The Center's work on 'Income Inequality' Issues


Wisconsin Law Would Tilt Playing Field Even More Against Workers

March 4, 2015 at 3:38 pm

My colleague Jared Bernstein recently addressed some of the canards around Wisconsin’s proposed “Right to Work” (RTW) law, which would dilute unions’ bargaining strength by making it harder for them to collect dues from the workers they represent.  The bill, which would make Wisconsin the 25th state with such a law, is part of an ongoing movement to weaken protections for workers attempting to bargain collectively — a movement that’s exacerbating the trend toward growing income inequality and wage stagnation.

As Bernstein explains:

Here’s what the legislation does:  It makes it illegal for unions to negotiate contracts wherein everyone covered by that contract has to contribute to its negotiation and enforcement. . . .

Let’s also be clear about what goes on in non-RTW states, as anti-union forces consistently distort the current reality.  In non-RTW states, no one has to join a union.  There have been no “closed shops” in America for more than 20 years.  When RTW advocates say they’re fighting against “forced unionism,” they are making stuff up.  There’s no such thing.

​By weakening unions, RTW weakens wages, Bernstein explains, citing a study that found “a significant wage advantage in non-RTW states of about 3 percent, which, for full-time workers, amounts to $1,500 per year.”  Weaker wages, in turn, place upward pressure on income inequality.

The long-term growth in income inequality is well documented.  It has many causes, including the growth in investment income (which goes mainly to those at the top of the income scale) as a share of the economic pie.  At the same time, wages have grown more unequal due to longer periods of high unemployment (which reduce workers’ negotiating power), more foreign competition, and a decline in higher-paying manufacturing jobs.  Earnings for low- and middle-income workers have frequently fallen or remained stagnant.  A range of studies (see here and here for examples) have concluded that falling union membership has played a significant role in these unfortunate trends.

Federal and state policymakers can push back against these trends by enacting (and enforcing) stronger labor standards, reforming immigration policies to bring workers out of the shadows, promoting full employment, and, importantly, protecting workers’ rights to organize.

Support for Home Visiting Programs Slated to Expire

February 13, 2015 at 10:44 am

A federal-state partnership that supports home visiting programs in every state will expire March 31 unless Congress extends it, jeopardizing programs with a proven record of strengthening high-risk families and saving money over the long term.

The Maternal, Infant, and Early Childhood Home Visiting (MIECHV) program funds programs through which trained professionals — often nurses, social workers, or specialists in early childhood development— help parents acquire the skills to promote their children’s development.

More specifically, MIECHV works to improve maternal and newborn health, prevent child injuries and abuse, help children succeed in school, reduce crime and domestic violence, and make families more economically self-sufficient.  Research shows that it helps keep children out of the social welfare, mental health, and juvenile corrections systems, with considerable cost savings for states.

A new report and 22 state and tribal profiles from the Center for American Progress and Center for Law and Social Policy explain how states and tribes use MIECHV funds to improve and expand home visiting programs to serve more vulnerable families.

For example, MIECHV funds help these programs create or expand data collection systems that enable them to evaluate and report on outcomes for children and families.  (Most MIECHV funds go to rigorously evaluated programs for which there’s well-documented evidence of success.)  MIECHV funds also support training, technical assistance, and professional development for home visiting workers.

Many families have benefited from MIECHV-funded services.  Continued federal support would help states build on that success by reaching more vulnerable families.  Congress should reauthorize the program at current funding levels.

State and Local Tax Systems Hit Lower-Income Families the Hardest

January 15, 2015 at 9:59 am

In nearly every state, low- and middle-income families pay a bigger share of their income in state and local taxes than wealthy families, a new report from the Institute on Taxation and Economic Policy (ITEP) finds.  As the New York Times’ Patricia Cohen wrote, “When it comes to the taxes closest to home, the less you earn, the harder you’re hit.”

Only California taxes the top 1 percent of households at a higher effective rate (8.7 percent) than middle-income taxpayers (8.2 percent), ITEP found.  In the ten states with the most regressive tax systems, the bottom 20 percent pay up to seven times as much of their income in taxes as their wealthy neighbors.

Washington State’s tax system is the most regressive, according to ITEP.  The bottom 20 percent of taxpayers pay 16.8 percent of their income in taxes, while the top 1 percent pay just 2.4 percent.  After Washington, the most regressive state and local tax systems are in Florida, Texas, South Dakota, Illinois, Pennsylvania, Tennessee, Ari­zona, Kansas, and Indiana.

