Study: US Wealth Gap Is ‘Unsustainable’

Only part of the economy is prospering, and that’s going to end up hurting us all.

That’s the finding of a new Harvard Business School study on U.S. competitiveness. The study, based on interviews with 1,947 Harvard Business School alumni, said that although larger U.S. companies are showing good signs of recovery since the financial crisis, things don’t look nearly as sunny for many American workers.

According to the study:

A truly competitive U.S. economy would lift both firms and citizens. But our survey findings and other evidence reveal that that is not happening today in America. Instead, our “recovering” economy is doing just half its job: The typical large or midsized firm in America is rallying or even prospering, as are highly skilled individuals. But many middle- and working-class citizens and small businesses are struggling.

The Boston Globe reported that while the average income rose 4 percent in the past three years, “most of that increase has been concentrated among the highest earners. Meantime, the income of a typical family has dropped 5 percent, to $46,700, from $49,000 in that period.”

That ever-widening gap between America’s rich and the middle- and lower-class is “unsustainable,” the study said. It explains why, while offering a prescription for change:

We see a need for business leaders to act — to move from an opportunistic patchwork of projects toward strategic, collaborative efforts that make the average American productive enough to command higher wages even in competitive global labor markets. Without such actions, the U.S. economy will continue to do only half its job, with many citizens struggling. And in the long run, American business will suffer from an inadequate workforce, a population of depleted consumers, and large blocs of anti-business voters. Businesses cannot thrive for long while their communities languish.

“Some 47 percent of respondents in the survey said that over the next three years they expected U.S. companies to be both less competitive internationally and less able to pay higher wages and benefits, versus 33 percent who thought the opposite,” Reuters said.

It’s really no surprise that the wealth gap is widening, especially when you consider that the respondents noted weaknesses in the education system, quality of workplace skills and effectiveness of the political system, all factors that help “drive the prospects of middle- and working-class citizens,” the study said.

In contrast, survey respondents noted strengths in the quality of management, vibrancy of capital markets and firm access to innovation, influential factors in company success.

What do you think of the Harvard study? Do its conclusions ring true? Share your comments below or on our Facebook page.