Category Archives: Income Inequality/Gap

The Globalization of Production and Income Inequality in Rich Democracies

Source: Matthew C. Mahutga, Anthony Roberts, Ronald Kwon, Social Forces, Advance Articles, May 25, 2017
(subscription required)

From the abstract:
Despite prominent and compelling theoretical arguments linking manufacturing imports from the global South to rising income inequality in the global North, the literature has produced decidedly mixed support for such arguments. We explain this mixed support by introducing intervening processes at the global and national levels. At the global level, evolving characteristics of global production networks (GPNs) amplify the effect of Southern imports. At the national level, wage coordination and welfare state generosity counteract the mechanisms by which Southern imports increase inequality, and thereby mitigate their effects. We conduct a time-series cross-section regression analyses of income inequality among eighteen advanced capitalist countries to test these propositions. Our analysis addresses alternative explanations, as well as validity threats related to model specification, sample composition, and measurement. We find substantial variation in the effect of Southern imports across global and national contexts. Southern imports have no systematic effect on income inequality until the magnitude of GPN activity surpasses its world-historical average, or in states with above-average levels of wage coordination and welfare state generosity. With counterfactual analyses, we show that Southern imports would have led to much different inequality trajectories in the North if there were fewer GPNs, and if the prevailing degrees of wage coordination and welfare state generosity were higher. The countervailing effects of GPNs and institutional context call for theories of inequality at the intersection of the global and the national, and raise important questions about distributional politics in the years to come.

Equal Pay for Mothers Is Critical for Families

Source: Jasmine Tucker, National Women’s Law Center, Fact Sheet, May 2017

From the summary:
More than 22.8 million mothers with children under 18 are in the workforce, making up nearly 1 in 6 – or 15.5 percent – of all workers. The great majority of these mothers work full time. In 2015, 42 percent of mothers were sole or primary family breadwinners, while 22.4 percent of mothers were co-breadwinners, meaning families are increasingly relying on mothers’ earnings.

While women in the U.S. who work full time, year round are typically paid just 80 cents for every dollar paid to their male counterparts, the wage gap between mothers and fathers is even larger. Mothers working full time, year round outside the home are paid just 71 cents for every dollar paid to fathers, a gap that translates to a loss of $16,000 annually. The wage gap between mothers and fathers exists across education level, age, location, race, and occupation, and compromises families’ economic security….

Why Is Government One of the Worst Industries for Equal Pay?

Source: Katherine Barrett & Richard Greene, Governing, May 18, 2017

Women working in public administration make, on average, 25 percent — or $16,900 — less than men.

Related:
Unions help narrow the gender wage gap
Source: Elise Gould and Celine McNichols, Economic Policy Institute, Working Economics Blog, April 3, 2017

….One promising way to address both gender-specific disparities and the broken link between all typical workers’ pay and economy-wide productivity growth is through the resuscitation of collective bargaining. Unions have been proven to provide women with higher wages and better benefits. As shown in the figure below, working women in unions are paid 94 cents, on average, for every dollar paid to unionized working men, compared to 78 cents on the dollar for non-union women as a share of non-union men’s dollar. Furthermore, hourly wages for women represented by unions are 23 percent higher than for nonunionized women. Unions provide a boost to women regardless of their race or ethnicity. The gender wage gap is significantly smaller among both white and black unionized workers than their non-union counterparts. Unionized workers are also more likely to have access to various kinds of paid leave, from paid sick days, vacations, and holidays to paid family and medical leave, enabling them to balance work and family obligations…..

The Dynamics of Gender Earnings Differentials: Evidence from Establishment Data

Source: Erling Barth, Sari Pekkala Kerr, Claudia Olivetti, National Bureau of Economic Research (NBER), NBER Working Paper No. w23381, May 2017
(subscription required)

From the abstract:
We use a unique match between the 2000 Decennial Census of the United States and the Longitudinal Employer Household Dynamics (LEHD) data to analyze how much of the increase in the gender earnings gap over the lifecycle comes from shifts in the sorting of men and women across high- and low-pay establishments and how much is due to differential earnings growth within establishments. We find that for the college educated the increase is substantial and, for the most part, due to differential earnings growth within establishment by gender. The between component is also important. Differential mobility between establishments by gender can explain 27 percent of the widening of the pay gap for this group. For those with no college, the, relatively small, increase of the gender gap over the lifecycle can be fully explained by differential moves by gender across establishments. The evidence suggests that, for both education groups, the between-establishment component of the increasing wage gap is due almost entirely to those who are married.

Globalization and Executive Compensation

Source: Wolfgang Keller, William W. Olney, National Bureau of Economic Research (NBER), NBER Working Paper No. w23384, May 8, 2017
(subscription required)

From the abstract:
This paper examines the role of globalization in the rapid increase in top incomes. Using a comprehensive data set of thousands of executives at U.S. firms from 1993-2013, we find that exports, along with technology and firm size, have contributed to rising executive compensation. Isolating changes in exports that are unrelated to the executive’s talent and actions, we show that globalization has affected executive pay not only through market channels but also through non-market channels. Furthermore, exogenous export shocks raise executive compensation mostly through bonus payments in poor-governance settings, in line with the hypothesis that globalization has enhanced the executive’s rent capture opportunities. Overall, these results indicate that globalization has played a more central role in the rapid growth of executive compensation and U.S. inequality than previously thought, and that rent capture is an important part of this story.

