Category Archives: Income Inequality/Gap

Wage Differentials, Bargaining Protocols, and Trade Unionism in Mid-Twentieth-Century American Labor Markets

Source: John Pencavel, ILR Review, OnlineFirst, Published June 1, 2020
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From the abstract:
Income inequality in the United States has been lower in periods when trade unionism has been strong. Using observations on wages by occupation, by geography, and by gender in collective bargaining contracts from the 1940s to the 1970s, patterns in movements of wage differentials are revealed. As wages increased, some contracts maintained relative wage differentials constant, some maintained absolute differences in wages constant, others combined these two patterns, and some did not reveal an obvious pattern. The patterns persisted even as price inflation increased in the 1970s. The dominant pattern implies a reduction in inequality as usually measured.

Racial Economic Inequality Amid the COVID-19 Crisis

Source: Bradley L. Hardy, Trevon D. Logan, Hamilton Project, Brookings Institution, Essay 2020-17 August 2020

From the introduction:
COVID-19 confronts Americans with two crises: a public health crisis and an economic crisis. The two operate together, since the public health crisis has dramatically reduced economic activity and overall spending. Moreover, this crisis has broader distributional consequences than any economic event in recent memory, altering most aspects of how we live, work, and conduct business—and in truth, who will survive.

Across the economy and society, the distributional consequences of COVID-19 are uneven: the pandemic and its broader economic and health consequences are disproportionately impacting Black Americans.

The outsized challenges that Black Americans are facing are a reflection of the generally diminished economic position and health status that they faced prior to this crisis. Several pre–COVID-19 economic conditions—including lower levels of income and wealth, higher unemployment, and greater levels of food and housing insecurity—leave Black families with fewer buffers to absorb economic shocks and contribute to Black households’ vulnerability to the COVID-19 economic crisis.

The interaction of those pre–COVID-19 economic and health disparities—including a higher rate of preexisting health conditions such as hypertension and lung disease—has contributed to higher COVID-19 mortality rates for Black Americans (e.g. Benitez, Courtemanche, and Yelowitz 2020; Weimers et al. 2020). According to the APM Research Lab, Black Americans continue to experience the highest overall actual COVID-19 mortality rates (80.4 per 100,000)—more than twice the rate of white Americans (35.9 per 100,000) or Asian Americans (33.1 per 100,000), who have the lowest COVID-19 mortality rates. In 2020 more Black Americans will die of COVID-19 than will succumb to diabetes, strokes, accidents, or pneumonia. In fact, COVID-19 is currently the third leading cause of death for Black Americans (APM Research Lab 2020).

Why is the American South Poorer?

Source: Regina S Baker, Social Forces, Volume 99, Issue 1, September 2020
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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.

….Beyond these factors, this study focuses on the role of politics and policy via power resources theory (PRT). Here,power resources refer to class-based collective political actors, such as labor unions and parties, and the social policies they are able to institutionalize…

October 2019 pre-print version

The Gender Wage Gap: 2019 Earnings Differences by Race and Ethnicity

Source: Ariane Hegewisch, Zohal Barsi, Institute for Women’s Policy Research, Fact Sheet, C489, March 10, 2020

From the summary:

The gender wage gap in weekly earnings for full-time workers in the United States narrowed marginally between 2018 and 2019. In 2019, the ratio of women’s to men’s median weekly full-time earnings was 81.5 percent, an increase of 0.4 percent since 2018, when the ratio was 81.1 percent, leaving a wage gap of 18.5 percent, compared with 18.9 percent in 2018 (Figure 1). Women’s median weekly earnings for full-time work were $821 in 2019 compared with $1,007 for men. Adjusting for inflation, women’s median earnings increased by 2.2 percent compared with 2018; men’s earnings increased by 1.7 percent.

Another measure of the wage gap, the ratio of women’s and men’s median annual earnings for full-time, year-round workers, was 81.6 percent in 2018 (data for 2019 are not yet available). An earnings ratio of 81.6 percent means that the gender wage gap for full-time, year-round workers is 18.4 percent.

Unlike the gender earnings ratio for full-time year-round workers, the ratio for weekly earnings excludes self-employed workers, does not include earnings from annual bonuses, and includes workers who work only part of the year. Both earnings ratios are for full-time workers only. When all workers with earnings are included, the gap in earnings is much larger because women are more likely than men to work part-time or take time out of paid work to manage childrearing and other caregiving work. Over a 15 year period women workers’ earnings were just 49 percent—less than half—of men’s earnings, a wage gap of 51 percent in 2001-2015.

Job Turf or Variety: Task Structure as a Source of Organizational Inequality

Source: Nathan Wilmers, Administrative Science Quarterly, OnlineFirst, Published February 25, 2020
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From the abstract:
What explains pay inequality among coworkers? Theories of organizational influence on inequality emphasize the effects of formal hierarchy. But restructuring, firm flattening, and individualized pay setting have challenged the relevance of these structuralist theories. I propose a new organizational theory of differences in pay, focused on task structure and the horizontal division of labor across jobs. When organizations specialize jobs, they reduce the variety of tasks performed by some workers. In doing so they leave exclusive job turf to other coworkers, who capture the learning and discretion associated with performing a distinct task. The division of labor thus erodes pay premiums for some workers while advantaging others through job turf. I test this theory with linked employer–employee panel data from U.S. labor unions, which include a type of data that is rarely collected: annual reporting on work tasks. Results show that reducing task variety lowers workers’ earnings, while increasing job turf raises earnings. When organizations reduce task variety for some workers, they increase job turf for others. Without assuming fixed job hierarchies and pay rates, interdependencies in organizational task allocation yield unequal pay premiums among coworkers.

