Category Archives: Income Inequality/Gap

To Fight Inequality, Support Women’s Work

Source: Judith Warner, Center for American Progress, September 29, 2015

From the summary:
…The dual awareness that women’s work serves as an income equalizer among households and that family-friendly policies, by extension, are essential tools in fighting income inequality has been slow to take root on this side of the Atlantic. In recent years, it instead has been fashionable in the United States to point to studies showing that women’s work has actually worsened income inequality. That conversation has focused on “assortative mating”—the practice of people marrying others like them, in this case, others with a similar education level—to argue that the widespread movement of women into the workplace since the 1970s has brought high-earning men and women together into even more high-earning households in an entirely new way.

This report will argue that this line of reasoning is misleading and—worse—pernicious: It is the latest in a set of destructive attitudes that have kept the United States from moving forward with the rest of the industrialized world in adopting policies that support women’s employment….

Measuring wage inequality within and across U.S. metropolitan areas, 2003–13

Source: J. Chris Cunningham, U.S. Bureau of Labor Statistics, Monthly Labor Review, September 2015

From the abstract:
This article shows that location, size, and occupational composition play important roles in determining the level of wage inequality within and across U.S. metropolitan areas. Larger areas, especially in the Northeast and on the West Coast, typically have greater wage inequality, while smaller areas, many of which are in the South and Midwest, have less inequality. Metropolitan areas with high concentrations of employment in higher paying occupations also tend to have greater inequality.

The many ways to measure economic inequality

Source: Drew DeSilver, Pew Research Center, Fact Tank, September 22, 2015

Issues of economic inequality have pushed their way back into the national and global conversation – from Pope Francis and Sen. Bernie Sanders to Thomas Piketty and ongoing debates about raising the minimum wage. Surveys, though, show a wide partisan gap in views of whether inequality is a problem that should be addressed. For instance, an NBC News/Wall Street Journal poll in January found that, while 67% of Democrats identified reducing income inequality as an “absolute priority,” just 19% of Republicans did. And economists are also divided on just how to define and measure inequality…..

The Growing Gap in Life Expectancy by Income: Implications for Federal Programs and Policy Responses

Source: Committee on the Long-Run Macroeconomic Effects of the Aging U.S. Population; Committee on Population–Phase II; Division of Behavioral and Social Sciences and Education; Board on Mathematical Sciences and Their Applications; Division on Engineering and Physical Sciences; The National Academies of Sciences, Engineering, and Medicine, ISBN: 978-0-309-31707-8, 2015

From the abstract:
The U.S. population is aging. Social Security projections suggest that between 2013 and 2050, the population aged 65 and over will almost double, from 45 million to 86 million. One key driver of population aging is ongoing increases in life expectancy. Average U.S. life expectancy was 67 years for males and 73 years for females five decades ago; the averages are now 76 and 81, respectively. It has long been the case that better-educated, higher-income people enjoy longer life expectancies than less-educated, lower-income people. The causes include early life conditions, behavioral factors (such as nutrition, exercise, and smoking behaviors), stress, and access to health care services, all of which can vary across education and income.

The Gender Wage Gap: 2014

Source: Ariane Hegewisch, Heidi Hartmann, Institute for Women’s Policy Research, Fact Sheet, IWPR #C433, September 2015

From the abstract:
The ratio of women’s and men’s median annual earnings was 78.6 percent for full-time/year-round workers in 2014. This means the gender wage gap for full-time/year-round workers is 21.4 percent. Women’s median annual earnings in 2014 were $39,621 compared with $50,383 for men. Neither women’s nor men’s earnings significantly improved compared to 2013. If the pace of change in the annual earnings ratio continues at the same rate as it has since 1960, it will take another 45 years, until 2059, for men and women to reach parity.

Why the Rich Are So Much Richer

Source: James Surowiecki, New York Review of Books, Volume 62 Number 14, September 24, 2015

The fundamental truth about American economic growth today is that while the work is done by many, the real rewards largely go to the few. The numbers are, at this point, woefully familiar: the top one percent of earners take home more than 20 percent of the income, and their share has more than doubled in the last thirty-five years. The gains for people in the top 0.1 percent, meanwhile, have been even greater. Yet over that same period, average wages and household incomes in the US have risen only slightly, and a number of demographic groups (like men with only a high school education) have actually seen their average wages decline….

