Income Inequality

March 19, 2016 – Inequality.org

Income includes the revenue streams from wages, salaries, interest on a savings account, dividends from shares of stock, rent, and profits from selling something for more than you paid for it. Income inequality refers to the extent to which income is distributed in an uneven manner among a population. In the United States, income inequality, or the gap between the rich and everyone else, has been growing markedly, by every major statistical measure, for some 30 years.

Household and Family Income

Source: Emmanuel Saez, Center for Equitable Growth, June 2015

Income disparities have become so pronounced that America’s top 10 percent now average nearly nine times as much income as the bottom 90 percent. Americans in the top 1 percent tower stunningly higher. They average over 38 times more income than the bottom 90 percent. But that gap pales in comparison to the divide between the nation’s top 0.1 percent and everyone else. Americans at this lofty level are taking in over 184 times the income of the bottom 90 percent.

 

Source: Striking it Richer: The Evolution of Top Incomes in the United States, Emmanuel Saez, June 2015

The top 1 percent of America’s income earners have more than doubled their share of the nation’s income since the middle of the 20th century. American top 1 percent incomes peaked in the late 1920s, right before the onset of the Great Depression.

 

Source: Striking it Richer: The Evolution of Top Incomes in the United States, Emmanuel Saez, June 2015

Inequality in America is growing, even at the top. The nation’s highest 0.1 percent of income-earners have, over recent decades, seen their incomes rise much faster than the rest of the top 1 percent. Incomes in this top 0.1 percent increased 7.5 times between 1973 and 2007, from 0.8 percent to an all-time high of 6 percent. The Great Recession in 2008 did dampen this top 0.1 percent share, but only momentarily. The upward surge of the top 0.1 percent has resumed.

 

Source: Statistics of Income Division, Research, Anlaysis and Statistics, Internal Revenue Service, Table 1, December 2015

The 1990s saw the annual incomes of the ultra rich explode in size. Between 1992 and 2002, the 400 highest incomes reported to the Internal Revenue Service more than doubled, even after the collapse of the dot.com bubble in 2000. In the early 21st century, the economic boom driven by the real estate bubble would more than triple top 400 average incomes before the 2008 economic collapse.

 

Sources: Household income shares for the 0-99 percent, U.S. Census Bureau. Top 1 percent data, the World Top Incomes Database. Analysis by NPR, January 2015

Before the 1980s, lower-income earners owned a far larger portion of total U.S. income than they do today. How much more income would these earners be making today if the United States had the same distribution of income as the nation displayed in 1979? NPR found that Americans would experience income increases of at least $3,000 across all quintile levels, with the highest quintile owed an additional $17,311. The top 1 percent of earners would see a dramatic fall in their income, losing more than just $824,844.

 

Source: Congressional Budget Office, The Distribution of Household Income and Federal Taxes, Table 3, November 2014

The Congressional Budget Office defines before-tax income as “market income plus government transfers,” or, quite simply, how much income a person makes counting government social assistance. Analysts have a number of ways to define income. But they all tell the same story: The top 1 percent of U.S. earners take home a disproportionate amount of income compared to even the nation’s highest fifth of earners.

 

Source: Congressional Budget Office, The Distribution of Household Income and Federal Taxes, Figure 11, November 2014

Since 1979, the before-tax incomes of the top 1 percent of America’s households have increased more than four times faster than bottom 20 percent incomes.

 

Source: Congressional Budget Office, The Distribution of Household Income and Federal Taxes, Figure 13, November 2014

The Congressional Budget Office defines after-tax income as “before-tax income minus federal taxes.” After taxes, top 1 percent incomes are increasing even faster than before taxes. Before-tax income growth for the top 1 percent has averaged 174.5 percent since 1979. The after-tax increase: 200.2 percent. A progressive tax system should function to narrow income gaps between the affluent and everyone else. Over recent decades, America’s tax system has done no narrowing.

 

CEO Pay

Source: Institute for Policy Studies and AFL-CIO analysis of Bureau of Labor Statistics average hourly earnings data and corporate proxy statements, 2015

In the United States today, unions have a much smaller economic presence than they did decades ago. With unions playing a smaller economic role, the gap between worker and CEO pay was nine times larger in 2013 than in 1980.

 

Wages

Source: A look at pay at the top, the bottom, and in between, Spotlight on Statistics, Page 2, U.S Bureau of Labor Statistics, May 2015

Wages in the United States, after taking inflation into account, have been stagnating for more than three decades. Typical American workers and the nation’s lowest-wage workers have seen little or no growth in their real weekly wages.

 

Source: Economic Policy Institute analysis of Kopczuk, Saez and Song (2010) and Social Security Administration wage statistics, November 2015

Between 1979 and 2007, paycheck income of the top 1 percent of U.S. earners exploded by over 256 percent. Meanwhile, the bottom 90 percent of earners have seen little change in their average income, with just a 16.7 percent increase from 1979 to 2014.

 

Source: Economic Policy Institute analysis of Bureau of Labor Statistics and Bureau of Economic Analysis data, January 2015

Productivity has increased at a relatively consistent rate since 1948. But the wages of American workers have not, since the 1970s, kept up with this rising productivity. Worker hourly compensation has flat-lined since the mid-1970s, increasing just 15.5 percent from 1979 to 2013, while worker productivity has increased 132.8 percent over the same time period.

