Category Archives: Income Inequality/Gap

Unions and Income Inequality: A Panel Cointegration and Causality Analysis for the United States

Source: Dierk Herzer, Economic Development Quarterly, Published online before print March 3, 2016
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From the abstract:
In this research note it is shown that by applying cointegration and causality techniques to U.S. state-level panel data there is a negative long-run relationship between unionization and income inequality in the United States and that causality is unidirectional from unionization to inequality.

Later Retirement, Inequality in Old Age, and the Growing Gap in Longevity Between Rich and Poor

Source: Barry Bosworth, Gary Burtless, Kan Zhang, Brookings Institution, 2016

From the summary:
The U.S. Social Security system, which established old age benefits, is designed to be highly progressive by redistributing income from workers with high average lifetime earnings to workers—and their dependents—who have low lifetime earnings.

Under the basic benefit formula, workers that make less over the course of their lifetime will see a higher percentage of their monthly earnings replaced through Social Security benefits than workers with high lifetime earnings.

The program is one reason America’s senior citizens, when taken as a whole, have fared so well—even throughout the Great Recession. While the average income (adjusted for inflation) of households with a head below the age of 65 fell by 4 percent between 2003 and 2013, the income of those with a head 65 and over rose by 15 percent.

But new research from Barry Bosworth, Gary Burtless, and Kan Zhang finds evidence that some of the program’s progressivity is being offset due to a growing gap in life expectancy between the rich and the poor.

That gap, when taken together with the rise in average retirement ages since the early 1990s, means the gap between lifetime benefits received by poor and less educated workers and the benefits received by high-income and well educated workers is widening in favor of the higher income workers.

Key findings on delayed retirement
Key findings on rising old-age inequality
Key findings on the growing gap in life expectancy between rich and poor

Wage Inequality and Cognitive Skills: Re-Opening the Debate

Source: Stijn Broecke, Glenda Quintini, Marieke Vandeweyer, National Bureau of Economic Research (NBER), NBER Working Paper No. w21965, February 2016
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From the abstract:
Inequality in the United States is high by international standards, and keeps rising. This is likely to bring significant social as well as economic costs, including lower growth. In this paper, we use the Survey of Adult Skills (PIAAC) to revisit the debate on the relative importance of skills in explaining international differences in wage inequality. While simple decomposition exercises suggest that skills only play a very minor role, demand and supply analysis indicates that the relative net supply of skills could explain 29% of the higher top-end wage inequality in the United States. Our analysis also suggests that skills could explain a substantial portion of the racial wage gap, as well as between individuals from different socio-economic backgrounds. Finally, we find little support for the argument that higher wage inequality in the United States may be compensated for by better relative employment outcomes of the low-skilled.

The 100 Most Overpaid CEOs: Are Fund Managers Asleep at the Wheel?

Source: As You Sow, 2016

From the press release:
Leading mutual funds and pension funds so far have taken little action to curb the “extraordinary misallocation of assets” represented by the excessive compensation of America’s top 100 overpaid CEOs, according to a new report from As You Sow. The report identifies Calamos, Steward, TCW, Wadell & Reed, BlackRock and Vanguard as among the 10 mutual fund families most likely to “rubberstamp” excessive compensation for CEOs. The As You Sow report cites David Zaslav/Discovery Communications Inc., Leslie Moonves/CBS Corporation, Steve Ells and Marty Moran/Chipotle Mexican Grill Inc., Satya Nadella/Microsoft Corporation, and Jeffrey Leiden/Vertex Pharmaceuticals Inc., as being among the most overpaid CEOs in America. Of the top 25 most overpaid CEOs in the As You Sow list, 11 made the list for the second year in a row. ….

The 100 Most Overpaid CEOs 2015
Source: As You Sow, 2015

CEO pay has grown nearly 1,000% over the past four decades, far exceeding growth in median worker pay or company share prices. Our new report, The 100 Most Overpaid CEOs: Executive Compensation at S&P 500 Companies, highlights the 100 most overpaid CEOs and examines the forces behind the trend of ever-increasing CEO pay.

The Gender Wage Gap: Extent, Trends, and Explanations

Source: Francine D. Blau, Lawrence M. Kahn, National Bureau of Economic Research (NBER), NBER Working Paper No. w21913, January 2016
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From the abstract:
Using PSID microdata over the 1980-2010, we provide new empirical evidence on the extent of and trends in the gender wage gap, which declined considerably over this period. By 2010, conventional human capital variables taken together explained little of the gender wage gap, while gender differences in occupation and industry continued to be important. Moreover, the gender pay gap declined much more slowly at the top of the wage distribution that at the middle or the bottom and by 2010 was noticeably higher at the top. We then survey the literature to identify what has been learned about the explanations for the gap. We conclude that many of the traditional explanations continue to have salience. Although human capital factors are now relatively unimportant in the aggregate, women’s work force interruptions and shorter hours remain significant in high skilled occupations, possibly due to compensating differentials. Gender differences in occupations and industries, as well as differences in gender roles and the gender division of labor remain important, and research based on experimental evidence strongly suggests that discrimination cannot be discounted. Psychological attributes or noncognitive skills comprise one of the newer explanations for gender differences in outcomes. Our effort to assess the quantitative evidence on the importance of these factors suggests that they account for a small to moderate portion of the gender pay gap, considerably smaller than say occupation and industry effects, though they appear to modestly contribute to these differences.

