Category Archives: Income Inequality/Gap

Solidarity and disparity: Declining labor union density and changing racial and educational mortality inequities in the United States

Source: Jerzy Eisenberg‐Guyot, Stephen J. Mooney, Amy Hagopian, Wendy E. Barrington, Anjum Hajat, American Journal of Industrial Medicine, Early View, December 17, 2019
(subscription required)

From the abstract:
Recently, United States life expectancy has stagnated or declined for the poor and working class and risen for the middle and upper classes. Declining labor‐union density—the percent of workers who are unionized—has precipitated burgeoning income inequity. We examined whether it has also exacerbated racial and educational mortality inequities.

From CDC, we obtained state‐level all‐cause and overdose/suicide mortality overall and by gender, gender‐race, and gender‐education from 1986–2016. State‐level union density and demographic and economic confounders came from the Current Population Survey. State‐level policy confounders included the minimum wage, the generosity of Aid to Families with Dependent Children or Temporary Assistance for Needy Families, and the generosity of unemployment insurance. To model the exposure‐outcome relationship, we used marginal structural modeling. Using state‐level inverse probability of treatment‐weighted Poisson models, we estimated 3‐year moving average union density’s effects on the following year’s mortality rates. Then, we tested for gender, gender‐race, and gender‐education effect‐modification. Finally, we estimated how racial and educational all‐cause mortality inequities would change if union density increased to 1985 or 1988 levels, respectively.

Overall, a 10% increase in union density was associated with a 17% relative decrease in overdose/suicide mortality (95% confidence interval [CI]: 0.70, 0.98), or 5.7 lives saved per 100 000 person‐years (95% CI: −10.7, −0.7). Union density’s absolute (lives‐saved) effects on overdose/suicide mortality were stronger for men than women, but its relative effects were similar across genders. Union density had little effect on all‐cause mortality overall or across subgroups, and modeling suggested union‐density increases would not affect mortality inequities.

Declining union density (as operationalized in this study) may not explain all‐cause mortality inequities, although increases in union density may reduce overdose/suicide mortality.

There’s a pay penalty for certain speech patterns

Source: Futurity, November 12, 2019

The new paper by Jeffrey Grogger, a professor in urban policy at the Harris School of Public Policy at the University of Chicago, shows that workers with racially and regionally distinctive speech patterns earn lower wages compared to those who speak in the mainstream.

For Southern whites, speech-related wage differences are largely due to location, with Southern-sounding workers who live in rural areas earning less than those in urban areas.

For the black community, what Grogger calls “a sorting model” explains the wage difference, which can be significant. The term refers to African Americans who speak with what are perceived as mainstream accents sorting into jobs that involve intensive interactions with customers and coworkers—and earning a sizable wage premium in positions including lawyer, psychologist, dietitian, and social worker…..

Speech and Wages
Source: Jeffrey Grogger, Journal of Human Resources, Vol. 54 no. 4, Fall 2019
(subscription required)

From the abstract:
Although language has been widely studied, relatively little is known about how a worker’s speech, in his/her native tongue, is related to wages, or what explains the observed relationship. To address these questions, I analyzed audio data from respondents to the NLSY97. Wages are strongly associated with speech patterns among both African Americans and Southern whites. For Southern whites, this is largely explained by residential location. For blacks, it is explained by sorting: workers with mainstream speech sort toward occupations that involve intensive interpersonal interactions and earn a sizeable wage premium there.

