September 2012, Week 2


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Fri, 14 Sep 2012 20:01:38 -0400
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The State of Working America


Economic Policy Institute

The State of Working America, an ongoing analysis
published since 1988 by the Economic Policy Institute,
includes a wide variety of data on family incomes,
wages, jobs, unemployment, wealth, and poverty that
allow for a clear, unbiased understanding of the
economy's effect on the living standards of working
Americans. Cornell University Press will publish the
hard edition and e-book in late November.This chapter
is from The State of Working America, 12th Edition, an
Economic Policy Institute book to be published by
Cornell University Press in November 2012.

"The State of Working America, 12th Edition" finds that
policy-driven inequality has undercut low- and
middle-income workers for past three decades

Low- and middle-income workers and their families would
have had far better income growth over the past 30
years if economic policies had not directed the fruits
of economic growth to the highest-income Americans, a
new Economic Policy Institute book, "The State of
Working America, 12th Edition" finds. For example, had
there been no growth in income disparities since 1979,
annual income for a middle-income household would have
been $88,875 in 2007, $18,897 higher than the $69,978
it actually was. The median household lost wealth
between 1983 and 2010 and had just $57,000 in net worth
in 2010, rather than the $119,000 it would have had if
wealth had grown equally across all households over
this period.

Like the 11 previous editions of "The State of Working
America" that EPI has released since 1988, the new
edition provides a comprehensive, data-based answer to
the question, "How well has the economy worked for
American families?" In the 12th edition, the first
published in four years, economists Josh Bivens, Elise
Gould, Lawrence Mishel and Heidi Shierholz analyze data
on income, mobility, wages, jobs, wealth and poverty.
Their analyses illuminate the economic experience of
working Americans since the 1970s, when compensation
and productivity growth diverged. For the first time,
the entire book, including the full text and all of the
charts, is available online and fully downloadable,
along with summary fact sheets that include the book's
key findings. Additionally, the feature "Open Data"
enables researchers to download additional data on
selected income, jobs and wages charts. The username
for the website is media and the password is $18,897.
The website is under embargo until 12:01 a.m. EDT on
Tuesday, September 11.

"The State of Working America, 12th Edition" explains
that economic policies, including policymakers' actions
and failures to act, have undercut the ability of
workers to benefit from economic growth in the United
States. Its primary findings include:

* America's vast middle class has suffered a "lost
decade" and faces the threat of another. The wages of
typical Americans, including college graduates, are
lower today than they have been in over a decade.
Because hourly wages and compensation failed to grow
after the 2001 recession, household incomes had
declined even before the Great Recession. Furthermore,
forecasts of high unemployment for many years ahead
suggest that another lost decade for typical American
workers and their families, as measured by wages and
income, has already begun. * Income and wage inequality
have risen sharply over the last 30 years. Income
inequality has grown sharply since 1979, a fact that is
universally recognized by researchers. The trends that
have driven this growing inequality in overall incomes
are growing concentration of both capital income (the
returns to financial assets) and labor income (wages
and benefits), as well as a shift from labor income
toward capital income. 

* Rising inequality is the major
cause of wage stagnation for workers and of the failure
of low- and middle-income families to appropriately
benefit from growth. The typical worker has not
benefited from productivity growth since 1979, though
there has been sufficient economic growth to provide a
substantial across-the-board increase in living
standards. Instead, higher earners have reaped a
disproportionate share of wage income, and the top one
percent of households have received a disproportionate
share of all income growth. Aside from the period of
strong growth in the late-1990s, wages for low-and
middle-wage workers were stagnant from 1979 to 2007,
and incomes for lower- and middle-class households grew

* Economic policies caused increased inequality
of wages and incomes. Inequality between the very top
wage earners and all others grew from 1979 to 2011
except during stock declines, driven by growing
executive compensation and an expanded and increasingly
highly-paid financial sector. Inequality between the
top wage earners and middle-wage earners also grew from
1979 to 2011. A number of policies played a role in
this growth, including those that: (1) targeted rates
of unemployment too high to provide reliably tight
labor markets for low- and middle-wage workers; (2)
hastened global integration of the U.S. economy without
protecting U.S. workers; (3) failed to manage
destructive international trade imbalances; (4) allowed
employer practices hostile to unions to flourish; (5)
privatized and deregulated industry, including the
financial sector; and (6) eroded labor standards.
Inequality between middle-wage earners and the lowest
wage earners grew only in the 1980s, fueled by the
erosion of the purchasing power of the minimum wage
and, again, the targeting of rates of unemployment that
were too high. Tax and budget policies have compounded
the inequalities that have been generated in
market-based, pre-tax incomes. 

* Claims that growing
inequality has not hurt middle-income families are
flawed. Some recent studies have suggested that
measures of comprehensive income since 1979 show that
middle-income families have seen adequate income
growth. Rather, incomes for the middle class have not
grown as fast as average incomes, and middle-income
growth was much slower between 1979 and 2007 than it
was between 1947 and 1979. Furthermore, more than half
of the income growth between 1979 and 2007 was made up
of government transfers, which reflects the strength of
programs like Social Security, Medicare and Medicaid,
not the strength of the labor market. In fact, higher
household labor earnings can be traced to increasing
work hours, not higher wages. Finally, the data on
comprehensive incomes are technically flawed because
they count rapidly rising health expenditures made on
behalf of households by employers and the government as
income, without taking excessive health care inflation
into account. 

* Growing income inequality has not been
offset by increased mobility. There is no evidence that
mobility--changes in economic status from one generation
to the next--has increased to offset rising inequality,
and some research shows a decline. 

* Inequalities
persist by race and gender. Key economic measures,
including unemployment, wealth, and poverty
(particularly child poverty), continue to show
staggering disparities by race and ethnicity. Gender
disparities also persist, and while gaps in labor
market outcomes have closed in recent decades, a number
have done so because men lost ground, not because women
gained it.

"The State of Working America, 12th Edition" includes
new and compelling data on:


* the components of the Congressional Budget Office's
"comprehensive income" growth for the middle class
(health care insurance, wages, pensions, work hours,
government benefits) * the growth of capital income by
income group and the growing concentration of capital


* the stagnation of economic mobility * the poor
performance of the U.S. economy in international
rankings of mobility


* flat or falling wages for college graduates in almost
every occupation over the past 10 years * wage trends
by education, decile, gender, and race/ethnicity * the
growth of wage inequality for the three key wage gaps:
between the top one percent and others, between the top
and middle (95/50 wage gap), and between the middle and
bottom (50/10 wage gap) * the impact of rising health
care costs on wage growth and wage inequality * the
factors driving the gap between productivity and median
hourly compensation growth * the role of the financial
sector and CEO compensation in fueling the top one
percent's income growth


* the extent to which changes in the labor force
participation rate are due to the weak economy or are
structural/demographic * why current unemployment is
cyclical and not structural


* the decline of median wealth between 1983 and 2010
(while wealth at the top grew strongly) * the collapse
of wealth in African American and Hispanic households *
the role of housing equity's collapse on middle class
wealth * the increasing concentration of stock


* the factors driving high poverty and low-end wages *
the large role income inequality plays in growing
poverty (as opposed to demographic factors like family
formation) * the contribution of longer work hours to
low-income families' income * the relatively small role
tax and transfer policy plays in reducing poverty in
the U.S. in comparison to peer countries * high child
poverty rates in comparison to peer countries


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