Income Trends 6: Can People Reverse the Income Gap

This concludes our series examining economic trends widening the income gap in America

One of the issues Pulling Apart a State-by-State Analysis on Income Trends asks and answers the question “Do Low-Income Families Move Quickly up the Economic Ladder?”  The question resonates. If you cannot change the direction and reverse the gap, the world looks pretty dismal. If, however, you can move up the economic ladder then hope can stimulate change.

Temporary Low-Income Situations

The study reviews how income gaps have occurred in the last 30 years and increased significantly in the past 10 years. The researchers then give hope:

Short-term Mobility versus Long-term Mobility

• “Some families, however, have low incomes for only a few years and quickly move into the middle class.
  • For example, the parents of a young child may be working part time while finishing college. The family’s income might be very low for a few years,
  • After both parents graduate from college and obtain well paying jobs, the family’s income could increase substantially.”
• “Most low-income families have low incomes for many years.
  • In the short term, workers in the bottom fifth of the income distribution experience very little income mobility.
  • In the early 1990s, 75% of individuals who were in the bottom fifth in year one were still in the bottom fifth the next year.

Mobility Improves Somewhat Longer Period of Time

• During the 1970s-1990s, about half of the individuals who started in the bottom fifth had moved up the income ladder after ten years.
  • However, the rest of the individuals remained in the bottom fifth
  • Half of those who did move up the income ladder only rose to the second-lowest quintile
• Faster movement up the economic ladder could offset the problems of greater income inequality
• Studies show that the income mobility of black families is half that of white families

Concluding Thought

We must reverse income gaps. Paying living wages encourages people to work. Higher wages gives people hope they can improve life. They believe they can achieve the American Dream.

Monday we encourage you to stop saying stupid things when looking for a job

Income Trends 5: Impact of Education and Other Facts

This continues our series reviewing the findings of research on income inequality

In this post we will discuss the correlation between incomes and educational levels. We will also share additional facts found in the studies. The studies highlight so many statistics that you could easily miss their significance. So, let me summarize America is dividing itself from a middle-class based society into one where the richest 5% significantly out earn 80% of all other Americans.

 

Impact of Education on Income Equality

Pulling Apart a State-by-State Analysis of Income Trends says “Several factors contributed to increasing wage inequality, including long periods of high unemployment, globalization, the shrinkage of manufacturing jobs and the expansion of low-wage service jobs and immigration, as well as the lower real value of the minimum wage and fewer and weaker unions.

• Wages plummeted for workers with less than a college education, (lowest-earning 70% of the workforce) .
• More recently, even those with a college education experienced real wage declines”

Pulling Apart continues “fundamental changes in the United States economy contributed to disparities in low- and middle-income workers relative to highly skilled, highly paid workers.

• The shift from manufacturing to services led to an increase in the number of low-paying jobs and a decline in higher-paying jobs for workers with less than a college education.
• 1979-2003 manufacturing  jobs fell 25% and service jobs rose 115% in service industries (46% in retail alone).
  • Services/retail trade industries accounted for 79% of net job growth 1979-2000.
  • In 2002, the retail trades paid just 55% of manufacturing jobs.”

Other Statistics Shared by the Studies

• The U.S. currently has more income inequality than Pakistan or the Ivory Coast
• Emmanuel Saez found the top 1% captured 93% of growth in income during the first year after the recovery
• The bottom 20% lost 6% of real income in 10 years while the highest 5%r increased by 8.6%
• In the late 1970s the top 5% earned 11.7 times what the bottom fifth earned and grew to 14.1 by the mid-2000s

Friday we discuss the ability of low-income families to move quickly up the economic ladder

Income Trends 4: Causes Contributing to Income Gaps

This continues our series describing the causes and consequences of the income gap

Income gaps affect families in upper, middle, & lower incomes. Income in the top 5% rose between the late 1970s and mid-2000s by more than $100,000 (adjusting for inflation). By contrast, the largest increase in the bottom fifth was $5,620. In the 1970s incomes for the top 5% were 2.5 times the middle 20%, by the 2000s they were more than 4 times as much. Pulling Apart a State-by-State Analysis of Income Trends declares “Several factors have contributed to the large and growing income gaps in most states.”

