(Photo: AP) Supporters of an increased minimum wage rally at the New York State Capitol on March 15, 2016. I n an election season dominated by populist appeals, globalization and trade deals like the Trans-Pacific Partnership have come under fire for offshoring the manufacturing jobs that helped create a healthy American middle class. But there has been less attention to another factor that has contributed to the increase in income inequality: The dramatic decline in union membership since the late 1970s. A new Economic Policy Institute white paper published Tuesday found that since 1979, the share of men who belong to unions in the private-sector workforce has fallen from 34 percent to 10 percent. According to the Washington-based think tank, if unions had the same presence in the private sector today that they did in 1979, men—both union members and nonunion members alike—would be making $2,704 more each year. The EPI researchers also found that union membership makes a tremendous...
When the American economy crashed in 2008, economists took care to use the term “Great Recession” to distinguish the severity of the first major downturn of the 21st century from the 1929 stock market crash that ended up in the history books as the Great Depression. But there’s one byproduct of the recession that has Depression-era overtones: income inequality.
Today income inequality is pervasive. Since 2009, income gains have accrued almost exclusively to the country’s highest income earners, according to a new study by the Washington-based Economic Policy Institute. In 2013, the top 1 percent of American families acquired 25 times as much income as those in the bottom 99 percent. The average income for the top 1 percent was $1.2 million, while the average income of the bottom 99 percent was $45,567.
“These trends in income concentration can’t go on,” says Mark Price, labor economist for the Keystone Research Center based in Harrisburg, Pennsylvania, who is a co-author of the report. “We’re on this conveyor belt that is spinning off greater and greater amounts of income to a tiny group of people,” he says. “It threatens to undermine the engine of our economic growth, which is our people.”
The researchers examined the period from 1917 to 2013, using Internal Revenue Service data for states, counties, and metropolitan areas.
They found that in 15 states all income growth went to the top 1 percent in the four years leading up to 2013.
Florida, which has fifth greatest rate of income inequality, claimed four of the top seven most unequal metropolitan areas in the country—Naples-Immokalee-Marco Island, Sebastian-Vero Beach, Miami-Fort Lauderdale-West Palm Beach, and Key West. Franklin County, located on the coast of the Florida panhandle, is the most unequal county in the state. The county’s top 1 percent of income-earners averaged $1.8 million in income; the average income for the remaining 99 percent a little is more than $25,000.
Income inequality became a hot topic when the Occupy Wall Street movement hit the streets in 2011, but these unnerving developments have been building since 1979. In 1978, income inequality reached a nadir between the Great Depression and the Great Recession, with the top 1 percent earning 9 percent of all the country’s income.
Income inequality had peaked in 1928 when 24 percent of income in the country went to the top 1 percent. In 2012, that figure had reached 23 percent. It dipped a few points in 2013 (only because of savvy tax planning by the wealthiest Americans, who shifted income from 2013 to 2012 to avoid a higher tax rate in the later year.) But according to a 2015 update of a 2003 study conducted by Thomas Piketty and Emmanuel Saez, which uses the same methodology, income inequality rose again in 2014.
“We haven’t quite passed that previous peak [of 1928], says Price, but that’s where we’re headed.”
For Price, the most frightening aspect of this increase in inequality is the reversal of an ideal that is ingrained in the American identity—upward mobility. “Because ability is distributed randomly rather than according to the income of your parents, the great danger is that the next brain surgeon or inventor of apps for things that will fundamentally improve human health and capacity might be born to poor parents and not get the education they need to realize their full potential,” Price says. “That doesn’t just hurt them, it hurts us all.”
A 2008 Pew Charitable Trust report came to a similar conclusion. “Americans are more optimistic than others about their chances of getting ahead,” the report’s authors noted. But “the earnings of American men are more closely tied to the earnings of their fathers than are those of men in other countries.”
The Economic Policy Institute study offered a number of recommendations to stem rising inequality, including encouraging greater unionization, which is currently at a historic low particularly in the private sector, raising the minimum wage, and addressing the problems created by a business culture that condones top corporate executives earning salaries that vastly outpace the ones earned by their employees.
Sergey Mironov/Shutterstock On May 18, the Obama administration announced that it will raise the salary threshold for overtime pay at the end of this year. When the Department of Labor’s new law goes into effect on December 1, millions of workers making less than $47,476 a year will finally be entitled to overtime pay at time and a half, regardless of title or duties. The current overtime salary threshold is less than half of that—$23,660—and has been adjusted just once since 1975. In 1975, nearly 60 percent of workers qualified for overtime pay. Today, only about 7 percent are eligible. The overtime rule was also narrowed during the George W. Bush administration, when a 2004 update made it harder for workers to receive overtime protections. The changes included removing the “duties test,” which had exempted workers from overtime based on whether they performed such managerial duties as hiring and firing. The 2004 rules also established a “concurrent duties” definition, which exempted...