Taxation and Inequality in Canada and the United States: Two Stories or One?

Source: Richard M. Bird, Eric M. Zolt, University of California, Los Angeles (UCLA) – School of Law, Law-Econ Research Paper No. 15-15, August 28, 2015

From the abstract:
Canada and the United States have both experienced a substantial increase in income inequality over the last several decades. In this article, we examine the complex interaction of income inequality with tax and transfer systems in Canada and the United States. We begin by comparing the data on taxation and expenditure to understand the similarities and differences between the two countries. We then consider how changes to tax and transfer policies have affected the levels of inequality in both countries. The article concludes by offering some policy recommendations that each country may consider to address the increasing levels of inequality.

Understanding the Historic Divergence Between Productivity and a Typical Worker’s Pay Why It Matters and Why It’s Real

Source: Josh Bivens and Lawrence Mishel, Economic Policy Institute, Briefing Paper #406, September 2, 2015

From the press release:
In the decades following World War II, inflation-adjusted hourly compensation for the vast majority of American workers rose in line with economy-wide productivity. Since the 1970s, however, hourly compensation for the typical worker has essentially stagnated, even as net productivity continues to increase. This trend continues to present day. From 2000 to 2014, net productivity grew by 21.6 percent, while the hourly compensation of a typical worker grew by just 1.8 percent. EPI has long-documented the productivity-pay divergence in work that has been widely cited by economists and policymakers concerned with growing income inequality. In Understanding the Historic Divergence between Productivity and a Typical Worker’s Pay, EPI President Lawrence Mishel and Research and Policy Director Josh Bivens update their research and address several critiques of their analysis…. Mishel and Bivens identify three “wedges” that are responsible for the disparity between productivity and worker pay. Two are elements of income inequality: a falling share of income going to workers relative to capital owners and widening inequality of compensation. These inequality-related wedges explain more than 80 percent of the pay-productivity divergence since 2000…. The third wedge responsible for the productivity-pay gap is the difference between the rising costs of consumer goods compared to economy-wide output, sometimes referred to as the “terms of trade.” The prices of things that workers buy—as measured by consumer price indices—have risen faster than prices of economy-wide output (which includes non-consumption items like exports, government purchases and investment goods). Mishel and Bivens argue that this discrepancy, which has shrunk in the 2000-2014 period, is a reflection of actual dynamics in the economy and not simply a statistical anomaly that should be ignored by analysts….
Introduction and key findings

Inequality When Effort Matters

Source: Martin Ravallion, National Bureau of Economic Research (NBER), NBER Working Paper No. w21394, July 2015
(subscription required)

From the abstract:
It is sometimes argued that poorer people choose to work less, implying less welfare inequality than suggested by observed incomes. Social policies have also acknowledged that efforts differ, and that people respond to incentives. Prevailing measures of inequality (in outcomes or opportunities) do not, however, measure incomes consistently with personal choices of effort. The direction of bias is unclear given the heterogeneity in efforts and preferences. Data on the labor supplies of single American adults suggest that adjusting for effort imposing common preferences attenuates inequality, although the effect is small. Allowing for preference heterogeneity consistently with behavior suggests higher inequality.

The Future of Work and Workers

Source: Pacific Standard, 2015

A special project in which business and labor leaders, social scientists, technology visionaries, activists, and journalists weigh in on the most consequential changes in the workplace.

