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Posts Tagged ‘Income disparity’

Wealth Inequality And Middle-Class Decline Is Worse That We Think

Monday, October 20th, 2014

Isaih J. PooleWe know how bad income inequality has gotten in the past few years in America, thanks largely to the work of economist Emmanuel Saez and his colleagues at University of California at Berkeley’s Center for Equitable Growth. But Saez’s latest paper finds that the share of the nation’s wealth going to the bottom 90 percent of Americans has declined to where it was in the 1940s, erasing decades of hard-won gains due to pro-worker, pro-middle-class economic policies.

Meanwhile, the top 0.1 percent of Americans – the 160,000 families with net assets in excess of $20 million in 2012 – now hold 22 percent of the nation’s wealth, up from 7 percent in 1978. That monopolization of a large share of national wealth by an elite few hasn’t been seen since the late 1920s.

The bottom 90 percent, by contrast, saw their wealth share fall from 35 percent in the mid-1980s to about 23 percent in 2012, the paper said. It was about 20 percent in the 1920s, it said.

The paper, “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data,” focuses not just on wages and income but on the accumulation of overall wealth, including the value of real estate, stocks and certain other assets. It explicitly refutes the view that while nearly all of the gains in national income since the 2008 recession have gone to the top 1 percent, that hasn’t translated into a substantial increase in the concentration of overall wealth at the top. To the contrary, the paper said, “we find that wealth inequality has considerably increased at the top over the last three decades.”

“Wealth concentration has increased particularly strongly during the Great Recession of 2008-2009 and in its aftermath,” the paper said. Largely because of the decline in housing prices, the share of wealth held by the bottom 90 percent fell more than 10 percent from the middle of 2007 to mid-2008. Afterward, real wealth continued declining at a rate of 0.6 percent a year on average through 2012, while it increased at a rate of almost 6 percent a year for the top 1 percent and almost 8 percent a year for the top 0.1 percent.

The bottom line: “Wealth is getting more concentrated in the United States,” and is in fact “ten times more concentrated than income today.”

How did this happen? “The share of wealth owned by the middle class has followed an inverted-U shape evolution,” the paper said. Middle-class households reached the apex of the upside-down “U” in the mid-1980s, driven by the accumulation of housing wealth and, more significantly, pensions. Since then, housing values for the bottom 90 percent as a share of total household wealth has fallen by as much as two-thirds, and most workers have IRAs or 401(k) defined contribution plans instead of pensions. And these households have significantly higher debt than they did in the 1980s.

What can we do about it? The paper points out that it was New Deal policies of the 1930s that began reversing the effects of Gilded Age inequality in the 1930s, particularly “very progressive income and estate taxation” that made it difficult for the wealthy to accumulate large fortunes and pass them to their heirs. “The historical experience of the United States and other rich countries suggests that progressive taxation can powerfully affect income and wealth concentration,” the paper said.

Other steps that can help include “access to quality and affordable education, health benefit cost controls, minimum wage policies, or, more generally, policies shifting bargaining power away from shareholders and management toward workers.” Finally, the paper suggests policies that “nudge” workers toward sound investment and savings vehicles and offer alternatives to short-term debt at high interest rates.

The fact that a group of people equal to the population of Salem, Oregon controls as much of the nation’s wealth as 90 percent of the rest of the country speaks to the fundamental unfairness of our economy. It is a level of imbalance that is as unsustainable today as it was before the crashes of 1929 and 2008. It also stands as a dire warning that we cannot afford to elect more politicians whose policies of giving more relief to the wealthy and more pain to the working class would only make wealth inequality and, and economic inequity, even worse.

This blog originally appeared in Ourfuture.org on October 20, 2014. Reprinted with permission. http://ourfuture.org/20141020/wealth-inequality-and-middle-class-decline-is-worse-that-we-think.

About the Author: Isaiah J. Poole has been the editor of OurFuture.org since 2007. Previously he worked for 25 years in mainstream media, most recently at Congressional Quarterly, where he covered congressional leadership and tracked major bills through Congress. Most of his journalism experience has been in Washington as both a reporter and an editor on topics ranging from presidential politics to pop culture. His work has put him at the front lines of ideological battles between progressives and conservatives. He also served as a founding member of the Washington Association of Black Journalists and the National Lesbian and Gay Journalists Association.

So Rich, So Poor: What to make of America's poverty problem

Monday, June 25th, 2012

Eric MogelCurrent Georgetown University Law Center Professor Peter Edelman knows a thing or
two about poverty. While serving in the Health and Human Services Department under
the Clinton administration, Peter famously resigned in protest to Clinton’s signing of the
1996 Welfare Reform Act. He believed that the move from federal control of welfare
grants to a system in which individual states were able to control these funds themselves
would result in an increase in the poverty rate and the disappearance of a safety net for
America’s poorest citizens. Sixteen years later, Peter Edelman’s new book So Rich, So
Poor
paints a portrait of the effects of welfare reform on Americans in the lower and
middle classes and makes a compelling argument for an increase in government aid and
intervention.