Lifetime Disadvantage, Discrimination and the Gendered Workforce (Chapter One)

Source: Susan Bisom-Rapp & Malcolm Sargeant, Thomas Jefferson School of Law Research Paper No. 2958253, posted May 3, 2017

Cambridge University Press, 2016

From the abstract:
Lifetime Disadvantage, Discrimination and the Gendered Workforce fills a gap in the literature on discrimination and disadvantage suffered by women at work by focusing on the inadequacies of the current law and the need for a new holistic approach. Each stage of the working life cycle for women is examined with a critical consideration of how the law attempts to address the problems that inhibit women’s labor force participation. By using their model of lifetime disadvantage, the authors show how the law adopts an incremental and disjointed approach to resolving the challenges, and argue that a more holistic orientation towards eliminating women’s discrimination and disadvantage is required before true gender equality can be achieved. Using the concept of resilience from vulnerability theory, the authors advocate a reconfigured workplace that acknowledges yet transcends gender.

The Economic Impact of Equal Pay by State

Source: Jessica Milli, Institute for Women’s Policy Research (IWPR), Fact Sheet, #C457 May 11, 2017

From the summary:
Persistent earnings inequality for working women translates into lower lifetime pay for women, less income for families, and higher rates of poverty across the United States. In each state in the country, women experience lower earnings and higher poverty rates than men. The economic impact of this persistent pay inequality is far-reaching: if women in the United States received equal pay with comparable men, poverty for working women would be reduced by half and the U.S. economy would have added $512.6 billion in wage and salary income (equivalent to 2.8 percent of 2016 GDP) to its economy. This fact sheet presents state-level data on the impact equal pay would have on poverty and each state’s economy as well as the families living in them.

What France and the UK can teach Trump about reviving America’s middle class

Source: Steven Pressman, The Conversation, May 11, 2017

America’s middle class is in deep trouble.

Signs of its decline are everywhere, from stagnant incomes and falling wealth to soaring household debt and the rise of populist politicians promising a return to the “glory days.”

While there is near universal agreement that a thriving middle class is essential to long-term economic prosperity, we’re deeply divided about what builds it. Conservatives, such as those in the White House and in control of Congress, contend that lower taxes are a key ingredient. Liberals argue it comes down to government policies that give low earners a leg up and support those already in the middle.
My own research on trends in the U.S. and eight other developed countries looks at what conditions create more middle-income households. If President Donald Trump really wants to help the working class voters who elected him, he should look to what other developed nations have been doing to sustain a large middle class.

His current proposals, I believe, will simply accelerate its erosion in the United States….

Related:
The fall of the USmiddle class and the hair-raising ascent of Donald Trump
Source: Steven Pressman, Real-World Economics Review, issue no. 78, 2017

According to Thomas Piketty (2014), between 1980 and 2010 the share of total US income going to the top 10% of earners rose from around 30 – 35%, where it stood for several decades, to nearly 50%. These are very conservative estimates. Piketty’s figures come from the distribution of adjusted gross income (AGI), reported by the US Internal Revenue Service. AGI subtracts from income things like investment losses, retirement account contributions and their returns (see Pressman 2015, Chapter 2). With large adjustments, someone can make a lot of money but have little AGI; or, as in the case of Donald Trump, you can report a negative AGI of nearly $1 billion. In addition, tax – free income (such as unrealized capital gains and interest on municipal bonds), as well as returns on money hidden in tax havens, are not reported to the IRS and do not appear in AGI. Like the adjustments helping Trump avoid taxes, this income mainly goes to the wealthy and has been growing for several decades (Zucman, 2015).

Lifetime Incomes in the United States over Six Decades

Source: Fatih Guvenen, Greg Kaplan, Jae Song, Justin Weidner, NBER Working Paper No. 23371, April 2017
(subscription required)

From the abstract:
Using panel data on individual labor income histories from 1957 to 2013, we document two empirical facts about the distribution of lifetime income in the United States. First, from the cohort that entered the labor market in 1967 to the cohort that entered in 1983, median lifetime income of men declined by 10%–19%. We find little-to-no rise in the lower three-quarters of the percentiles of the male lifetime income distribution during this period. Accounting for rising employer-provided health and pension benefits partly mitigates these findings but does not alter the substantive conclusions. For women, median lifetime income increased by 22%–33% from the 1957 to the 1983 cohort, but these gains were relative to very low lifetime income for the earliest cohort. Much of the difference between newer and older cohorts is attributed to differences in income during the early years in the labor market. Partial life-cycle profiles of income observed for cohorts that are currently in the labor market indicate that the stagnation of lifetime incomes is unlikely to reverse. Second, we find that inequality in lifetime incomes has increased significantly within each gender group. However, the closing lifetime gender gap has kept overall lifetime inequality virtually flat. The increase within gender groups is largely attributed to an increase in inequality at young ages, and partial life-cycle income data for younger cohorts indicate that the increase in inequality is likely to continue. Overall, our findings point to the substantial changes in labor market outcomes for younger workers as a critical driver of trends in both the level and inequality of lifetime income over the past 50 years.