Category Archives: Income Inequality/Gap

Earnings Inequality and Mobility Trends in the United States: Nationally Representative Estimates from Longitudinally Linked Employer-Employee Data

Source: John M. Abowd, Kevin L. McKinney, Nellie L. Zhao, Journal of Labor Economics, Volume 36, Number S1, January 2018
(subscription required)

From the abstract:
Decomposing the year-to-year changes in the earnings distribution from 2004 to 2013, we analyze the role of the employer in explaining earnings inequality in the United States. Movements between the bottom, middle, and top involve 20.5 million workers each year. Another 19.9 million move between employment and nonemployment. There are large gains from working at a top-paying firm for all skill types. Working for a high-paying firm produces benefits today, through higher earnings, that persist through an increase in the probability of upward mobility. High-paying firms facilitate moving workers to the top of the distribution and keeping them there.

A journey through a land of extreme poverty: welcome to America

Source: Ed Pilkington, The Guardian, December 15, 2017

The UN’s Philip Alston is an expert on deprivation – and he wants to know why 41m Americans are living in poverty. The Guardian joined him on a special two-week mission into the dark heart of the world’s richest nation…..

Related:
Statement on Visit to the USA
Source: Philip Alston – United Nations Special Rapporteur on extreme poverty and human rights, December 15, 2017

…..My visit coincides with a dramatic change of direction in US policies relating to inequality and extreme poverty. The proposed tax reform package stakes out America’s bid to become the most unequal society in the world, and will greatly increase the already high levels of wealth and income inequality between the richest 1% and the poorest 50% of Americans.  The dramatic cuts in welfare, foreshadowed by the President and Speaker Ryan, and already beginning to be implemented by the administration, will essentially shred crucial dimensions of a safety net that is already full of holes.  It is against this background that my report is presented.

The United States is one of the world’s richest and most powerful and technologically innovative countries; but neither its wealth nor its power nor its technology is being harnessed to address the situation in which 40 million people continue to live in poverty…..

An anti-poverty effort created jobs but didn’t fix inequality

Source: Alex Shashkevich, Futurity, November 2, 2017

New research examines former President Lyndon Johnson’s War on Poverty initiative in the 1960s and its legacy in American cities.

In an article in the Journal of Urban History, historian Claire Dunning argues that New Careers, one of Johnson’s lesser-known anti-poverty programs, and the theory behind it contributed to the growth of the nonprofit sector across the United States, but also perpetuated inequality in urban areas. It’s a lesson, Dunning says, that should not be forgotten…..

…..New Careers, which existed between the mid-1960s and early 1970s, awarded grants to a large swath of nonprofit sector organizations, which included large hospitals and schools, as well as small community daycares and health clinics, to create new human services positions for local workers who lacked professional training.

Dunning’s research shows that while New Careers created between 250,000 and 400,000 nonprofessional jobs, according to some estimates, it also inspired a wider approach to creating entry-level jobs in the human services fields. Those jobs—predominantly taken by African-African and Latina women who were typically excluded from contemporary job programs designed for men, like manufacturing—were low wage and without the promised career advancement that eager officials advertised, Dunning says…..

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New Careers for the Poor: Human Services and the Post-Industrial City
Source: Claire Dunning, Journal of Urban History, First Published August 26, 2017
(subscription required)

From the abstract:
In the 1960s, a new and popular theory of “new careers” proposed to address urban poverty and deindustrialization by growing the human services sector and hiring so-called nonprofessional workers to aid the delivery of those services. This strategy gained traction in social scientific, philanthropic, and bureaucratic circles and shaped Great Society legislation, which allocated federal grants to create entry-level jobs and professionalizing career ladders in the fields of health, education, and welfare. The implementation of this strategy had consequences for the human service organizations that received federal funds, as well as for the people hired into the new positions. Instead of building ladders to professional employment, efforts produced dead-end positions that left the predominantly African American women hired as aides in poverty. Even as the new careers experiment helped usher in a post-industrial economy, it reinforced the stratification of the labor market along lines of race, gender, and credentials.

Richest Americans Benefit Most from The Tax Cuts and Jobs Act

Source: Institute on Taxation and Economic Policy (ITEP), November 2017

From the introduction:
The Tax Cuts and Jobs Act, which was introduced on November 2 in the House of Representatives, would raise taxes on some Americans and cut taxes on others while also providing significant savings to foreign investors. Of those tax cuts that would benefit Americans, nearly a third would go to the richest one percent in 2018, and by 2027 that fraction would rise to nearly half. Because the legislation, which will be simply called the House bill in this report, includes provisions that raise taxes and provisions that cut taxes, the net effect for any particular family depends on their situation.  This report includes estimates of the House bill’s average impact on each income group and estimates of the fraction of each income group facing a tax cut or a tax hike. The estimates incorporate all the significant changes that the bill would make to the federal personal income tax, corporate income tax and estate tax, as explained in more detail in the methodology section. (See Table 1 and Table 2 for a detailed distributional analysis of the House Bill in 2018 and 2027.)

Some of the provisions in the House bill that benefit the middle-class — like lower tax rates and fewer brackets, an increased standard deduction, and a $300 tax credit for each adult in a household — are designed to expire or become less generous over time. Some of the provisions that benefit the wealthy, such as the reduction and eventual repeal of the estate tax, become more generous over time. The result is that by 2027, the benefits of the House bill become increasingly generous for the richest one percent compared to other income groups…..
Related:
State data
Spreadsheet of data

The Tax Debate We Need

Source: Marshall Steinbaum, Jacobin, October 20, 2017

Progressive taxation curbs the power of the wealthy — and that’s exactly why the Right hates it. ….

