Category Archives: Income Inequality/Gap

Underpaid and Unequal: Racial Wage Disparities in the Early Childhood Workforce

Source: Rebecca Ullrich, Katie Hamm, Rachel Herzfeldt-Kamprath, Center for American Progress, August 2016

From the summary:
More than 3 million children younger than age 6 regularly attend center-based care and education. Formal care arrangements—such as child care centers and preschools—are an increasingly prominent part of children’s lives: 65 percent of young children have all available parents in the workforce. Policymakers, recognizing the importance of these early care and education environments—not just as a work support for parents but also as a means to promote children’s learning and development—are looking for strategies to boost program quality.

Experts know that effective teachers are central to quality early care and education. It is no surprise, then, that many quality improvement efforts have focused on increasing education requirements for teachers and bolstering access to professional development and training. Children’s learning and development is supported by thoughtful instruction and warm, engaging interactions. It takes a skilled and effective workforce to provide the level of instruction necessary to promote positive outcomes—including social skills and early literacy and numeracy skills—but the United States continues to pay most early childhood educators embarrassingly low wages. Preschool teachers and child care workers rank in the bottom 20th percentile for mean annual salaries. Moreover, many teachers lack access to important benefits such as health insurance and paid leave.

New analyses presented in this report suggest that poor compensation and benefits are felt most acutely by African American women in the early childhood workforce. On average, African American female teachers working full time make 84 cents for every $1 earned by their white counterparts. White teachers working full-time make an average of $13.86 per hour: This 16 percent wage gap means an African American teacher would make $366 less per month and $4,395 less per year, on average. When differences in educational backgrounds, years of experience, and employment characteristics are taken into account, the wage gap between African American and white female, full-time teachers is reduced to roughly 93 cents on the dollar. However, this is still a meaningful difference in a workforce that makes less than $30,000 per year, on average…..

Black Workers, Unions, and Inequality

Source: Cherrie Bucknor, Center for Economic and Policy Research (CEPR), August 2016

From the summary:
This study uses the most recent Census Bureau data available to examine the trends in unionization for Black workers, focusing on unionization rates as well as the demographic composition of the Black union workforce. This paper also presents data on the impact of unionization on the wages and benefits of Black workers and how these benefits work to reduce racial wage inequality.

Unionization rates have been in decline across the board for decades. Despite this fact, Black workers are still more likely than workers of any other race or ethnicity to be unionized. In 2015, 14.2 percent of Black workers and 12.3 percent of the entire workforce were represented by unions, down from 31.7 percent and 23.3 percent, respectively, in 1983. This large decline in unionization has occurred alongside, and contributed to, an increase in overall wage inequality, as well as the widening Black-white wage gap.

This paper finds that Black union workers of today are very different from Black union workers of the past. In particular, Black union workers today are more likely to be female, older, have more years of formal education, be immigrants, and work in the public sector.

Black union workers also enjoy higher wages, and better access to health insurance and retirement benefits than their non-union peers. These benefits persist even after controlling for systematic differences between the union and non-union workforce. Specifically, Black union workers on average earn 16.4 percent higher wages than non-union Black workers. Black union workers are also 17.4 percentage points more likely than non-union Blacks to have employer-provided health insurance, and 18.3 percentage points more likely to have an employer-sponsored retirement plan.

These benefits are also large for Black workers in low-wage occupations and those with fewer years of formal education. Black union workers in low-wage occupations have wages that are 18.9 percent higher than their non-union counterparts, are 13.1 percentage points more likely to have employer-provided health insurance, and 15.4 percentage points more likely to have employer-sponsored retirement plans. Furthermore, Black union workers with less than a high school degree have a wage advantage of 19.6 percent over their non-union peers, and are 23.4 percentage points and 25.2 percentage points more likely to have health insurance and a retirement plan, respectively.

Some other highlights include:
– The percent of Black union workers who are immigrants has more than doubled since 1994: from 7.0 percent in 1994, to 15.4 percent in 2015.
– Black immigrants are more likely than native Blacks to be unionized. In 2015, Black immigrant workers had a unionization rate of 16.9 percent compared to 13.8 percent for native Blacks.
– Unionization rates for Black workers have declined across all sectors, but the decline has been especially steep for manufacturing (from 42.3 percent in 1983 to 13.3 percent in 2015).
– Black union workers on average earn $24.24 per hour, compared to $17.78 for non-union Black workers.
– 71.4 percent of Black union workers have employer-provided health insurance, compared to 47.7 percent of non-union Black workers.
– 61.6 percent of Black union members have employer-sponsored retirement plans, compared to 38.2 percent of non-union Black workers.

Executive Pay: What Worked?

Source: Steven A. Bank, Brian R. Cheffins, Harwell Wells, University of Cambridge Faculty of Law Research Paper No. 38/2016, August 2016

From the abstract:
CEO pay is a controversial issue in America but there was a time, often overlooked today, when chief executives were not paid nearly as much as they are now. From 1940 to the mid-1970s executive pay was modest by today’s standards even though U.S. business was generally thriving. What worked to keep executive pay in check? Economist Thomas Piketty and others credit high marginal income tax rates, leading to calls for a return to a similar tax regime. This paper casts doubt on the impact tax had and also shows that neither the configuration of boards nor shareholder activism played a significant role in constraining executive pay. It emphasizes instead the roles played by strong unions, a different and more circumscribed market for managerial talent, and social norms, explanations that do not easily lend themselves to generating modern policy prescriptions.

Dream On

Source: David Brodwin, U.S. News and World Report, August 22, 2016

Growing inequality has made the American ‘rags to riches’ story more myth than reality. ….