Articles include:
Stagnation, Automation … Frustration
Source: Steven Greenhouse, August 27, 2015
….Let’s explore two major workplace issues, starting with wage stagnation. This is a huge problem, and unfortunately many Americans don’t realize how serious it is. Wages for the typical worker are up just 1.6 percent over the past six years, and, believe it or not, after-inflation wages remain below where they were in 1973. Try to raise a family on that. Median household income—$52,250—remains 8.6 percent or nearly $5,000 below its peak back in 2000. Forty-two percent of American workers earn less than $15 an hour—that translates to just $31,200 a year for a full-time worker…. One doesn’t have to be an Einstein to realize that wage stagnation has contributed to America’s income inequality—the worst it’s been since the Gilded Age of the 1920s. … A second major issue: the effects of automation. For more than a century, economists have maintained that new technologies create as many jobs as they destroy. …

The World Needs a New Business Model
Source: Sharan Burrow, Pacific Standard, August 26, 2015
….The world needs a new business model. The world’s GDP has trebled since 1980, yet inequality is at historic levels. The hidden workforce of the richest companies in the world work long hours for poverty wages, too often in unsafe environments or with unsafe products…..

Creative Destruction and the New World of Work
Source: John Irons & Alyson Wise, Pacific Standard, August 25, 2015
….With technology proliferating at an increasingly rapid pace, we face a pressing need for modernized labor laws, systems, and organizations that will promote greater resilience and inclusion. Creating these will require us to re-frame, re-imagine, and build upon Joseph Schumpeter’s notion of creative destruction. This is both a challenge and an opportunity for the 21st century…..

Preparing Students for a Changing World of Work
Source: Freeman A. Hrabowski III, Pacific Standard, August 24, 2015
Our nation’s workforce continues to evolve in a workplace transformed by new ideas, products, processes and services—the offspring of our highly productive innovation ecosystem. At the same time, the workforce is affected by increasing globalization and major demographic shifts—including an aging Baby Boomer generation and growing minority and immigrant populations. These changes have created a more competitive economy that affects the substance and conditions of the work we will do across occupations, the participation of underserved groups in the economy, and the ways colleges and universities prepare students for careers….

Caring for the Crowdworker Going It Alone
Source: Mary L. Gray, Pacific Standard, August 21, 2015
…..While we must develop robust mechanisms that prevent individuals from scamming platforms in the on-demand economy, we must with equal vigilance penalize employers for misclassifying, delaying, or failing to pay workers, one of the greatest challenges facing those making a living at freelancing today. Supporting the many people who may never enjoy the security of a 40-hour workweek will be one of the most important conversations we have about the on-demand sharing economy…..

Shorter Hours, Higher Pay
Source: Dorothy Sue Cobble, Pacific Standard, August 20, 2015
Most Americans work too much and are paid too little. Reversing these trends is the most important thing we can do to improve the lives of workers and their families today. Time and money are connected but not in the way we often think. For all too long we’ve been trying to raise our pay by lengthening our hours. In truth, we need to shorten our hours. Then and only then will we be able to raise our pay…..

Organize the Immigrant Workers
Source: Kent Wong, Pacific Standard, August 19, 2015
….The United States is home to 11 million undocumented immigrants. A national campaign for legalization and a path to citizenship has repeatedly been blocked in Congress. But immigrant workers are actively forming and joining unions. Their emergence as a powerful force bodes well for the future of the U.S. labor movement and is an inspiration to other workers struggling for justice and dignity in the U.S. and throughout the world. ….The American labor movement will be well served if it continues to advance an aggressive campaign to organize immigrant workers and to build a new labor movement for the new working class…..

The Transformation of Work at the Heart of Middle East Unrest
Source: Ragui Assaad, Pacific Standard, August 18, 2015
He is a 28-year-old Egyptian with a degree in sociology. He graduated six years ago and has since had three jobs as a waiter in various Cairo coffee shops and restaurants. He wants to marry but can’t convince his sweetheart’s parents he is ready, given his employment situation. He lives with his parents, both government employees who will soon retire with government pensions. He, on the other hand, can only dream of a job that would guarantee him a pension. Millions of educated youth like this find themselves shut out of the middle class because of an inability to convert their education into the kind of decent job their parents found a generation ago. Even as access to education has expanded dramatically in the region, the quality of employment for educated workers has deteriorated markedly. I’d argue that the gap between what these young people expected for their education and what they have achieved is the main source of the anger and frustration driving the Arab uprisings….