…. Given the Republicans’ control of every branch of government, their plan has a high probability of becoming law. This article will forecast the contours of the “tax debate” in the coming months, as they attempt to shepherd their legislative obscenity to passage.

But it will then take a step back and consider the role that progressive taxation plays in the economy, and why it must be at the top of any left-oriented policy agenda: because without progressive taxation, the privileged have never been peacefully toppled from their position of power over the economy. ….

Income Inequality and Household Labor

Source: Daniel Schneider, Orestes P Hastings, Social Forces, Advance articles, Published: 23 October 2017

From the abstract:
Income inequality has increased dramatically in the United States since the mid-1970s. This remarkable change in the distribution of household income has spurred a great deal of research on the social and economic consequences of exposure to high inequality. However, the empirical record on the effects of income inequality is mixed. In this paper, we suggest that previous research has generally overlooked a simple but important pathway through which inequality might manifest in daily life: inequality shapes the ability of women to outsource domestic labor by hiring others to perform it. One important venue where such dynamics might then manifest is in time spent on housework, and in particular in the time divide in housework between women of high and low socio-economic status. We combine micro-data from the 2003–2013 American Time Use Survey with area-level data on income inequality to show that the class divide in housework time between women with a college degree and from high-earning households and women of lower socio-economic status is wider in more unequal places. We further assess whether this gap can be explained by domestic outsourcing by combining micro-data from the 2003–2013 Consumer Expenditure Survey with area-level data on income inequality and show that the gap in spending for household services between households of high and low socio-economic status also increases in contexts of higher inequality.

White Lawmakers Are Using Alabama’s Racist State Constitution To Keep Black Wages Down

Source: Bryce Covert, In These Times, November 2017

Alabama wrote its 1901 constitution to “establish white supremacy.” Workers in a majority-black city say it’s Jim Crow all over again. ….

Just two years ago, these Fight for $15 workers and their allies won a minimum wage increase to $10.10 in Birmingham. It was short-lived. State lawmakers intervened before the law took effect, passing a preemption bill that undid the work of the City Council and the will of its constituents. Since Alabama doesn’t even have its own minimum wage, minimum-wage workers still make the federal wage of just $7.25 an hour.

“We want $10.10, we gonna do it again,” the crowd chanted.

The workers are using protests to pressure corporate employers and state legislators to raise their pay. But they’re not counting on it happening voluntarily. On April 28, 2016, workers in Birmingham filed a lawsuit accusing the state of racial animus and violating the U.S. Constitution’s 14th Amendment guarantee of equal protection.

The lawsuit offers a novel approach in a struggle taking place across the country as blue cities battle red states for self-determination. Republicans often extoll the virtue of local governmental control, but not, it seems, when it comes to progressive change…..

Millionaires or Job Creators: What Really Happens to Employment Growth When You Stick It to the Rich?

Source: Ahiteme N. Houndonougbo, Matthew N. Murray, Public Finance Review, Online First, Published September 27, 2017
(subscription required)

From the abstract:
We provide empirical evidence on the consequences of relatively higher tax burdens on the rich for aggregate employment growth using a newly constructed time series for 1947 through 2011 derived from the US Statistics of Income. In response to shifts in the relative federal tax burden toward the rich, we find statistically significant positive effects on employment growth in the short run and some evidence of negative effects on employment growth in the long run. Among our robustness checks, we use the Romer and Romer narrative record analysis to restrict our sample to a period of exclusively exogenous tax changes. The results hold in the restricted sample and are also consistent across alternative specifications and estimation methods, including unrestricted and Bayesian vector autoregressive.

Changes in U.S. Family Finances from 2013 to 2016: Evidence from the Survey of Consumer Finances

Source: Jesse Bricker, Lisa J. Dettling, Alice Henriques, Joanne W. Hsu, Lindsay Jacobs, Kevin B. Moore, Sarah Pack, John Sabelhaus, Jeffrey Thompson, and Richard A. Windle, Federal Reserve Bulletin, Vol. 103, No. 3, September 2017

The Federal Reserve Board’s triennial Survey of Consumer Finances (SCF) collects information about family incomes, net worth, balance sheet components, credit use, and other financial outcomes. The 2016 SCF reveals broad-based gains in income and net worth since the previous time the survey was conducted, in 2013.

During the three years between the beginning of the 2013 and 2016 surveys, real gross domestic product grew at an annual rate of 2.2 percent, the civilian unemployment rate fell from 7.5 percent to 5 percent, and the annual rate of change in the consumer price index averaged 0.8 percent. These changes in aggregate economic performance led to broadbased income gains across many different types of families. Several observations from the SCF about family incomes stand out:
• Between 2013 and 2016, median family income grew 10 percent, and mean family income grew 14 percent (figure 1).
• Families throughout the income distribution experienced gains in average real incomes between 2013 and 2016, reversing the trend from 2010 to 2013, when real incomes fell or remained stagnant for all but the top of the income distribution.
• Families at the top of the income distribution saw larger gains in income between 2013 and 2016 than other families, consistent with widening income inequality.
• Families without a high school diploma and nonwhite and Hispanic families experienced larger proportional gains in incomes than other families between 2013 and 2016, although more-educated families and white non-Hispanic families continue to have higher incomes than other families

Related:
U.S. Growth Starts to Help More People, But Wealthiest Win Most
Source: Craig Torres and Jordan Yadoo, Bloomberg, September 27, 2017