• If you are having problems logging in please use the Contact Us in the lower right hand corner of the forum page for assistance.

Agman's Selective Economy

Econ101

Well-known member
Income Inequality Has Intensified Under Bush

Though the Bush administration continues to laud the strength of the economy and the success of its economic and tax policies, a large percentage of Americans are continuing to struggle to make ends meet as income growth has become increasingly concentrated at the top of the income scale. Income inequality, in fact, is at an all-time high, illustrating that current tax, budget, and wage and employment policies are all not working in favor of average American families.

The country experienced relatively broad-based wage growth during the latter part of the 1990's, but this growth ended with the 2001 economic downturn. Growth in real wages for low- and moderate-income families began to slow, and by 2003 wages began to decline and have not picked up in real terms. The economic recovery after the recession, one of the weakest recoveries on record, has not been diverse enough to generate the kind of income gains among low- and middle-income families seen over the last decade.

This real wage stagnation comes despite economic expansion over the last two years, relatively strong Gross Domestic Product (GDP) growth of late, and record highs for corporate profits in many sectors. These gains have not been reflected in job and wage growth across the board for averages workers. Real hourly wages fell for most low- and middle-wage workers by 1 - 2 percent last year and have not increased since 2000 after adjusting for inflation. In addition, the Federal Reserve recently reported in its Survey of Consumer Finances that average income for American families declined 2.3 percent between 2001 and 2004 after adjusting for inflation.

Compounding this trend has been Congress's utter inability to pass even one minimum wage increase in the last nine years. The federal minimum wage still sits at $5.15 per hour and has lost over 17 percent of its purchasing power since 1997. In 2005, minimum wage workers earned only 32 percent of the average hourly wage and in fact, the wage would have to rise to $8.20 just to reach half of the current average hourly wage. If Congress fails raise the minimum wage this year, it will mark the longest stretch the wage has remained unchanged since it was instituted in 1938 and the greatest inequality between minimum wage and average wage earners since the end of World War II.

The connection between the drastically low minimum wage and growing economic inequality seems to have escaped notice only in the nation's capitol. Eighteen states have now enacted higher state minimum wages, and many others are currently considering increases of their own. According to the Ballot Initiative Strategy Center, as many as 30 states could consider legislative proposals this November to increase the minimum wage or tie it directly to inflation.

Other Bush administration policies have contributed to these negative income trends, particularly the regressive redistribution of federal revenues through the President's tax cuts. The Bangor Daily News summed up the problem succinctly:

"Suppose that the administration's tax cuts, which began in 2001, remain in effect until 2015. Over these 15 years, more than half of the tax cuts - 53 percent - will go to people with incomes in the top 10 percent, according to studies commissioned by The New York Times. And 15 percent of the cuts will go to the top one-tenth of 1 percent of taxpayers. By 2015 the tax cuts, if retained, will provide average yearly tax savings of $23 to taxpayers in the bottom 20 percent. The wealthy will fare better. The top one-tenth of 1 percent of all taxpayers will save an average of $196,000 a year, or a total of $2.9 million over the 15 years. By 2015, the top 1 percent of taxpayers will pay a lower share of total taxes than they did in 2001."



Far from distributing money back to average American families, the Bush tax cuts overall have profited the super rich, leaving the vast majority of Americans with comparatively little or nothing to show for it. This has only made the distribution of income and wealth across America more skewed.

Showing further evidence of an exacerbated income gap, the Center on Budget and Policy Priorities and the Economic Policy Institute recently released Pulling Apart: A State-by-State Analysis of Income Trends, a study highlighting the growing gap between rich and poor. The study finds that this gap -- mainly between the highest-income families and low- and middle-income families -- grew significantly between the early 1980s and the early 2000s. During this period of time, the incomes of the bottom fifth of families grew more slowly than the incomes of the top fifth of families in 38 states; the incomes of the rich grew by an average of 62 percent, while the incomes of the poor grew by an average of 21 percent. Additionally, in 39 states the incomes of the middle fifth of families grew more slowly than the incomes of the top fifth of families.

The five states with the largest income gap between the top and bottom fifths of families, according to the study, are New York, Texas, Tennessee, Arizona, and Florida. The five states with the largest income gaps between the top and middle fifths of families are Texas, Kentucky, Florida, Arizona, and Tennessee. Generally, income gaps are larger in the Southeast and Southwest and smaller in the Midwest, Great Plains, and Mountain West.