Growth in wage inequality has been the biggest factor 

• “Wages at the bottom and middle have been stagnant or grown modestly for 30 years. 
• Wages of the very highest-paid employees have grown significantly.
• Over the last 30 years, the nation has seen
  • Increasingly long periods of high unemployment
  • More intense competition from foreign firms
  • Shift in the mix of jobs from manufacturing to services
  • Advances in technology that have changed jobs. 
  • Share of workers in unions also fell significantly.
• Today, inequality between low- and high-income households — and between middle- and high-income households — is greater than it was in the late 1970s or the late 1990s.”

Government Policies 

“Government actions — and, in some cases, inaction — have contributed to the increase in wage and income inequality in most states.  Examples include

• Deregulation and trade liberalization
• Weakening of the safety net
• Lack of effective laws concerning the right to collective bargaining
• Declining real value of the minimum wage
• Changes in federal, state, and local tax structures and benefit programs have accelerated the trend toward growing inequality.”

Expansion of investment income. 

• “Forms of income such as dividends, rent, interest, and capital gains, which primarily accrue to those at the top of the income structure, rose substantially as a share of total income during the 1990s.
• Large increase in corporate profits during the economic recovery after the 2001 recession also widened inequality by boosting investors’ incomes.”

Wednesday we review the impact of higher education on income trends and gaps

Income Trends 3: Long-Term & Short-Term 10-30 Years

This continues our review of recent studies about income gaps between rich and poor

The study described how they measured trends, “To assess how households at different income levels have fared, this report measures income inequality at four points in time: the late 1970s, the late 1990s, and the mid- and late 2000s.”

Gap Widened Significantly Since the Late 1970’s

They outlined the following nationwide trends since 1970:

• “Income gaps between the richest households and both the poorest households and middle-income households have widened significantly since the late 1970s.”
• “The incomes of the country’s richest households have climbed substantially over the past three decades”
• “But middle- and lower-income households have seen only modest increases or actual declines after adjusting for inflation.”
• “This trend is in marked contrast to the broadly shared increases in prosperity that prevailed between World War II and the 1970s.”
• “On average across the 50 states, incomes fell by close to 6 percent among the bottom fifth between the late 1990s and the mid-2000s while rising by 8.6 percent among the top fifth.”

Short-term Trends Since 1990s

They continue “In the latter half of the 1990s, a number of factors helped boost the incomes of low- and moderate- income families. Economic growth sped up, and productivity and average real wages grew more quickly.”

• “Low- and moderate-income wage earners did not fare nearly as well in the 2001-2007 expansion.”
• “Even though productivity grew more quickly during this period than in the latter 1990s, slow job creation led to stagnating or declining real wages for these workers.”
• “Even as high-income families recovered from the hit their incomes took as a result of the stock market decline and saw their incomes grow rapidly.”
• “Average household incomes fell among all income classes during the 2007-2009 recession”
• “The large capital losses associated with the stock market crash — which disproportionately affected wealthier households — drove inequality down.”
• “The economy has since begun to grow again, and while incomes at the top have begun to rebound,”
• “Incomes among poor and middle-income households have not.”

Monday we analyze causes and consequences of rising inequality

Income Trends 2: Problems from the Income Gap

This continues our series analyzing the income gap

Studies released in the last month revealed a growing gap between incomes of the average and richest Americans. Too many of the former middle class were pushed into poverty. Yet, too many people, like the frog in the pot of water slowly coming to a boil, do not recognize the major problems with the income gap.

Consequences of the Income Gap

Pulling Apart a State-by-State Analysis of Income Trends cites several challenges:

“It is a basic American belief that hard work should pay off — that individuals who contribute to the nation’s economic growth should reap the benefits of that growth. Over the past three decades, however, the benefits of economic growth have been skewed in favor of the wealthiest members of society. Rising income inequality not only raises basic issues of fairness but also adversely affects our economy and political system.