Separate and Unequal in the Labor Market: Human Capital and the Jim Crow Wage Gap

Source: Celeste K. Carruthers, Marianne Wanamaker, National Bureau of Economic Research (NBER), NBER Working Paper No. w21947, January 2016
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From the abstract:
The gap between black and white earnings is a longstanding feature of the United States labor market. Competing explanations attribute different weight to wage discrimination and access to human capital. Using new data on local school quality, we find that human capital played a predominant role in determining 1940 wage and occupational status gaps in the South despite the effective disenfranchisement of blacks, entrenched racial discrimination in civic life, and lack of federal employment protections. The 1940 conditional black-white wage gap coincides with the higher end of the range of estimates from the post-Civil Rights era. We estimate that a truly “separate but equal” school system would have reduced wage inequality by 40-51 percent.

The Koch Effect – The Impact of a Cadre-Led Network on American Politics

Source: Theda Skocpol and Alexander Hertel-Fernandez, Harvard University, Prepared for presentation at the Inequality Mini-Conference, Southern Political Science Association San Juan, Puerto Rico, January 8, 2016 – Slightly corrected version, January 27, 2016

Presidential election years attract attention to the rhetoric, personalities, and agendas of contending White House aspirants, but these headlines do not reflect the ongoing political shifts that will confront whoever moves into the White House in 2017. Earthquakes and erosions have remade the U.S. political terrain, reconfiguring the ground on which politicians and social groups must maneuver, and it is important to make sure that narrow and short-term analyses do not blind us to this shifting terrain. In this paper, we draw from research on changes since 2000 in the organizational universes surrounding the Republican and Democratic parties to highlight a major emergent force in U.S. politics: the recently expanded “Koch network” that coordinates big money funders, idea producers, issue advocates, and innovative constituency-building efforts in an ongoing effort to pull the Republican Party and agendas of U.S. politics sharply to the right. We review the major components and evolution of the Koch network and explore how it has reshaped American politics and policy agendas, focusing especially on implications for right-tilted partisan polarization and rising economic inequality.

The Steep Climb to Economic Opportunity for Vulnerable Families

Source: Kasey Wiedrich, Lebaron Sims, Jr., Holden Weisman, Solana Rice and Jennifer Brooks, Corporation for Enterprise Development (CFED), January 2016

The Assets & Opportunity Scorecard is a comprehensive look at Americans’ financial security today and their opportunities to create a more prosperous future. It assesses the 50 states and the District of Columbia on 130 outcome and policy measures, which describe how well residents are faring and what states can do to help them build and protect assets. Despite the nation’s ongoing economic recovery, millions of low- and moderate-income Americans are, like the Greek mythological character Sisyphus, perpetually forced to push an outsized boulder up a steep hill with little prospect of reaching stable financial ground. The 2016 Assets & Opportunity Scorecard shows how today’s economic status quo offers little hope to these struggling families. This report summarizes the key findings from the 2016 Assets & Opportunity Scorecard and provides a deeper look at the racial wealth divide and the outcome and policy data trends over time and across states in the Scorecard’s five issue areas: Financial Assets & Income, Businesses & Jobs, Housing & Homeownership, Education and Health Care. The report also includes an infographic of the overall adoption of the 69 Scorecard policies across the states, which allows you to see at-a-glance which states have adopted the most policies and which policies have been adopted by the most states.
Related:Main Findings
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How Computer Automation Affects Occupations: Technology, Jobs, and Skills

Source: James E. Bessen, Boston University – School of Law, Law and Economics Research Paper No. 15-49, January 16, 2016

From the abstract:
This paper investigates basic relationships between technology and occupations. Building a general occupational model, I look at detailed occupations since 1980 to explore whether computers are related to job losses or other sources of wage inequality. Occupations that use computers grow faster, not slower. This is true even for highly routine and mid-wage occupations. Estimates reject computers as a source of significant net technological unemployment or job polarization. But computerized occupations substitute for other occupations, shifting employment and requiring new skills. Because new skills are costly to learn, computer use is associated with substantially greater within-occupation wage inequality.