Category Archives: Income Inequality/Gap

Genes, Education, and Labor Market Outcomes: Evidence from the Health and Retirement Study

Source: Nicholas W. Papageorge, Kevin Thom, NBER Working Paper No. 25114, September 2018
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From the abstract:
Recent advances have led to the discovery of specific genetic variants that predict educational attainment. We study how these variants, summarized as a linear index — known as a polygenic score — are associated with human capital accumulation and labor market outcomes in the Health and Retirement Study (HRS). We present two main sets of results. First, we find evidence that the genetic factors measured by this score interact strongly with childhood socioeconomic status in determining educational outcomes. In particular, while the polygenic score predicts higher rates of college graduation on average, this relationship is substantially stronger for individuals who grew up in households with higher socioeconomic status relative to those who grew up in poorer households. Second, the polygenic score predicts labor earnings even after adjusting for completed education, with larger returns in more recent decades. These patterns suggest that the genetic traits that promote education might allow workers to better accommodate ongoing skill biased technological change. Consistent with this interpretation, we find a positive association between the polygenic score and non-routine analytic tasks that have benefited from the introduction of new technologies. Nonetheless, the college premium remains the dominant determinant of earnings differences at all levels of the polygenic score. Given the role of childhood SES in predicting college attainment, this raises concerns about wasted potential arising from limited household resources.

It’s better to be born rich than gifted
Source: Andrew Van Dam, Washington Post, Wonkblog, October 9, 2018

The least-gifted children of high-income parents graduate from college at higher rates than the most-gifted children of low-income parents.

Income data from the Census may not tell full story on middle-class trends

Source: Gary Burtless and Christopher Pulliam, Brookings Institution, Up Front, September 17, 2018

…. The resulting news stories deserve our attention, but it is important to keep a vital question in mind: Does the CPS give us an accurate picture of household incomes?

In many recent years, the answer has been “No.” Compared to the national income and product accounts (NIPA) produced by the Bureau of Economic Analysis (BEA), the CPS often gives us a strikingly different picture of the recent trend in household income. ….

Damages Done: The Longitudinal Impacts of Natural Hazards on Wealth Inequality in the United States

Source: Junia Howell, James R Elliott, Social Problems, Advance Access, August 14, 2018
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From the abstract:
This study investigates a largely ignored contributor to wealth inequality in the United States: damages from natural hazards, which are expected to increase substantially in coming years. Instead of targeting a specific large-scale disaster and assessing how different subpopulations recover, we begin with a nationally representative sample of respondents from the restricted, geocoded Panel Study of Income Dynamics. We follow them through time (1999–2013) as hazard damages of varying scales accrue in the counties where they live. This design synthesizes the longitudinal, population-centered approach common in stratification research with a broad hazard-centered focus that extends beyond disasters to integrate ongoing environmental dynamics more centrally into the production of social inequality. Results indicate that as local hazard damages increase, so does wealth inequality, especially along lines of race, education, and homeownership. At any given level of local damage, the more aid an area receives from the Federal Emergency Management Agency, the more this inequality grows. These findings suggest that two defining social problems of our day – wealth inequality and rising natural hazard damages – are dynamically linked, requiring new lines of research and policy making in the future.

Does Socioeconomic Status Account for Racial and Ethnic Disparities in Childhood Cancer Survival?

Source: Rebecca D. Kehm, Logan G. Spector, Jenny N. Poynter, David M. Vock, Sean F. Altekruse, Theresa L. Osypuk, Cancer, Early View, First published: 20 August 2018

From the abstract:
For many childhood cancers, survival is lower among non‐Hispanic blacks and Hispanics in comparison with non‐Hispanic whites, and this may be attributed to underlying socioeconomic factors. However, prior childhood cancer survival studies have not formally tested for mediation by socioeconomic status (SES). This study applied mediation methods to quantify the role of SES in racial/ethnic differences in childhood cancer survival.