These trends indicate a fundamental inconsistency and unfairness within our economic system that threatens the well-being of future generations. Jared Bernstein, a senior economist at the Economic Policy Institute, makes this point, explaining, "When income growth is concentrated at the top of the income scale, the people at the bottom have a much harder time lifting themselves out of poverty and giving their children a decent start in life. A fundamental principle of our economic system is that the benefits of economic growth will flow to those responsible for their creation. When how fast your income grows depends on your position in the income scale, this principle is violated. In that sense, today's unprecedented gap between the growth of the typical family's income and productivity is our most pressing economic problem."

Growing income inequality in America did not happen by accident and it cannot fix itself. It will take proactive changes from policy makers at the state and national level to help reduce the gap and truly level the economic playing field to create a more robust environment for opportunity for all. Raising the minimum wage, as well as adjusting it annually for inflation, would be one small but necessary first steps toward reducing the enormous income disparity in America today.

Despite the White House's selective use of economic data and sweeping generalizations about the overall strength of the economy, mining the data actually paints a much drearier picture, one in which most Americans are not making progress but actually losing ground, while the wealthy prosper more and more. This trend will only worsen unless more just and sensible fiscal and economic policies are adopted.


Agman:
Facts override opinion once again; results dispel perception.

Agman, if your neighbor wins the lottery down the street and the average income for your neighborhood goes up, does that mean your average income went up also?
 

Econ101

Well-known member
Who is winning the "lottery"?

A few more facts over perception:



Income Inequality Bonanza
Posted by Eric de Place on 02/27/2006 at 12:00 AM

In the New York Times, columnist Paul Krugman deflates the notion that widening income gaps are the result of education and specialized skills:

...a college degree has hardly been a ticket to big income gains. The 2006 Economic Report of the President tells us that the real earnings of college graduates actually fell more than 5 percent between 2000 and 2004. Over the longer stretch from 1975 to 2004 the average earnings of college graduates rose, but by less than 1 percent per year.

The Economic Policy Institute makes the same point on their website: "Since 2000, the real earnings of college-educated workers (those with bachelor's degrees) have fallen quite steeply..." So having a degree doesn't guarantee that you'll grab a big slice of income pie. But who is capturing all the wealth?

As Krugman points out, big income gains have lately been restricted to a very tiny slice of Americans:

Between 1972 and 2001 the wage and salary income of Americans at the 90th percentile of the income distribution rose only 34 percent, or about 1 percent per year. So being in the top 10 percent of the income distribution, like being a college graduate, wasn't a ticket to big income gains. But income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent. [Emphasis added.]

In other words, not only are the ultra-rich getting richer, but they're getting richer much, much faster than the plain old rich. And even if you count yourself among the fortunate few who earn more than 90 percent of American households, your gains (as a class) have been very slow.

And the picture looks even bleaker for young workers.
More...
 

Cowpuncher

Well-known member
Econ,

I guess it all in your perspective. I grew up poor as a churchmouse and I probably am now in the top 5% of the population in terms of assets.

I see opportunity now as it has always existed before. I see 16 year old making 10 bucks an hour where I was happy to work a few hours a week at 35 cents.

I once was a comnputer programmer doing confidential payroll. I was surprised to see how much some made who weren't really to swift. The lesson - get in gear and get obn the other side of the poverty line. Ain't easy, but the possibilities are there more than ever.

And there is no longer tax rates around 90%. Believe it or not, in the UK, they once had the tax rates so high that the tax rate was over 100%. Thanks to Maggie Thatcher, UK is flourishing again.
 

Econ101

Well-known member
Cowpuncher said:
Econ,

I guess it all in your perspective. I grew up poor as a churchmouse and I probably am now in the top 5% of the population in terms of assets.

I see opportunity now as it has always existed before. I see 16 year old making 10 bucks an hour where I was happy to work a few hours a week at 35 cents.

I once was a comnputer programmer doing confidential payroll. I was surprised to see how much some made who weren't really to swift. The lesson - get in gear and get obn the other side of the poverty line. Ain't easy, but the possibilities are there more than ever.

And there is no longer tax rates around 90%. Believe it or not, in the UK, they once had the tax rates so high that the tax rate was over 100%. Thanks to Maggie Thatcher, UK is flourishing again.