CEO compensation has grown 940% since 1978 – Typical worker compensation has risen only 12% during that time

Source: Lawrence Mishel and Julia Wolfe, Economic Policy Institute, August 14, 2019

From the summary:
What this report finds: The increased focus on growing inequality has led to an increased focus on CEO pay. Corporate boards running America’s largest public firms are giving top executives outsize compensation packages. Average pay of CEOs at the top 350 firms in 2018 was $17.2 million—or $14.0 million using a more conservative measure. (Stock options make up a big part of CEO pay packages, and the conservative measure values the options when granted, versus when cashed in, or “realized.”) CEO compensation is very high relative to typical worker compensation (by a ratio of 278-to-1 or 221-to-1). In contrast, the CEO-to-typical-worker compensation ratio (options realized) was 20-to-1 in 1965 and 58-to-1 in 1989. CEOs are even making a lot more—about five times as much—as other earners in the top 0.1%. From 1978 to 2018, CEO compensation grew by 1,007.5% (940.3% under the options-realized measure), far outstripping S&P stock market growth (706.7%) and the wage growth of very high earners (339.2%). In contrast, wages for the typical worker grew by just 11.9%.

Why it matters: Exorbitant CEO pay is a major contributor to rising inequality that we could safely do away with. CEOs are getting more because of their power to set pay, not because they are increasing productivity or possess specific, high-demand skills. This escalation of CEO compensation, and of executive compensation more generally, has fueled the growth of top 1.0% and top 0.1% incomes, leaving less of the fruits of economic growth for ordinary workers and widening the gap between very high earners and the bottom 90%. The economy would suffer no harm if CEOs were paid less (or taxed more).

How we can solve the problem: We need to enact policy solutions that would both reduce incentives for CEOs to extract economic concessions and limit their ability to do so. Such policies could include reinstating higher marginal income tax rates at the very top; setting corporate tax rates higher for firms that have higher ratios of CEO-to-worker compensation; establishing a luxury tax on compensation such that for every dollar in compensation over a set cap, a firm must pay a dollar in taxes; reforming corporate governance to give other stakeholders better tools to exercise countervailing power against CEOs’ pay demands; and allowing greater use of “say on pay,” which allows a firm’s shareholders to vote on top executives’ compensation.

Press Release

Tax Justice Is Gender Justice

Source: National Women’s Law Center, November 2019

From the abstract:
The tax code sets the rules that shape our economy, reflecting and perpetuating notions of who and what our society values. It’s an opportunity to fight inequality. But today’s tax code contains outdated and often biased assumptions about family structures, marriage, participation in the paid workforce, and more that work together to perpetuate structural barriers against women, families with low incomes, and people of color. The tax code can be a barrier for realizing gender justice – but it can also be a tool. It’s time we take advantage.

Executive Summary

Reports include:
The Faulty Foundations of the Tax Code
Source: Ariel Jurow Kleiman (University of San Diego School of Law), Amy K. Matsui, and Estelle Mitchell, National Women’s Law Center, November 2019

This paper examines the outdated assumptions and gender and racial biases embedded in the U.S. tax code. It highlights tax code provisions that reflect and exacerbate gender disparities, with particular attention to those that disadvantage women with low incomes, women of color, members of the LGBTQ community, people with disabilities, and immigrants.

Reckoning With the Hidden Rules of Gender in the Tax Code
Source: Katy Milani, Melissa Boteach,Steph Sterling, Sarah Hassmer, Roosevelt Institute & National Women’s Law Center, November 2019

Low taxes for the wealthy and corporations have played a role in enabling – and in some cases encouraging – those with the highest incomes and the most capital to accumulate outsized wealth and power in our economy. Centuries of discrimination and subjugation of women and people of color interact today with widening income inequality, such that white, non-Hispanic men are disproportionately represented among the wealthiest households, while labor and economic contributions from women of color are consistently undervalued. An agenda to advance racial and gender justice must reckon with provisions in our tax code perpetuate and enable these inequities.

