution system system via xfinity cable and/or xfinity mobile as well as the entertainment producer in NBCUniversal. 

All of these companies and the ideas behind them are changing the way we live.  Further, behind this growth and development are the financial systems, the plumbing that makes it work. Server farms.  Mining rare earth minerals.  Venture capital firms in Silicon Valley.  Private equity firms, pension funds, and bankers like Goldman Sachs on Wall Street.  Ideas, technology and capital all producing incredible fortunes with business leaders exercising amazing power and influence throughout our democracy. 

Similar to the Gilded Age, we also see today’s workers feeling left behind or left out.  For the past forty years, the labor movement has lost thousands of members with new laws passing that make it more difficult to organize and/or retain union members.  Immigration tensions have risen to new heights again with concerns over losing jobs to newcomers.  And last, we have seen renewed energy in organizations like the Proud Boys and white nationalist fringe groups that target Black Americans.  

While this comparison may not be perfect, it feels like there is a tension in the air today perhaps similar to the Gilded Age between those that had incredible wealth and those that labor for their income.  This has become clearer to me due to the COVID pandemic and seeing the stock market continue its surging growth, while small business owners and service workers in hotels, restaurants, bowling alleys, and tourism industries all struggling mightily.

To see if my hunch was correct, I wanted to check some data.  What type of change has there been in income distribution during the past forty years?  Are the wealthy, wealthier?  Below is some information you may find interesting.  

There are a few ways to look at income distribution to get a sense of what is happening.  First is looking at the median vs the mean.  The median tells us where the half-way line falls.  50% more.  50% less. The mean is the average.  The sum / divided by the number.  If the mean is more than the median, the overall distribution skews higher.  If the mean is lower than the median, the overall distribution skews lower.   

The Median vs Mean for Income and Wealth from 2017 shows the following:

	2017
Median Household Income	$61,372
Mean Household Income	$86,220
Median Wealth per Adult	$61,667
Mean Wealth per Adult	$403,974

The mean income is more than the median showing that the tilt skews higher.  Those that earn more, earn enough to skew the median/mean by roughly $25,000 per household.  But the wealth data is really fascinating. It too skews higher, but the amount is much higher than $25,000 per household.  It is roughly $340,000 per adult.  Granted wealth is built over a lifetime, and can be transferred generation to generation.  But the size difference is stark.  Thinking about it as a ratio, Mean Household Income to Median is 1.4.  Mean Wealth per Adult to Median is 6.6.

Another way to look at income distribution is by quintile.  Think about it as if a pie were cut into five pieces, each would have 20%.  So when we look at income distribution by quintile, anything more than 20% skews higher than it would if it were an even distribution.  

In this case, the Income Distribution by Quintile as a Percentage Share of Total Income shows that during my lifetime (I was born in 1974), the distribution has skewed toward the top quintile.  Looking at the chart below, we see in 1970, the top quintile earned 23.3% more than what one would expect if the split were even.  But in 2017, it was 31.5% more than if it were an even split.  Additionally, this represents an 8% shift higher during the past 47 years.

Year	Equal Distribution	1970	2017
Top Quintile (80 – 100)	20%	43.3%	51.5%
Fourth Quintile	20%	24.5%	23.0%
Middle Quintile	20%	17.4%	14.3%
Second Quintile	20%	10.9%	8.2%
Lowest Quintile (0 – 20)	20%	4.1%	3.1%

What also strikes me is that the middle quintiles (second, middle, fourth) have seen a decrease in the 47 years.  Combined in 2017 these quintiles made up 45.5% of the total; while in 1970 they made up 52.8% of the total.  Moreover, each quintile including the lowest decreased with all of the increase moving to the top quintile.  Clearly, income distribution has been skewing higher.  

One last way to look at income distribution is something called the Gini Coefficient Index.   It is a complicated formula that an Italian statistician created to measure the distribution of income across a population. It is often used to compare income inequality between nations.  But it also allows researchers to measure changes within a nation over time.  The lower the Gini Coeffecient number, the more equal the distribution of income.  The higher the Gini Coeffecient number means that wealth is concentrating.

Looking at the United States, we find that Gini Coeffecient has increased over time.  My understanding is that 1968 represents the lowest Gini Coeffecient measured for the United States at 0.386.  In 2017, it was 0.482.  

So trying to explain this in layman’s terms, I think it is fair to state the following:

• Since 1968, income distribution in the United States has tilted toward the wealthy and become less equal as demonstrated by the Median/Mean test; the Quintile Test; and the Gini Coeffecient Index Test.  

As I have in many of these essays, I wonder what this means for our society?  Our human condition?  Is the change good, bad or indifferent?  Does it show that one can really ‘make it’ in America still? Or is it a reflection of changes in tax policy and union laws?  Which demographic groups have the changes in income distribution benefitted?  Minorities?  Whites?  Urban, suburban or rural families? Those that are highly educated or high school graduates?  Those that live on the coasts or in the Midwest?  Those that work with their hands vs those that work with ideas?  Et cetera, et cetera.  

As of now, I would suggest these changes have financially benefited white America, those with higher education, and those that work with ideas. But I honestly don’t know how much.  I have not dug into the data deep enough.

What I do believe is that because income distribution has tilted further toward the wealthy during my lifetime, and no matter how it occurred, we may have seemingly entered into a new Gilded Age.  Maybe we call it GA2.0 – like software: Gilded Age 2.0.  

My remembrance of the Gilded Age from history included a rocky time for the worker which ultimately led to the Progressive Era, and the trust busting of President Theodore Roosevelt. The establishment of child labor law, and creation of juvenile courts. The establishment of the 40 hour work week, food inspections, as well as water and sewer systems.  There were leaders like Jane Addams with the Settlement House movement along with social reforms like creating orphanages. There was Women’s Suffrage and the passage of a constitutional amendment to allow an Income Tax.  President Wilson pushed through significant banking reforms.  And the conservation of the environment became important with the establishment of National Parks. 

What’s described above is a lot of change over a short period of time.  But today, much of it is  part of our social fabric, and we don’t think twice about it. 

If we are in GA2.0, what social and political reforms will we see in the next 20 years?  How much wealth will be transferred to college endowments and private foundations to ensure important institutions grow and are supported over time?  How much wealth will be passed on to heirs or captured by estate taxes?  And if it is captured by estate taxes, what will it be used for?  Investments in infrastructure – maybe nationwide broadband like rural electrification in the 1920s?

There is much uncertainty in the world today.  A new President.  New technologies.  A mutating virus.  An uneven vaccine rollout.  Who knows what is next?  I certainly don’t know, but it sure feels like the precipice of something significant.  Let’s commit to considering new ideas, and figuring out how we can create a brighter future together.

Coda:

The data I used in this essay was from a sociology textbook called Soc 2020, 6th Edition by Dr. Jon Witt and published by McGraw Hill.  Jon was one of my college professors and frankly someone I would call a mentor.  He cites the data from:  

Fontenot, Kayla, Jessica Semega, and Melissa Kollar.  2018. “Income and Poverty in the United States:  2017.”  Current Population Reports. P60-263. Washington, DC.  U.S. Government Printing Office.  Accessed November 2018 (www.census.gov/content/dam/Census/library/publications/2018/demo/p60-263.pdf).

Also, I did not complete any type of Literature Review to learn if someone has already compared the circumstances of the past 10 to 20 years to the ‘Gilded Age.’  If so, my deepest regrets for not providing proper credit.