This study used population‐based cancer survival data from the Surveillance, Epidemiology, and End Results 18 database for black, white, and Hispanic children who had been diagnosed at the ages of 0 to 19 years in 2000‐2011 (n = 31,866). Black‐white and Hispanic‐white mortality hazard ratios and 95% confidence intervals, adjusted for age, sex, and stage at diagnosis, were estimated. The inverse odds weighting method was used to test for mediation by SES, which was measured with a validated census‐tract composite index.

Whites had a significant survival advantage over blacks and Hispanics for several childhood cancers. SES significantly mediated the race/ethnicity–survival association for acute lymphoblastic leukemia, acute myeloid leukemia, neuroblastoma, and non‐Hodgkin lymphoma; SES reduced the original association between race/ethnicity and survival by 44%, 28%, 49%, and 34%, respectively, for blacks versus whites and by 31%, 73%, 48%, and 28%, respectively, for Hispanics versus whites ((log hazard ratio total effect – log hazard ratio direct effect)/log hazard ratio total effect).

SES significantly mediates racial/ethnic childhood cancer survival disparities for several cancers. However, the proportion of the total race/ethnicity–survival association explained by SES varies between black‐white and Hispanic‐white comparisons for some cancers, and this suggests that mediation by other factors differs across groups.

CEO compensation surged in 2017

Source: Lawrence Mishel and Jessica Schieder, Economic Policy Institute, August 16, 2018

What this report finds: This report looks at trends in chief executive officer (CEO) compensation, using two different measures. The first measure includes stock options realized (in addition to salary, bonuses, restricted stock grants, and long-term incentive payouts). By this measure, in 2017 the average CEO of the 350 largest firms in the U.S. received $18.9 million in compensation, a 17.6 percent increase over 2016. The typical worker’s compensation remained flat, rising a mere 0.3 percent. The 2017 CEO-to-worker compensation ratio of 312-to-1 was far greater than the 20-to-1 ratio in 1965 and more than five times greater than the 58-to-1 ratio in 1989 (although it was lower than the peak ratio of 344-to-1, reached in 2000). The gap between the compensation of CEOs and other very-high-wage earners is also substantial, with the CEOs in large firms earning 5.5 times as much as the average earner in the top 0.1 percent.

The surge in CEO compensation measured with realized stock options was driven by the stock-related components of CEO compensation (stock awards and cashed-in stock options), not by changes in salaries or cash bonuses.

Because the decision to realize, or cash in, stock options tends to fluctuate with current and potential stock market trends (as people tend to cash in their stock options when it is most advantageous to do so), we also look at another measure of CEO compensation, to get a more complete picture of trends in CEO compensation. This measure tracks the value of stock options at the time they are granted. By this measure, CEO compensation rose to $13.3 million in 2017, up from $13.0 million in 2016.

By either measure, CEO compensation is very high relative to the compensation of a typical worker—and an earner in the top 0.1 percent.

CEO compensation has grown far faster than stock prices or corporate profits. CEO compensation rose by 979 percent (based on stock options granted) or 1,070 percent (based on stock options realized) between 1978 and 2017. The corresponding 637 percent growth in the stock market (S & P Index) was far lower. Both measures of compensation are substantially greater than the painfully slow 11.2 percent growth in the typical worker’s compensation over the same period and at least three times as fast as the 308 percent growth of wages for the very highest earners, those in the top 0.1 percent….

Unequal Cities, Unequal Participation: The Effect of Income Inequality on Civic Engagement

Source: Eric Joseph van Holm, American Review of Public Administration, Online First, Published July 30, 2018
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From the abstract:
Civic participation is a touchstone of American government, yet it has declined steadily over the past 50 years. Alongside changes in the relationship between American citizens and their government has been a stark increase in the levels of income and wealth concentration. While there is strong evidence that income inequality drives down participation at the national level, there have been fewer studies on the effects for local governments. This article studies the relationship between participation in departmental policy making and income inequality at the local level across the United States in a sample of small and mid-sized cities. When accounting for aspects of the government’s structure, local department culture, and community demographics, income inequality has a significant, though mixed, effect on civic participation. While changes in a community’s income inequality diminish the likelihood of citizens participating in government decision making, the present level of income inequality correlates with higher rates of engagement.