 

Source: Economic Policy Institute analysis of Bureau of Labor Statistics and Bureau of Economic Analysis data, January 2015

Productivity has increased at a relatively consistent rate since 1948. But the wages of American workers have not, since the 1970s, kept up with this rising productivity. Worker hourly compensation has flat-lined since the mid-1970s, increasing just 15.5 percent from 1979 to 2013, while worker productivity has increased 132.8 percent over the same time period.

http://inequality.org/income-inequality/

Candidates on Raising Minimum Wage

Bernie Sanders: “I believe that over the next few years, not tomorrow, over the next few years, we’ve got to move the minimum wage to a living wage, 15 bucks an hour. And I apologize to nobody for that,” Sanders said.

Hillary Clinton: “If we went to $15, there are no international comparisons, that is why I support a $12 national federal minimum wage,” she said. “That is what the Democrats in the Senate have put forward as a proposal, but I do believe that is a minimum, and places like Seattle, like Los Angeles, like New York City, they can go higher.”

Martin O’ Malley: “This was not merely theory in Maryland, we actually did it,” he said. “$10.10 was all I could get the state to do by the time I left, but two of our counties actually went to $12.80,” he said. O’Malley now advocates a $15 minimum wage.

Donald Trump: Says raising the minimum wage creates “a lot of problems.” (Like reducing poverty and creating jobs?) Supports creating two minimum wages, one for high school students and a slightly higher one for adults.

Jeb Bush: Supports eliminating the federal minimum wage: “We need to leave it to the private sector…The federal government shouldn’t be doing this. The federal government doing this will make it harder and harder for the first rung of the ladder to be reached, particularly for young people, particularly for people that have less education.” Believes the minimum wage “perpetuates” poverty.

Marco Rubio: Believes a focus on the minimum wage is “a waste of time.” “My problem with raising the minimum wage is not that I want to deny someone $10.10. I’m worried about the people whose wages are going to go down to zero because you’ve made them more expensive than a machine.”

Ben Carson: Supports raising the minimum wage, and believes it is a way for individuals to be removed from public assistance programs. “I think, probably, it should be higher than now.”
 But has also praised minimum wage work: “It’s important for those in poverty to work hard, even with minimal wages they gain knowledge and skill that will allow for upward progress.”

 “Recognize that if you go and take that chicken job, you gain skills, relationships, the possibility of moving up the ladder. So a year or two or five down the road, you’re no longer in that position. This is what people have forgotten.”

 Rand Paul: Doesn’t support increasing the minimum wage. “The minimum wage is a temporary thing.” “It is a fact, an economic fact, that when you raise the minimum wage, the people that are hurt the worst are minorities and kids” (Actually a CAP study found raising the federal minimum wage to $10.10 would boost wages for people of color by over $16 billion.) He said last year that a $6 minimum wage is “fine.”

Mike Huckabee: Believes the minimum wage hurts entry-level workers.

 “Instead of fighting over the minimum wage, why don’t we focus on solutions that help every American earn his or her maximum wage.”

 “If you get suckered into believing some politician is looking out for you because he wants to keep you locked into a low minimum wage, tell him you’ve got a better idea. Tell him you can do better than his minimum wage.” He argues that Jesus would oppose the minimum wage, as an example of people who want to be paid more than they originally agreed to. But as governor he signed into law a minimum wage increase in Arkansas in 2006.

 Ted Cruz: “I think the minimum wage consistently hurts the most vulnerable.” He has said $0 is the “real Obama minimum wage.”

 “If you raise the minimum wage, the inevitable effect will be, number one, young people will lose their jobs or not be able to get their first jobs.” “Unemployment among young people will go up if the minimum wage goes up as President Obama says. Unemployment among Hispanics, among African Americans, among those struggling to get their first job to climb the economic ladder, will go up.”

 Chris Christie “I’m tired of hearing about the minimum wage. I really am. I don’t think there’s a mother or father sitting around a kitchen table tonight saying ‘you know honey, if our son or daughter could just make a higher minimum wage, my god – all our dreams would be realized.” (Polling support suggests three in four Americans are doing just that.)

 John Kasich: Is “concerned” about raising the minimum wage, though was powerless to stop an automatic fifteen-cent minimum wage increase in Ohio.

 Rick Santorum: Supports a small increase to the minimum wage. Thinks it is important that Republicans support a wage hike to reach out to the middle class. “I’ve proposed a 50 cents an hour raise per year for three years. Keeping it in that area provides a floor for wages — a worker protection device — and it doesn’t have an inflationary effect on wages or increase unemployment.”

 “It’s hard to go out and make the argument that Republicans are making that this is going to have some sort of cataclysmic effect on workers. For me, it’s a worker protection issue, and also an issue that connects with the people who look at the Republican agenda and don’t see anything concrete that indicates we have any understanding of what folks experience at the lower end of the income spectrum.”

 Carly Fiorina: “The sad truth is that raising the minimum wage will hurt those who are looking for entry-level jobs.” Has incorrectly argued that 62% of minimum wage workers are still in high school, when the actual number is closer to a third.

https://ourfuture.org/20150724/republican-candidates-on-raising-the-minimum-wage
http://time.com/4113499/democratic-debate-minimum-wage/

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