So Rich, So Poor details some of the troubling facts about just how much income
disparity has affected the poorest and wealthiest citizens. In 1979 the top one percent of
America’s wealthiest citizens earned nine percent of all personal income. However, in
2007 the same top one percent pulled in over twenty three percent of all personal income.
On the other end of the spectrum, twenty million Americans are living in a state of deep
poverty. According to Peter Edelman, deep poverty is a state in which a family of three
is earning below nine thousand dollars per year. While the twenty million Americans in
deep poverty come from all backgrounds and states, some groups are disproportionately
overrepresented. Single mothers and minority groups make up a large percent of the
people living in deep poverty. As So Rich, So Poor notes however, it is not only single
mothers that suffer when they are living in deep poverty. The children being raised by
these single mothers are also living in a state of deep poverty, with untold consequences
on these children’s abilities to grow up and reach their full potential.

So Rich, So Poor looks at the policy decisions that are increasingly driving America’s
lower class into a state of deep poverty. Peter Edelman traces some of the blame all
the way back to 1996, and the decision to allow states to decide for themselves how to
distribute welfare funds. Peter notes that states have the option of not distributing any
cash assistance to low income citizens, and that the lack of federal cash assistance to
low income families has removed a safety net for America’s poorest citizens. The effect
of allowing states to decide how to distribute welfare funds has resulted in six million
Americans whose only source of income is food stamps. Clearly it is impossible to live,
let alone raise a family, when the only government support is food stamps and no cash
assistance.

While the situation for America’s poorest citizens might be dire, Peter Edelman does not
believe that those living in deep poverty are beyond saving. Peter has suggested that the
federal government should increase the amount of aid given to the poorest citizens, as
well as using federal legislation to create a living wage for all Americans. As noted in So
Rich, So Poor
much of America’s economic growth over the past forty years has gone
straight to America’s richest citizens. If America wants to alleviate its poverty problem,
economic growth has to support all Americans, especially the poorest citizens.

Peter Edelman interview for Democracy Now!

Purchase So Rich, So Poor

About the Author: Eric Mogel is an intern at Workplace Fairness. Eric grew up in
Manhattan Beach, California and holds a BA in history from the University of Michigan.
He is currently a second year student pursuing his JD at The George Washington
University Law School.

Three Years After Ledbetter Fair Pay Act Passed, Women Still Earn Far Less Than Men

Monday, January 30th, 2012

waldron_travis_bioSunday marked the third anniversary of the Lilly Ledbetter Fair Pay Act, the first legislation signed into law by President Obama. The law, which expanded the statute of limitations on fair pay lawsuits, was a response to a Supreme Court ruling against Ledbetter in her fair pay case.

Though the law expanded the legal remedies available to women who have been victims of discriminatory pay, little has been done to address the pay gap that exists between male and female employees. Since the Equal Pay Act of 1963 was signed into law, the pay gap has closed at less than half-a-cent per year. That trend is continuing, as the pay gap barely closed from 2009 to 2010.

Women made 77 percent of men’s earnings in 2009, the year the law passed. In 2010, that wasvirtually unchanged, as women’s wages rose to 77.4 percent of men’s. The gap is even larger for African Americans and Latinos: black women made 67.5 percent of all men’s earnings in 2009, while Latino women made 57.7 percent. In 2010, those figures ticked up to 67.7 percent and 58.7 percent, respectively.

Women make up half of the American workforce, and in two-thirds of American families, the mother is the primary breadwinner or a co-breadwinner. But they make less than their male counterparts in all 50 states, though the size of each state’s wage gap varies. While the gap continues to close in places like Washington, D.C., where women make 91.8 percent of men’s earnings, it is growing in others, like Wyoming, where women’s earnings dropped from 65.5 percent of men’s in 2009 to just 63.8 percent in 2010.

Because of the gender pay gap, women with the same education doing the same job as men earn far less over their working lifetimes. The wage gap costs $723,000 over a 40-year career for women with college degrees. In some industries, the gap can cost women close to a million dollars.

In November 2010, Senate Republicans killed efforts to close the pay gap when they unanimously voted to block the Paycheck Fairness Act, which would have updated the Equal Pay Act, closed many of its loopholes, and strengthened incentives to prevent pay discrimination.

This blog originally appeared in ThinkProgress on January 30, 2012. Reprinted with permission.

About the Author: Travis Waldron is a reporter/blogger for ThinkProgress.org at the Center for American Progress Action Fund. Travis grew up in Louisville, Kentucky, and holds a BA in journalism and political science from the University of Kentucky. Before coming to ThinkProgress, he worked as a press aide at the Health Information Center and as a staffer on Kentucky Attorney General Jack Conway’s 2010 Senate campaign. He also interned at National Journal’s Hotline and was a sports writer and political columnist at the Kentucky Kernel, the University of Kentucky’s daily student newspaper.

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