….If you work hard and play by the rules you will get ahead, according to the American Dream. But working hard and playing by the rules now feels like running in place to a lot of Americans. The past few years of economic data justify their complaint: Most of the productivity gains in the U.S. economy have been captured by the top 1 percent, and most working Americans have seen their standard of living plateau rather than rise.

Economic stratification has spurred politically explosive resentments. And these resentments have encouraged economists to seek a better understanding of economic mobility – or the lack thereof. Is America still a land of opportunity despite rising inequality? And is education – often hailed as the key to getting ahead – still an important part of the solution?….
Related:
The Decline in Lifetime Earnings Mobility in the U.S.: Evidence from Survey-Linked Administrative Data
Source: Michael D. Carr, Emily E. Wiemers, Washington Center for Equitable Growth, May 2016

The teacher pay gap is wider than ever: Teachers’ pay continues to fall further behind pay of comparable workers

Source: Sylvia Allegretto and Lawrence Mishel, Economic Policy Institute, August 9, 2016

From the summary:
What this report finds: The teacher pay penalty is bigger than ever. In 2015, public school teachers’ weekly wages were 17.0 percent lower than those of comparable workers—compared with just 1.8 percent lower in 1994. This erosion of relative teacher wages has fallen more heavily on experienced teachers than on entry-level teachers. Importantly, collective bargaining can help to abate this teacher wage penalty. Some of the increase in the teacher wage penalty may be attributed to a trade-off between wages and benefits. Even so, teachers’ compensation (wages plus benefits) was 11.1 percent lower than that of comparable workers in 2015.

Why this matters: An effective teacher is the most important school-based determinant of education outcomes. It is therefore crucial that school districts recruit and retain high-quality teachers. This is particularly difficult at a time when the supply of teachers is constrained by high turnover rates, annual retirements of longtime teachers, and a decline in students opting for a teaching career—and when demand for teachers is rising due to rigorous national student performance standards and many locales’ mandates to shrink class sizes. In light of these challenges, providing adequate wages and benefits is a crucial tool for attracting and keeping the teachers America’s children need.
Related:
Press Release

The Morale Effects of Pay Inequality

Source: Emily Breza, Supreet Kaur, and Yogita Shamdasani, National Bureau of Economic Research (NBER), NBER Working Paper No. 22491, August 2016

From the abstract:
The idea that worker utility is affected by co-worker wages has potentially broad labor market implications. In a month-long experiment with Indian manufacturing workers, we randomize whether co-workers within production units receive the same flat daily wage or different wages (according to baseline productivity rank). For a given absolute wage, pay inequality reduces output and attendance by 0.24 standard deviations and 12%, respectively. These effects strengthen in later weeks. Pay disparity also lowers co-workers’ ability to cooperate in their selfinterest. However, when workers can clearly observe productivity differences, pay inequality has no discernible effect on output, attendance, or group cohesion.

Ever-Growing Gap: Without Change, African-American and Latino Families Won’t Match White Wealth for Centuries

Source: Chuck Collins, Dedrick Asante-Muhammed, Josh Hoxie and Emanuel Nieves, Institute for Policy Studies, August 2016

From the summary:
Racial and economic inequality are the most pressing social issues of our time. In the last decade, we have seen the catastrophic economic impact of the Great Recession and an ensuing recovery that has bypassed millions of Americans, especially households of color. This period of economic turmoil has been punctuated by civil unrest throughout the country in the wake of a series of high-profile African-American deaths at the hands of police. These senseless and violent events have not only given rise to the Black Lives Matter movement, they have also sharpened the nation’s focus on the inequities and structural barriers facing households of color.

However, even when these economic inequities do get attention, the focus is often on a single facet of the issue: income. The new report Ever-Growing Gap, published by the Institute for Policy Studies and the Corporation for Enterprise Development, focuses instead on a related but distinct facet of the issue: the essential role that wealth plays in achieving financial security and opportunity. It examines our country’s growing racial wealth divide and the trajectory of that divide.

This growing wealth divide is no accident. It is the result of public policy designed to widen the economic chasm between white households and households of color and between the wealthy and everyone else. In the absence of significant reforms, the racial wealth divide—and overall wealth inequality—are on track to become even wider in the future….

CEOs make 276 times more than typical workers

Source: Lawrence Mishel and Jessica Schieder, Economic Policy Institute, Economic Snapshot, August 3, 2016

The compensation of the CEOs of the largest firms has grown much faster than stock prices, corporate profits and the wages of the top 0.1 percent. But the most dramatic difference is between the compensation of CEOs and the compensation of typical workers is that from 1978 to 2015 CEO compensation grew 941 percent while the compensation of a typical worker grew just 10 percent….

It’s Tax Not Trade (Stupid)

Source: Edward J. McCaffery, USC Gould School of Law, USC CLASS Research Papers Series No. CLASS16-20, USC Law Legal Studies Paper No. 16-22, July 19, 2016

….The simple fact is that globalization and free trade are good for economies, as Adam Smith taught us in 1776 and as a decent high school economics class can prove today. The trouble in America is that the gains from trade are not being shared. The rich who can live off their capital or wealth rather than by the sweat of their brows are the big winners from globalization; workers are the big losers.

Spreading the wealth from those who benefit most from social changes to those who are harmed by them is the responsibility of our tax system. Yet tax has failed miserably in this role. In fact, tax as it now stands is not even designed to collect from the wealthy. And no candidate — on the right, left, or middle — has any serious plan to change this fact. Indeed, Trump and his fellow Republicans continually vow to cut taxes on the wealthiest, further benefitting globalization’s winners while adding to the pain of its losers.

In sum, tax not trade is what ought to be changing, and rich Americans, not workers worldwide, ought to be paying more to help their fellow citizens…..