Category Archives: Income Inequality/Gap

Household Wealth Trends in the United States, 1962 to 2016: Has Middle Class Wealth Recovered?

Source: Edward N. Wolff, National Bureau of Economic Research, NBER Working Paper No. 24085, November 2017
(subscription required)

From the abstract:
Asset prices plunged between 2007 and 2010 but then rebounded from 2010 to 2016. The most telling finding is that median wealth plummeted by 44 percent over years 2007 to 2010. The inequality of net worth, after almost two decades of little movement, went up sharply from 2007 to 2010, and relative indebtedness for the middle class expanded. The sharp fall in median net worth and the rise in overall wealth inequality over these years are largely traceable to the high leverage of middle class families and the high share of homes in their portfolio. Mean and median wealth rebounded from 2010 to 2016, by 17 and 28 percent, respectively. While mean wealth surpassed its previous peak in 2007, median wealth was still down by 34 percent. More than 100 percent of the recovery in both was due to a high return on wealth but this factor was offset by negative savings. Relative indebtedness continued to fall for the middle class from 2010 to 2016, and wealth inequality increased somewhat. The racial and ethnic disparity in wealth holdings widened considerably between 2007 and 2016, and the wealth of households under age 45 declined in relative terms.

Unions Held Their Own in 2017

Source: Doug Henwood, Jacobin, January 20, 2018

Unions had a pretty good year in 2017: they didn’t lose any ground.

According to the latest edition of the Bureau of Labor Statistics annual survey, released this morning, 10.7 percent of employed wage and salary workers were members of unions, unchanged from last year. There was a mild uptick in the share of private-sector workers represented by unions (aka union density), from 6.4 percent to 6.5 percent. Density was unchanged at 34.4 percent for public-sector workers — mildly surprising, given the war on labor being conducted by Republican governors and legislatures across the country…..

And, as the graph below shows, unions bring higher wages — especially for workers who are neither white nor male.

the union difference

For example, black men who are not in unions earn 71 percent as much as all white men (union and nonunion); with a union, that rises to 89 percent as much. For black women, the numbers are 65 percent for nonunion and 81 percent for union. For what the BLS calls Hispanic or Latino workers the union boost is even sharper: from 69 percent of white men for nonunion men to 98 percent for unionized ones, and from 60 percent for nonunion women to 94 percent for union.

Unions also narrow gender gaps. Nonunion women of all races/ethnicities earn 82 percent as much as men; that rises to 88 percent for unionized women. Unions add 21 percent to the average weekly wage for men, and 30 percent for women. In other words, unions reduce inequality along all the familiar demographic axes — and make it harder to pit workers against each other…..

Reward Work, Not Wealth

Source: Diego Alejo Vázquez Pimentel, Iñigo Macías Aymar and Max Lawson, Oxfam International, January 2018

From the abstract:
To end the inequality crisis, we must build an economy for ordinary working people, not the rich and powerful. Last year saw the biggest increase in billionaires in history, one more every two days. Billionaires saw their wealth increase by $762bn in 12 months. This huge increase could have ended global extreme poverty seven times over. 82% of all wealth created in the last year went to the top 1%, while the bottom 50% saw no increase at all. Dangerous, poorly paid work for the many is supporting extreme wealth for the few. Women are in the worst work, and almost all the super-rich are men. Governments must create a more equal society by prioritizing ordinary workers and small-scale food producers instead of the rich and powerful.

What the dip in US life expectancy is really about: inequality

Source: Julia Belluz, Vox, January 9, 2018

Living in the US increasingly looks like a health risk. Average life expectancy here dropped for the second year in a row, according to recent data from the Centers for Disease Control and Prevention. The grim trend stems from a toxic mixture of more drug- and alcohol-related deaths and more heart disease and obesity in many parts of the country. And it puts Americans at a higher risk of early death compared to their counterparts in other wealthy countries.

But what’s often lost in the conversation about the uptick in mortality here is that this trend isn’t affecting all Americans. In fact, there’s one group in the US that’s actually doing better than ever: the rich. While poor and middle-class Americans are dying earlier these days, the wealthiest among us are enjoying unprecedented longevity….

The Rate of Return on Everything, 1870-2015

Source: Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, Alan M. Taylor, NBER Working Paper No. 24112, December 2017
(subscription required)

From the abstract:
This paper answers fundamental questions that have preoccupied modern economic thought since the 18th century. What is the aggregate real rate of return in the economy? Is it higher than the growth rate of the economy and, if so, by how much? Is there a tendency for returns to fall in the long-run? Which particular assets have the highest long-run returns? We answer these questions on the basis of a new and comprehensive dataset for all major asset classes, including—for the first time—total returns to the largest, but oft ignored, component of household wealth, housing. The annual data on total returns for equity, housing, bonds, and bills cover 16 advanced economies from 1870 to 2015, and our new evidence reveals many new insights and puzzles.

Massive new data set suggests economic inequality is about to get even worse
Source: Christopher Ingraham, Washington Post, Wonkblog, January 4, 2018

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…..

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…..


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…..
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. ….