A Tax Code for the Rest of Us: A Framework & Recommendations for Advancing Gender & Racial Equity Through Tax Credits
Source: Melissa Boteach, Amy K. Matsui, Indivar Dutta-Gupta, Kali Grant, Funke Aderonmu, Rachel Black, Georgetown Institute on Poverty and Inequality & National Women’s Law Center, November 2019

While the U.S. income tax system is progressive overall, many aspects of the tax code reward wealth-building by the already wealthy and exclude low- and moderate-income families. Given the historical discrimination and ongoing structural barriers that have locked women and people of color out of economic opportunity, such tax provisions not only exacerbate economic inequality, but also amplify gender and racial disparities. This report considers the question: how can our tax code build on the success of the EITC and CTC to better dismantle structural barriers that impede economic security and wealth-building for women and people of color? It ultimately proposes a framework to help policymakers, advocates, and the public evaluate when and how refundable tax credits can advance equity, economic mobility, and opportunity for all.

The Costs of Being Poor: Inflation Inequality Leads to Three Million More People in Poverty

Source: Christopher Wimer, Sophie Collyer, Xavier Jaravel, Columbia University, Center on Poverty and Social Policy and London School of Economics, November 2019

From the summary:
It is widely recognized that income inequality has skyrocketed in recent decades. Incomes at the top of the distribution have grown rapidly, far outpacing income growth at the bottom. Recent research also shows that prices have risen more quickly for people at the bottom of the income distribution than for those at the top —a phenomenon dubbed “inflation inequality.” An implication of this new finding is that we may be under-estimating income inequality and poverty rates in the United States—two national statistics that rely heavily on the annual inflation rate as part of their calculation. In this brief, we utilize an adjusted inflation index that accounts for inflation inequality across the income distribution and re-estimate recent trends in poverty and income inequality from 2004 to 2018. Our adjusted inflation index indicates that 3.2 million more people are classified as living in poverty in 2018, and that real household income for the bottom 20 percent of the income distribution actually declined by more than 7 percent since 2004. These results show that inflation inequality significantly accentuates both the incidence of poverty and income inequality.

The Unequal Race for Good Jobs: How Whites Made Outsized Gains in Education and Good Jobs Compared to Blacks and Latinos

Source: Anthony P. Carnevale, Jeff Strohl, Artem Gulish, Martin Van Der Werf, Kathryn Peltier Campbell, Georgetown University Center on Education and the Workforce, 2019

From the summary:
Inequities in access to good jobs by race and ethnicity have grown in past decades. The Unequal Race for Good Jobs: How Whites Made Outsized Gains in Education and Good Jobs Compared to Blacks and Latinos explores how White workers have relied on their educational and economic privileges to build disproportionate advantages in the educational pipeline and the workforce. Black and Latino workers, on the other hand, have strived to overcome discrimination, racism, and other injustices that continue to perpetuate earnings inequality. Policy changes can help narrow these equity gaps; otherwise, they will continue for generations to come.

Executive Summary
Press Release

State Higher Education Funding Cuts Have Pushed Costs to Students, Worsened Inequality

Source: Michael Mitchell, Michael Leachman, Matt Saenz, Center on Budget and Policy Priorities, October 24, 2019

From the introduction:
Deep state cuts in funding for higher education over the last decade have contributed to rapid, significant tuition increases and pushed more of the costs of college to students, making it harder for them to enroll and graduate. These cuts also have worsened racial and class inequality, since rising tuition can deter low-income students and students of color from college.

Overall state funding for public two- and four-year colleges in the school year ending in 2018 was more than $6.6 billion below what it was in 2008 just before the Great Recession fully took hold, after adjusting for inflation. In the most difficult years after the recession, colleges responded to significant funding cuts by increasing tuition, reducing faculty, limiting course offerings, and in some cases closing campuses. Funding has rebounded somewhat, but costs remain high and services in some places have not returned.

The potential benefits of a college degree are significant, with greater lifetime earnings for those who obtain a bachelor’s degree relative to those who only receive a high school diploma. But cuts to higher education, rising tuition, and stagnant household earnings make it difficult for today’s students — a cohort more racially and economically diverse than any before it — to secure those benefits….

The future of work in black America

Source: Kelemwork Cook, Duwain Pinder, Shelley Stewart III, Amaka Uchegbu, Jason Wright, McKinsey October 2019

From the summary:
There is a well-documented, persistent, and growing racial wealth gap between African American families and white families in the United States. Studies indicate the median white family in the United States holds more than ten times the wealth of the median African American family.

