Category Archives: Income Inequality/Gap

Where has all the income gone? Look up.

Source: Lawrence Mishel, Economic Policy Institute, March 3, 2010

The 400 American households with the highest incomes also have enjoyed a much faster pace of income growth than the vast majority. And, because tax rates applied to their income have fallen by a third, their after-tax incomes grew substantially faster than their pre-tax incomes. The figure looks at inflation-adjusted pre-tax and after-tax income growth for the 400 top-income families between 1992 and 2007, based on new data recently released by the Internal Revenue Service. It shows that while pre-tax income grew by a staggering 409% over that 15-year period, after-tax income increased even more, by 476%.

Labor Underutilization Problems of U.S. Workers Across Household Income Groups at the End of the Great Recession: A Truly Great Depression Among the Nation’s Low Income Workers Amidst Full Employment Among the Most Affluent

Source: Andrew Sum, Ishwar Khatiwada, Center for Labor Market Studies Northeastern University, February 2010

From the Wall Street Journal Blog:
For those wondering why luxury spending is back even as unemployment hovers close to 10%, consider this: unemployment among the affluent is only 3%.

According to a study from Northeastern University’s Center for Labor Studies, unemployment for those in the top income decile-individuals earning more than $150,000 a year-was 3% in the fourth quarter of 2009. That compares with unemployment of 31% for the bottom 10% of income, and unemployment of 9% for the middle decile.

The differing rates of underemployment-including those working part-time for economic reasons-are also notable. Underemployment for the top 10% was 1.6%, while the bottom was 21%.

In other words, the top 10% is experiencing what economists would consider full employment.

Inequality by the Numbers

Source: IPS Program on Inequality and the Common Good, 2009

From the summary:
Median household income in 2008 was $50,303, according to Census data. Half of American households had income greater than this figure, half had less.

Between the end of World War II and the late 1970s, incomes in the United States were becoming more equal. In other words, incomes at the bottom were rising faster than those at the top. Since the late 1970s, this trend has reversed.

· Percentage of U.S. total income in 1976 that went to the top 1% of American households: 8.9.
· Percentage in 2007: 23.5.
· Only other year since 1913 that the top 1 percent’s share was that high: 1928.
· Combined net worth of the Forbes 400 wealthiest Americans in 2007: $1.5 trillion.
· Combined net worth of the poorest 50% of American households: $1.6 trillion.
· U.S. minimum wage, per hour: $7.25.
· Hourly pay of Chesapeake Energy CEO Aubrey McClendon, for an 80-hour week: $27,034.74.
· Average hourly wage in 1972, adjusted for inflation: $20.06.
· In 2008: $18.52.

Who Pays? A Distributional Analysis of the Tax Systems in All 50 States

Source: Matthew Gardner, Institute on Taxation & Economic Policy, November 18, 2009

From the press release:
By an overwhelming margin, most states tax their middle- and low-income families far more heavily than the wealthy, according to a new study by the Institute on Taxation & Economic Policy.

Nationwide, the study found that middle- and low-income non-elderly families pay much higher shares of their income in state and local taxes than do the very well-off:
– The average state and local tax rate on the best-off one percent of families is 6.4 percent before accounting for the tax savings from federal itemized deductions. After the federal offset, the effective tax rate on the best off one percent is a mere 5.2 percent.
– The average tax rate on families in the middle 20 percent of the income spectrum is 9.7 percent before the federal offset and 9.4 percent after–almost twice the effective rate that the richest people pay.
– The average tax rate on the poorest 20 percent of families is the highest of all. At 10.9 percent, it is more than double the effective rate on the very wealthy
See also:
State Specific Fact Sheets

Changes in the Distribution of Workers’ Annual Earnings Between 1979 and 2007

Source: Congressional Budget Office, Pub. No. 4006, October 2009

From the CBO blog entry:
Understanding how the annual earnings of workers have changed over time is integral to projecting possible changes in such earnings in the future and considering government tax and spending policies that affect workers. Last week CBO released a paper documenting changes in workers’ annual earnings during the past three decades.

The paper first describes changes between 1979 and 2007 in the annual (inflation-adjusted) earnings of workers ages 25 to 54. CBO found, as depicted in the figures below, that men with relatively low, median, and relatively high earnings (specifically, men at the 10th, 50th, and 90th percentiles of their earnings distribution) earned more than women in the same position of their own earnings distribution in 2007, and that those differences were smaller in 2007 than in 1979.