A widening gulf between the richest Americans and those at the bottom or middle of the income scale can reduce social cohesion, trust in government and other institutions, and participation in the democratic process.:

• “Discrepancies in political influence in federal, state, and local government”
• “Richest Americans have less contact with everyone else—and thus familiarity with their problems”
• “Increased disparity in the quality of schools…makes it harder for children in low-income families to acquire the skills they need to succeed”
• Richer families living in the suburbs—and sending their children to private schools—“lose sight of the need to support public schools”
• “A link between higher levels of inequality and poor schools, substandard housing, and higher levels of crime”
• “A strong connection between income inequality and social problems such as mental health, violence, drug abuse, and poor educational performance”
• “Widens the gap between housing costs and what households particularly renters with very low incomes—can afford to pay”
• “When low-wage jobs do not pay enough to lift a family our of poverty and when the incomes of the poorest families grow only slowly or not at all, policies that encourage work cannot succeed”

Friday we examine long-term and short-term income trends that created gaps

Income Trends 1: Overview

This begins a series examining several studies of income statistics in 2011

Do you feel that your income falls behind your output every month? Are you one of the millions who used to be in the middle class—but now find yourself officially listed in poverty? Recent studies indicate you are right! Income for the average American increased 2.8% to $34,053 while CEOs for S&P companies rose 13.9% to $12.94 million. In other words, income for most Americans increased $953.48. CEO incomes increased $1,790 million.

Recent Studies Confirm Increasing Income Gap

One study, Pulling Apart a State-by-State Analysis of Income Trends released November 15 jointly by the Center on Budget and Policy Priorities and the Economic Policy Institute. Their study analyzed data from the U.S. Census' Bureau’s Annual Social and Economic Supplement (formerly called the March Current Population Survey). The other release, Trends in CEO Pay, issued by the AFL-CIO but using data from Salary.com, the U.S. Departments of Labor and the Census. I acknowledge all three sources represent liberal perspectives.

Pulling Apart concludes “Over the three decades since the late 1970s, states have not experienced broadly shared growth. While overall, the economy of the United States has grown over the period, most of the benefits of that growth have accrued to families at the top of the income distribution, lower-income families and families in the middle of the income distribution have seen their income grow only slowly. This has widened the gap in income between high-income families and poor and middle-class families.”

Multiple Findings in the Research

The studies included additional insights:

• Why the income gap is a problem
• Recent trends since the 1990s
• Long-term trend: The Late 1970s to the mid 2000s
• Causes and Consequence of Rising Inequality
• The impact of high school and college education on the income gap
• How easy is it to move up to higher incomes

We will examine these topics in the next few blogs. The findings of this research affects your career and career growth.

Wednesday we explore why the income gap is a problem, not just for you, but for society

Income Trends 1: Overview

This begins a series examining several studies of income statistics in 2011

Do you feel that your income falls behind your output every month? Are you one of the millions who used to be in the middle class—but now find yourself officially listed in poverty? Recent studies indicate you are right! Income for the average American increased 2.8% to $34,053 while CEOs for S&P companies rose 13.9% to $12.94 million. In other words, income for most Americans increased $953.48. CEO incomes increased $1,790 million.

Recent Studies Confirm Increasing Income Gap

One study, Pulling Apart a State-by-State Analysis of Income Trends released November 15 jointly by the Center on Budget and Policy Priorities and the Economic Policy Institute. Their study analyzed data from the U.S. Census' Bureau’s Annual Social and Economic Supplement (formerly called the March Current Population Survey). The other release, Trends in CEO Pay, issued by the AFL-CIO but using data from Salary.com, the U.S. Departments of Labor and the Census. I acknowledge all three sources represent liberal perspectives.

Pulling Apart concludes “Over the three decades since the late 1970s, states have not experienced broadly shared growth. While overall, the economy of the United States has grown over the period, most of the benefits of that growth have accrued to families at the top of the income distribution, lower-income families and families in the middle of the income distribution have seen their income grow only slowly. This has widened the gap in income between high-income families and poor and middle-class families.”

Multiple Findings in the Research

The studies included additional insights:

• Why the income gap is a problem
• Recent trends since the 1990s
• Long-term trend: The Late 1970s to the mid 2000s
• Causes and Consequence of Rising Inequality
• The impact of high school and college education on the income gap
• How easy is it to move up to higher incomes

We will examine these topics in the next few blogs. The findings of this research affects your career and career growth.

Wednesday we explore why the income gap is a problem, not just for you, but for society