As of October 2021, the wealthiest 10 percent of Americans own 89 percent of all US stocks, leaving the 11 remaining percent of stocks to the bottom 90 percent of Americans. The proportions of US stock market ownership matter because economic inequality eventually leads to poor outcomes for everyone. This is problematic because economic disparities impact numerous quality-of-life indicators, such as housing, poverty, crime, and physical and mental health, as evidenced by research published by the Organization for Economic Co-operation and Development (OECD). It also reduces overall demand for products and services, and this impacts businesses and eventually their stock prices. In addition, economic inequality may ultimately change our democracy from one in which all are equal, with opportunity and economic mobility, to a country that is ruled by the rich for the rich.
During Covid, inequality worsened when US monetary policy injected large amounts of liquidity into financial markets, which caused stock markets to boom. Though this policy was well-intentioned, meant to protect the economy and save jobs, it also inflated the value of stocks, which are mostly owned by the rich. The pandemic also affected lower-skilled and uneducated workers most, because they don’t have investments and rely on their jobs much more. As a result, they are unable to generate capital, make investments, and benefit from stock growth.
I believe that financial literacy, tax policy, and easier access to higher education will help more people participate and benefit from economic growth. First, financial literacy and investing should be taught in high-school to provide everyone with basic knowledge of money management and finance. Creating and/or joining investing or economics clubs are a great way to pursue relevant knowledge that may not be taught in the classroom. Second, tax policy should be redesigned to enable the less wealthy to keep more of their income so that they can participate in buying stocks and other assets. Finally, access to affordable, higher education will raise income levels and enable savings and investments.
These actions will help families share in the stock market’s growth, reduce inequality, and improve our democracy and the lives of all people.