Income, Poverty And Health Insurance Coverage In The United States: 2008

Source: U.S. Census Bureau, Press Release, CB09-141, September 10, 2009

The U.S. Census Bureau announced today that real median household income in the United States fell 3.6 percent between 2007 and 2008, from $52,163 to $50,303. This breaks a string of three years of annual income increases and coincides with the recession that started in December 2007.

The nation’s official poverty rate in 2008 was 13.2 percent, up from 12.5 percent in 2007. There were 39.8 million people in poverty in 2008, up from 37.3 million in 2007.

Meanwhile, the number of people without health insurance coverage rose from 45.7 million in 2007 to 46.3 million in 2008, while the percentage remained unchanged at 15.4 percent.

The Market Defense

Source: Sharon Rabin-Margalioth, Interdisciplinary Center Herzliyah – Radzyner School of Law, working draft, July 29, 2009

From the abstract:
Too often women encounter the argument that pay disparity is the outcome of market forces and not sex discrimination. Salary differentials are attributed to individual pay demands, bargaining effectiveness, external counteroffers and/or prior salaries. These are just a few examples of market justifications employers raise to explain why similar workers performing the same job are compensated differently.

This paper argues that, in most cases, market justifications for pay disparity in equal pay for equal work litigation should be rejected. The paper then takes on the more ambitious project of proposing an alternative model of gender discrimination, which is not restricted to causation.

Labour Law and the New Inequality

Source: Michael S. Lynk, University of New Brunswick Law Journal, forthcoming

From the abstract:
Rising economic inequality in Canada and the Western world has become an unspoken but influential political theme over the past quarter century. The Great Compression between the late 1940s and the 1980s – which brought an unlamented end to the pre-war Gilded Age and its social inequities, established a post-war middle-class society in the industrial democracies, and created a host of equalizing institutions, including a vibrant union movement – has been unravelling since the rise of modern political conservatism. A hydraulic relationship exists between unionization and inequality. Countries that have higher unionization rates tend to have lower patterns of economic inequality. And as unionization rates decline, inequality tends to rise. In Canada, the political impulse to reform labour laws has been waning since the early 1990s, shortly after Canadian unions had reached their numerical zenith. As income and wealth inequality levels rose, labour’s share of the Gross Domestic Product has declined to record lows in the post-war era, wages have stagnated and most of the economic productivity gains over the past 25 years have been captured by those at the very top of the income scale. One significant explanation for the eroding levels of unionization in Canada has been the country’s stagnant labour laws. In particular, statutory changes to the union certification process in a number of Canadian jurisdictions has diminished the ability of unions to protect their representational levels. Empirical social science suggests that labour laws matter, not only for unionization levels, but as an important tool to enhance economic egalitarianism.

Inequality and Specialization: The Growth of Low-Skill Service Jobs in the United States

Source: David Autor, David Dorn, IZA Discussion Papers, 4290, July 2009

From the abstract:
After a decade in which wages and employment fell precipitously in low-skill occupations and expanded in high-skill occupations, the shape of U.S. earnings and job growth sharply polarized in the 1990s. Employment shares and relative earnings rose in both low and high-skill jobs, leading to a distinct U-shaped relationship between skill levels and employment and wage growth. This paper analyzes the sources of the changing shape of the lower-tail of the U.S. wage and employment distributions. A first contribution is to document a hitherto unknown fact: the twisting of the lower tail is substantially accounted for by a single proximate cause − rising employment and wages in low-education, in-person service occupations. We study the determinants of this rise at the level of local labor markets over the period of 1950 through 2005. Our approach is rooted in a model of changing task specialization in which “routine” clerical and production tasks are displaced by automation. We find that in labor markets that were initially specialized in routine-intensive occupations, employment and wages polarized after 1980, with growing employment and earnings in both high-skill occupations and low-skill service jobs.

Unequal Unemployment – Racial disparities in unemployment vary widely by state

Source: Algernon Austin, Economic Policy Institute, EPI Issue Brief #257, July 21, 2009

From the summary:
The labor market crisis is breaking national records each month, with no end in sight. The heaviest burden is falling on blacks and Hispanics, who are contending with much higher unemployment rates than whites nationally–about one-and-a-half times as high for Hispanics and twice as high for blacks. According to an updated analysis through the second quarter of 2009 and new projections through 2010, the trend has worsened and is likely to continue to do so.
See also:
State Unemployment Trends by Race, Ethnicity and Gender