Racial Disparities and the Income Tax System

Source: Tax Policy Center, January 30, 2020
The Internal Revenue Service does not ask for a tax filer’s race or ethnicity on tax forms, but that does not mean the tax system affects people of different races in the same way.

Overall, federal income taxes are progressive: people with higher incomes pay a larger share of their income in taxes than those with lower incomes, and this can help close racial income gaps.

But some tax policies can also exacerbate income and wealth inequalities stemming from long-standing discrimination in areas such as housing, education, and employment.

Using the individual income tax Form 1040 as a guide, we explore how the federal income tax code interacts with existing racial inequities.

Social Security Is a Great Equalizer

Source: Wenliang Hou and Geoffrey T. Sanzenbacher, Center for Retirement Research at Boston College, IB#20-2, January 2020

The brief’s key findings are:

  • As the U.S. grows more diverse, it is important to understand how much Social Security affects the relative economic status of retirees by race/ethnicity.
  • This analysis uses the Health and Retirement Study to examine Social Security as a share of retirement wealth for whites, blacks, and Hispanics during 1992-2016.
  • Without Social Security, a typical white household has 5 to 7 times the wealth of a minority household, but adding in Social Security reduces the gap to 2 to 3.
  • Social Security has a similar leveling effect across the wealth distribution, but is particularly important for lower- and middle-income households.
  • Social Security reduces inequality because it covers nearly all workers and has a progressive benefit design, making it the most equal form of retirement wealth.

Measuring Racial/Ethnic Retirement Wealth Inequality

Source: Wenliang Hou and Geoffrey T. Sanzenbacher, Center for Retirement Research at Boston College, WP#2020-2, January 2020

From the abstract:
As the U.S. population becomes more diverse, it will be increasingly important for policymakers addressing Social Security’s solvency to understand how reliant various racial and ethnic groups will be on the program versus other sources of retirement wealth. Yet, to date, studies on retirement wealth have tended not to focus on race and ethnicity, have largely ignored the role of Social Security, or have excluded the most recent cohort approaching retirement – the Late Boomers. This project uses data from the Health and Retirement Study (HRS) to document the retirement resources of white, black, and Hispanic households at various points in the wealth distribution for five HRS cohorts of 51-56 year olds between 1992 and 2016.

The paper found that:

  • In 2016, the typical black household had 46 percent of the retirement wealth of the typical white household, while the typical Hispanic household had 49 percent.
  • This inequality would be much higher but for the presence of Social Security – black households had just 14 percent of the non-Social Security retirement wealth when compared to white households, and Hispanic households had just 20 percent.
  • The 1992 to 2010 HRS cohorts showed little change in retirement wealth inequality, although a decline in 51-56 year old white households’ retirement wealth between 2010 and 2016 narrowed the racial and ethnic gaps in retirement wealth slightly.
  • The progressivity of Social Security combined with lower average incomes for minority households means that replacement rates are more equal than wealth – in 2016, the replacement rate of black households was 82 percent of white households and Hispanic households was 95 percent.

The policy implications of the findings are:

  • Across-the-board benefit cuts, such as increases in the Full Retirement Age, will have an outsize impact on black and Hispanic households’ retirement wealth.
  • As policymakers consider changes to the Social Security program to shore up its finances, considering ways to mitigate any impact on these groups may be important.

Explaining the Persistence of Gender Inequality: The Work–family Narrative as a Social Defense against the 24/7 Work Culture

Source: Irene Padavic, Robin J. Ely, Erin M. Reid, Administrative Science Quarterly, Vol. 65 no. 1, March 2020
(subscription required)

From the abstract:
It is widely accepted that the conflict between women’s family obligations and professional jobs’ long hours lies at the heart of their stalled advancement. Yet research suggests that this “work–family narrative” is incomplete: men also experience it and nevertheless advance; moreover, organizations’ effort to mitigate it through flexible work policies has not improved women’s advancement prospects and often hurts them. Hence this presumed remedy has the perverse effect of perpetuating the problem. Drawing on a case study of a professional service firm, we develop a multilevel theory to explain why organizations are caught in this conundrum. We present data suggesting that the work–family explanation has become a “hegemonic narrative”—a pervasive, status-quo-preserving story that prevails despite countervailing evidence. We then advance systems-psychodynamic theory to show how organizations use this narrative and attendant policies and practices as an unconscious “social defense” to help employees fend off anxieties raised by a 24/7 work culture and to protect organizationally powerful groups—in our case, men and the firm’s leaders—and in so doing, sustain workplace inequality. Due to the social defense, two orthodoxies remain unchallenged—the necessity of long work hours and the inescapability of women’s stalled advancement. The result is that women’s thin representation at senior levels remains in place. We conclude by highlighting contributions to work–family, workplace inequality, and systems-psychodynamic theory.