Cowpuncher, I totally agree with you in many respects but the facts must be on your side for your optimism to have any validity.

Research Shows Myths Behind U.S. Social Mobility

AccountingWEB.com - 19th April 2006 - Is there any more 'American' story than the immigrant who earns success through hard work, determination and sheer grit?

Advertisement

This story is ingrained in the American psyche, but recent research is exploding the myths of the land of opportunity. Perhaps the United States was never a classless society, but it is certainly more rigid today than ever. These days, if you're born into a poor family, you're likely to die poor. If you're born into riches, you'll stay rich. If your parents are middle-class, the chances of ending up on a higher rung of the economic ladder are far smaller than you might think.

According to research cited in a new paper written by Alan Berube, a Brookings Institution scholar and metropolitan policy expert, the U.S. is becoming increasingly less socially mobile. Across the 1990s, about 40 percent of U.S. families ended the decade in the same income bracket in which they began, versus 36-37 percent in the 1970s and 1980s. More than half the families at the bottom were still there after 10 years.

Several serious examinations of class mobility–or more accurately the lack thereof–are drawing attention to the barriers that hinder movement from one social class to the next. As the divide between the haves and have-nots grows, the more difficult it is to climb from one rung to the next, Berube wrote.

He pointed out that in 2004 and 2005, The New York Times, the Wall Street Journal and the Los Angeles Times, have all written series of articles on the subject of whether and how Americans are moving up the ladder. And in the United Kingdom, the issue has taken central stage in the public debate, Berube said in “Overcoming Barriers to Mobility: The Role of Place in the United States and UK.”

“One important strand of the UK mobility discussion has focused on the role of 'place' The central questions here seem to be (a) 'Does where you live affect your chances in life?' and (b) 'If so, how much?.' ” In U.S. newspapers, the influence of place was mentioned only in passing. Berube's paper outlines the potential role of a person's location on his or her economic future.

He stated that living in a deprived area may keep poor people poor in several ways. Poor neighborhoods separate people from their work geographically; the schools do not offer high-quality education; crime rates are higher, especially for violent crime; health care is poorer. Social expectations to retain a job, stay away from crime and avoid risky behaviors, are lower in poor neighborhoods, too.

The strongest evidence of “area effects” is in mental health. Researchers found that mental health improved greatly when the poor people in the studies moved to better neighborhoods. “Overall, they likened the magnitude of the effect to that found in 'some of the most effective clinical and pharmacological mental health interventions.' ” Berube wrote. Physical health improved dramatically as well.

Berube suggested that U.S. research could be applied to UK housing policy. If people living in concentrated areas of poverty could gain access to better neighborhoods, their chances of moving up and living a healthier life are much improved.

He also noted that improving neighborhoods is only one strategy to improve social mobility, as it can help only a minority of people in the U.S. and UK. “At the same time, our societies do owe these families whose progress is most inhibited by the current social order a shot at something far better,” Berube concluded. “Relieving concentrated deprivation seems a logical place to start.”

The report is included in a new book published by the Institute of Public Policy Research of London, “Going Places: Neighborhood, Ethnicity, and Social Change.” Read the entire chapter at http://www.brookings.edu/metro/pubs/20060410_ukmobility.htm
 

DiamondSCattleCo

Well-known member
Cowpuncher said:
The lesson - get in gear and get obn the other side of the poverty line. Ain't easy, but the possibilities are there more than ever.

I agree with you to a point (I was once poor as a churchmouse, and then made some good money in systems analysis and some other business concerns), however for every success story I can point out 10 families who are starving, not because of a lack of work ethic or intelligence, but because government has now geared itself to servicing the rich and not worrying about the poor.

Fuel in Canada will be up to $1.35/litre by the end of summer, and this is with much of our fuel being pumped out of Canadian ground, not purchased at world oil prices. Government isn't lifting a finger. Why? Its a cash cow for them. But I know many middle class families who have now switched to cheaper running vehicles and travel far less than they did before. Their quality of life has went down. Low income families have simply moved into town where they can walk everywhere, effectively turning a once great little town into a welfare haven.

I could continue with a rant, but there isn't much point. For those who say that the economy is now "efficient", I say give me the old inefficient one. For those who say the economy is growing, I ask where. Low dollar service industries, gas companies and banks.

Rod
 

Latest posts

Top