A number of states, including Kansas, North Carolina, and Ohio, have made the situation worse in recent years by cutting income taxes, the only major state revenue source typically based on ability to pay.  Income tax cuts thus tend to push more of the cost of paying for schools and other public services to the middle class and poor — exactly the opposite of what is needed.

Our Big-Picture Look at Inequality

December 10, 2014 at 11:58 am

“The broad facts of income inequality over the past six decades are easily summarized,” our newly updated Guide to Statistics on Historical Trends in Income Inequality explains:

  • The years from the end of World War II into the 1970s were ones of substantial economic growth and broadly shared prosperity.
    • Incomes grew rapidly and at roughly the same rate up and down the income ladder, roughly doubling in inflation-adjusted terms between the late 1940s and early 1970s.
    • The income gap between those high up the income ladder and those on the middle and lower rungs — while substantial — did not change much during this period.
  • Beginning in the 1970s, economic growth slowed and the income gap widened.
    • Income growth for households in the middle and lower parts of the distribution slowed sharply, while incomes at the top continued to grow strongly. (See first graph below.)
    • The concentration of income at the very top of the distribution rose to levels last seen more than 80 years ago, during the “Roaring Twenties.” (See second graph below.)
  • Wealth — the value of a household’s property and financial assets, minus the value of its debts — is much more highly concentrated than income. The best survey data show that the top 3 percent of the distribution hold over half of all wealth.  Other research suggests that most of that is held by an even smaller percentage at the very top, whose share has been rising over the last three decades.

The guide describes common sources of income data and discusses their relative strengths and limitations in understanding income and inequality trends.  It also highlights the trends that those key data sources show and gives additional information on wealth (which helps measure how the richest Americans are doing) and poverty (which measures how the poorest Americans are doing).

5 Takeaways From Last Week’s Figures on Poverty, Inequality, and Health Coverage

September 25, 2014 at 12:32 pm

Here are five key findings from our analyses (here and here) and blog posts on the new figures from the Census Bureau and Centers for Disease Control and Prevention (CDC).

  1. While poverty and median income improved last year for families with children,poverty rates reached record highs for childless families and individuals.  The poverty rate for individuals not living in families (people living alone or only with non-relatives) rose to 23.3 percent in 2013, the highest in over 30 years.  The poverty rate for childless families (childless couples, older couples or other families whose children have moved away or turned 18, and other relatives who live together), while much lower at 6.2 percent, was also the highest in over three decades.
  1. Income inequality remained historically high.  The share of the nation’s income going to the bottom fifth of households remained at 3.2 percent, tied for the lowest level on record with data back to 1967.  The ratio of the median income of the top fifth of households to that of the bottom fifth topped 12 to 1 for the first time on record, with data back to 1967.
  1. Austerity policies limited progress on jobs, income, and poverty.  Instead of responding to continued weak job growth by creating jobs (such as by expanding infrastructure investments), policymakers adopted various austerity policies that constrained consumer spending and employment growth.  Sequestration budget cuts, for example, lowered appropriations for most discretionary programs by 5 to 8 percent in 2013.  Policymakers also allowed a payroll tax holiday to expire after December 2012 and allowed tax cuts for very high-income individuals to expire (though the latter mattered less for consumer demand since high-income people’s spending is less sensitive to tax changes).  The Congressional Budget Office projected in early 2013 that these measures would reduce economic growth over the year by about 1½ percentage points and lower employment by more than 1 million jobs.
  1. The uninsured rate fell slightly last year and is falling further in 2014, as health reform’s major coverage expansions take effect.  The share of Americans without health coverage fell from 14.8 percent to 14.5 percent in 2013, according to Census’ American Community Survey.  And preliminary data from CDC — the first government survey data that reflect the early impact of the coverage expansions (the Medicaid expansion and subsidized marketplace coverage) — show that the number of uninsured fell by 3.8 million in the first quarter of 2014.
  1. The coverage gap between states that have expanded Medicaid and states that haven’t is widening.  In 2013,before the expansion took effect, some 14.1 percent of the people in the 27 expansion states (including Washington, D.C.) were uninsured, compared to 17.3 percent in the 24 non-expansion states.  Figures for the first part of 2014 show the gap is widening.  For example, CDC data show that 15.7 percent of non-elderly adults in expansion states were uninsured in the first quarter of 2014, compared to 21.5 percent for non-expansion states (see graph).