Who Owns the Robot in Your Future Work Life?
Source: Richard Freeman, Pacific Standard, August 17, 2015
….The key to whether we all benefit from robots at work or whether robots exacerbate the inequality of income between the super-wealthy few and the rest of society depends on who owns the robot. The first law of a robotized labor market is that as artificial intelligence and computing power improve, robots will better substitute for human work. The second law is that technological progress will reduce the cost of the robot substitutes over time. The third law, a corollary of laws one and two, is that the wages of workers in occupations undergoing robotization will fall…..

Labor Law Must Catch Up
Source: Richard L. Trumka & Craig Becker, Pacific Standard, August 14, 2015
American workers will continue to become more productive as the digital revolution advances. But United States labor law must be reconstructed to recognize changes in work and the employment relationship and to once again effectively permit workers to organize and designate representatives to bargain with their employers. Otherwise, workers will not share the increased income generated by their productivity, ultimately threatening economic growth….

The Water Cooler and the Fridge
Source: Mario L. Small, Pacific Standard, August 13, 2015
….The simple opportunity to run into others may be one of the most overlooked privileges of modern work life, and the one aspect of the office that work from home can rarely replicate. The water cooler chat became ubiquitous in the workplace because talk, as water, sustains life. One cannot run into colleagues on the way to one’s refrigerator….

We Have Been Here Before
Source: Paul Saffo, Pacific Standard, August 12, 2015
This is not the first time society has fretted over the impact of ever-smarter machines on jobs and work—and not the first time we have overreacted. In the Depression-beset 1930s, labor Jeremiahs warned that robots would decimate American factory jobs. Three decades later, mid-1960s prognosticators offered a hopeful silver lining to an otherwise apocalyptic assessment of automation’s dark cloud: the displacement of work and workers would usher in a new “leisure society.”….

Why Wages Aren’t Keeping Up
Source: Robert Solow, Pacific Standard, August 11, 2015
One of the more puzzling and damaging features of the American labor market in the last few decades has been the failure of real (i.e. inflation-adjusted) wages and benefits to keep up with the increase in productivity. …. The custom is to think of value added in a corporation (or in the economy as a whole) as just the sum of the return to labor and the return to capital. But that is not quite right. There is a third component which I will call “monopoly rent” or, better still, just “rent.” It is not a return earned by capital or labor, but rather a return to the special position of the firm. ….The suggestion I want to make is that one important reason for the failure of real wages to keep up with productivity is that the division of rent in industry has been shifting against the labor side for several decades. This is a hard hypothesis to test in the absence of direct measurement. But the decay of unions and collective bargaining, the explicit hardening of business attitudes, the popularity of right-to-work laws, and the fact that the wage lag seems to have begun at about the same time as the Reagan presidency all point in the same direction: the share of wages in national value added may have fallen because the social bargaining power of labor has diminished. This is not to say that international competition and the biased nature of new technology have no role to play, only that they are not the whole story. Internal social change and the division of rent matter too…..

A Nightmare Scenario—and Three Things That Might Prevent It
Source: Andrew Schrank, Pacific Standard, August 10, 2015
What worries me most about the future of work and workers is the possibility that the technological determinists are right, or that scientific innovation will outpace social adaptation and wreak political and economic havoc. Skilled as well as unskilled workers would be replaced by robots and computers. Jobs that couldn’t be automated would be outsourced to the lowest bidder, whether in Boston, Barranquilla, or Bangalore. The profits would be captured by “supermanagers,” who would increasingly dictate their own salaries as well as the salaries of their subordinates. And the average worker—or former worker, as luck would have it—would be left to pick up the pieces: overqualified, underemployed, or just plain out in the cold. …

Making Service Work Pay
Source: Lydia DePillis, Pacific Standard, August 7, 2015
…And what if this trend continues? What if the new opportunities available to the Skillet Johnsons of the world continue to be low-paying positions with little opportunity for advancement? With the exception of registered nurses, the 10 highest-growth occupations for the next decade make less than $33,000 per year, according to the Bureau of Labor Statistics. That’s not the kind of employment base you need to rebuild a middle class. Part of the answer is better, cheaper education to match people with higher-paying jobs where there’s more demand, like nursing or computer programming. But Johnson thinks there’s another piece of the puzzle: Transforming those low-paying jobs into careers that can support a family. …