Category Archives: Income Inequality/Gap

Why is the American South Poorer?

Source: Regina S Baker, Social Forces, Advance Access, December 12 2019
(subscription required)

From the abstract:
While American poverty research has devoted greater attention to poverty in the Northeast and Midwest, poverty has been persistently higher in the U.S. South than in the other regions. Thus, this study investigates the enduring question of why poverty is higher in the South. Specifically, it demonstrates the role of power resources as an explanation for this regional disparity, yet also considers family demography, economic structure, and racial/ethnic heterogeneity. Using six waves (2000–2016) of U.S. Census Current Population Survey data from the Luxembourg Income Study (N = 1,157,914), this study employs a triangulation of analytic techniques: (1) tests of means and proportion differences, (2) multilevel linear probability models of poverty, and (3) binary decomposition of the South/non-South poverty gap. The comparison of means associated with the power resource hypothesis yields the largest substantive differences between the South and the non-South. In the multilevel models, adjusting for power resources yields the largest declines in the South coefficient. Binary decomposition results indicate power resources are the second most influential factor explaining the South/non-South poverty gap. Overall, power resources are an important source of the South/non-South poverty gap, though economic structure and other factors certainly also play a role. Results also suggest an important interplay between power resources and race. Altogether, these results underscore the importance of macrolevel characteristics of places, including political and economic contexts, in shaping individual poverty and overall patterns of inequality.

Why Don’t Women Self-Promote As Much As Men?

Source: Christine Exley, Judd Kessler, Harvard Business Review, December 19, 2019

….Since self-promotion is a pervasive part of work, those of us who do more self-promotion may have better chances of being hired, being promoted, and getting a raise or a bonus. As researchers interested in gender gaps in earnings, negotiations, and firm leadership, we wondered whether gender differences in self-promotion also exist and might contribute to those gaps.

We found a large gender gap in self-promotion — with men rating their performance 33% higher than equally performing women. To understand what’s driving this gap, we looked at two factors that might influence one’s level of self-promotion: confidence (you may be unsure of your actual performance) and strategic incentives (you may talk up your performance to get a raise or promotion)…..

Six tax-based ways to tackle US income inequality

Source: Jeffrey Frankel, The Guardian, December 18, 2019

….The first policy proposal would be to reinforce the estate tax. ….
Second, policymakers should give the IRS the resources it needs to collect taxes that are owed…..
Third, expanding the Earned Income Tax Credit (EITC) would help to “make work pay”. ….
Fourth, the payroll tax should be made more progressive…..
Fifth, the US government also should make the income tax more progressive – for example, by cutting the gap between the tax rates on investment income and wages. ….
Finally, Congress should revisit the December 2017 corporate-tax cut to make it revenue-neutral…..

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:
Background:
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.

Methods:
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.

Results:
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.

Conclusions:
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…..

Related:
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.

Related:
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.

Related:
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.

Related:
Executive Summary
Press Release
PowerPoint

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….