Pay No Attention to the Inequality Behind the Curtain! Corporate critics cry foul when SEC releases CEO pay data.

Source: John Miller, Dollars and Sense, no. 337, July/August 2018

It could have been a scene straight out of The Wizard of Oz.

This spring the Securities and Exchange Commission (SEC) began releasing data that exposes the unthinkably high ratio of CEO pay to that of their employees—4,987-to-one in one case. Then corporate critics shouted in near unison to pay no attention to those figures behind the curtain: They are misleading, ginned up merely to inflame class hatred, and sure to be a real downer for workplace morale. But despite the complaints of the defenders of the status quo, the SEC figures accurately portray just how unequal U.S. corporate compensation has become.

Pay Equity: What You Don’t Do Can Hurt You

Source: Maureen Minehan, Employment Alert, Volume 35 Issue 16, August 6, 2018
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$2.66 million. That’s the amount of money the University of Denver has agreed to pay to settle claims it paid full female professors in its law school less than their male counterparts.

Despite warnings that pay equity was high on the Equal Opportunity Commission (EEOC)’s priority list, the institution of higher education allegedly paid female full professors in its Sturm College of Law an average of $20,000 less per year than male full professors for substantially equal work under similar working conditions. The salary disparity wasn’t confined to just a portion of the female full professors. According to the EEOC’s lawsuit, the salaries of all seven female full professors in the school were below the average salary paid to men.

Connecticut in Crisis: How inequality is paralyzing ‘America’s country club’

Source: Jared Bennett, Center for Public Integrity, July 25, 2018

The state is caught in an economic straitjacket and there’s no easy way out…..

…. Blue chip companies like General Electric have either left or are threatening to leave. A yawning budget deficit continues to loom over the state, amplified by some of the nation’s most glaring economic inequality. Greenwich, home to hedge funders and Manhattan corporate titans, and the Norman Rockwell suburbs of Westport, New Canaan and Darien share few priorities with Hartford, New Haven and Bridgeport, gritty cities struggling with searing poverty and fiscal disaster. Connecticut’s political leaders must choose between what seem like equally rotten options: cut services, and push more burden onto the urban poor, or hike taxes, and risk repelling both the suburban rich who pay much of the freight and new businesses that might consider moving here. Put simply, Connecticut is in a bind with precious little room to maneuver.

Connecticut’s troubles are extreme but hardly unique. The recovery that has entrenched Connecticut into the haves and have-nots has been unequal in other regions as well – from Florida to California and down to Texas. As the stock market climbs but wages remain relatively flat, the Constitution State serves as a troubling bellwether of national priorities that seem to favor wealth creation for the few before investments in the broader economy. ….

Federal Tax Cuts in the Bush, Obama, and Trump Years

Source: Steve Wamhoff, Matthew Gardner, Institute on Taxation and Economic Policy (ITEP), Analysis, July 2018

From the introduction:
Since 2000, tax cuts have reduced federal revenue by trillions of dollars and disproportionately benefited well-off households. From 2001 through 2018, significant federal tax changes have reduced revenue by $5.1 trillion, with nearly two-thirds of that flowing to the richest fifth of Americans, as illustrated in Figure 1.

The cumulative impact on the deficit during this period is $5.9 trillion, including interest payments. By the end of 2025, the tally of tax cuts will grow to $10.6 trillion. Nearly $2 trillion of this amount will have gone to the richest 1 percent. By then, the total impact on the deficit will be $13.6 trillion, including interest payments.

This analysis does not include hundreds of billions of dollars in so-called tax cut “extenders” for corporations and other businesses that Congress has periodically enacted under each administration. More detailed figures are provided in the tables in Appendix I…..

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