Apart from its obvious negative impact on African American individuals, families, and communities, the racial wealth gap constrains the entire US economy. In a previous report, we projected that closing the racial wealth gap could net the US economy between $1.1 trillion and $1.5 trillion by 2028.

Despite this, the racial wealth gap threatens to grow as norms, standards, and opportunities in the current US workplace change and exacerbate existing income disparities. One critical disrupter will be the adoption of automation and other digital technologies by companies worldwide. According to estimates from the McKinsey Global Institute, companies have already invested between $20 billion and $30 billion in artificial intelligence technologies and applications. End users, businesses, and economies are hoping to significantly increase their productivity and capacity for innovation through using such technologies.

The economic impact of closing the racial wealth gap
Source: Nick Noel, Duwain Pinder, Shelley Stewart III, and Jason Wright, McKinsey, August 2019

From the summary:
The persistent racial wealth gap in the United States is a burden on black Americans as well as the overall economy. New research quantifies the impact of closing the gap and identifies key sources of this socioeconomic inequity.

The United States has spent the past century expanding its economic power, and it shows in American families’ wealth. Despite income stagnation outside the circle of high earners, median family wealth grew from $83,000 in 1992 to $97,000 in 2016 (in 2016 dollars).

Beyond the overall growth in top-line numbers, however, the growth in household wealth (defined as net worth—the net value of each family’s liquid and illiquid assets and debts) has not been inclusive. In wealth, black individuals, families, and communities tend to lag behind their white counterparts. Indeed, the median white family had more than ten times the wealth of the median black family in 2016 (Exhibit 1). In fact, the racial wealth gap between black and white families grew from about $100,000 in 1992 to $154,000 in 2016, in part because white families gained significantly more wealth (with the median increasing by $54,000), while median wealth for black families did not grow at all in real terms over that period…..

Financial Asset Inequality and Its Implications for Retirement Security

Source: Nari Rhee, Tyler Bond, National Institute on Retirement Security, Issue Brief, September 2019

From the summary:

A new research brief finds that financial asset inequality among Americans continues to increase, and the inequality is consistent across generations. This wealth inequality, combined with dangerously low retirement savings among most households, poses a significant threat to retirement for working Americans.

The new analysis indicates that from 2004 to 2016, the share of financial assets owned by the top 25 percent of Baby Boomer households grew from 86 percent to 91 percent. Meanwhile, the share of assets owned by the bottom 50 percent of Baby Boomer households shrank from three percent in 2004 to below two percent in 2016.

Among GenX households, the wealthiest top 25 percent owned 87 percent of financial assets in 2016. Millennials in 2016 reached a comparable degree of financial asset concentration, with 85 percent of financial assets owned by the wealthiest 25 percent.

The research brief also recommends three well-established public policies to help improve retirement security for working Americans:

Why Are Some Places So Much More Unequal Than Others?

Source: Jaison R. Abel and Richard Deitz, Federal Reserve Bank of New York, Economic Policy Review, Forthcoming [2019]

From the abstract:
This study examines the magnitude and sources of regional wage inequality in the United States. The authors find that, as in the nation as a whole, wage inequality has increased in nearly every metropolitan area since the early 1980s, though there is significant variation among places in both the degree of wage inequality and the pace at which it has risen. The most unequal places tend to be large urban areas that have benefited from strong demand for skill and agglomeration economies, with these factors leading to particularly rapid wage growth for high-skilled workers. The least unequal places tend to have seen weak demand for labor, largely as a consequence of technological change and globalization, and this weakness has led to lackluster wage growth across the entire wage distribution— particularly for middle- and lower-skilled workers. These findings suggest that a relatively low level of regional wage inequality is often the result of a weakening local economy, while relatively high regional wage inequality is often a consequence of strong but uneven economic growth.