Standard and Poor’s Says Inequality Suppresses Economic Growth and State Revenue

Monday, September 15, 2014 at 6:22 PM by

Concerns about increases in income inequality were voiced from a surprising perspective today, when Standard and Poor’s (the bond rating agency) issued a lengthy report titled “Income Inequality Weighs On State Tax Revenues.”  The report concludes that “disparity is contributing to weaker tax revenue growth by weakening the rate of overall economic expansion.” 

The authors offer this explanation for the correlation between income disparities and economic growth:

“…rising income inequality is a macroeconomic factor that acts as a drag on growth. There is evidence, although not conclusive at this point, that the higher savings rates of those with high incomes causes aggregate consumer spending to suffer. And since one person’s spending is another person’s income, the result is slower overall personal income growth despite continued strong income gains at the top.” 

An article in today’s Washington Post sums up the findings in clearer terms:

Even as income has accelerated for the affluent, it has barely kept pace with inflation for most other people. Read more

New Evidence that the Rich Have Prospered while the Poor Got Poorer

Monday, August 25, 2014 at 9:04 AM by

Rich Americans are getting richer and the poor are getting poorer. The top 20% of Americans have been enjoying most of the economic gains over the last decade, but the median net worth of most Americans has actually decreased.

To Reduce Income Inequality and Boost Economic Growth, Make sure every Student has an Opportunity to Attend College

Wednesday, August 13, 2014 at 1:15 PM by

Rising levels of income inequality are acting as a drag on the U.S. economy, but we can counter the economic harm by expanding opportunities to attend college, according to a new report from Standard & Poor’s, a financial services company.

Here’s the crux of the report, in a sentence:

Our review of the data, as well as a wealth of research on this matter, leads us to conclude that the current level of income inequality in the U.S. is dampening GDP growth, at a time when the world’s biggest economy is struggling to recover from the Great Recession and the government is in need of funds to support an aging population.

Pretty clear, right? Prominent policymakers, including President Obama, have warned time and again that high levels of income inequality are slowing economic growth. This report adds something new to the conversation in that it represents the viewpoint of a private sector company, and could be an indication that the business community is starting to view income inequality as a problem. Read more

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Lickety Piketty: A Very Brief Guide to Income Inequality

Friday, July 25, 2014 at 3:44 PM by

There has been a great deal of interest this year in the subject of income inequality – as evidenced by the fact that economist Thomas Piketty’s book, “Capital in the Twenty-First Century,” reached No. 1 on the non-fiction, best-seller list a few months ago.  However, it isn’t an easy summer read, which is why I’m bringing you a very condensed version of a short synopsis that appeared a few days ago in a New York Times column by Nicholas Kristof.

Apparently, buying Picketty’s book is one thing, and getting very far into the 685-page tome is something else.  An analysis of Kindle data by UW Madison mathematics professor Jordan Ellenberg suggests that Piketty’s best seller may also be this year’s most unread book.  With that in mind, Kristof wrote his recent column, which he calls “An Idiot’s Guide to Inequality.”

I don’t want to discourage you from buying and reading Piketty’s book, but if it isn’t something you envision taking with you to the beach this summer, I encourage you to read Kristof’s “idiot’s guide,” which elaborates on these five points (that I have excerpted from his column):

  1. Economic inequality has worsened significantly in the United States and some other countries.
  2. Read more

Categories: Blog, income inequality, JOBS & THE ECONOMY | Comments Off

Milwaukee among Metro Areas with Highest Levels of Segregated Poverty

Tuesday, March 25, 2014 at 1:31 PM by

Poor residents of the Milwaukee area are more economically segregated than poor residents in any other large metropolitan area in the country, according to a new report from Atlantic Cities. The Milwaukee metropolitan area includes West Allis and Waukesha.

When medium and smaller-sized metropolitan areas are also included in the ranking, Milwaukee ranks second in the country in poverty segregation, behind only State College, Pennsylvania.  Madison also ranks high in poverty segregation.

Areas where the poor are most segregated are in the Midwest and the Northeast, and the lowest levels occur in the Sunbelt, especially Florida, and the West.

Cities, in Wisconsin and elsewhere, should strive to avoid high levels of poverty segregation. According to the article: “This increasing concentration of poverty poses a host of problems to communities. Less advantaged communities suffer not just from a lack of economic resources but from everything from higher crime and drop-out rates to higher rates of infant mortality and chronic disease.” People living in segregated poverty also have a harder time getting access to jobs and quality schools. Read more

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Increasingly Unequal: Income Inequality in Wisconsin is on the Rise

Friday, February 28, 2014 at 2:15 PM by

Income inequality in Wisconsin is widening, according to a new report by the Center on Wisconsin Strategy (COWS) and the Wisconsin Budget Project. The top 1% of earners in Wisconsin have experienced tremendous gains in average income in recent decades, while incomes for the bottom 99% have declined.

Key findings of the report include:

  • Between 1979 and 2011, the average income of the top 1% in Wisconsin grew by 104%, while the average income of the bottom 99% dropped by 0.4%.
  • The top 1% in Wisconsin had an average income of $783,000 in 2011, more than 18 times the average income of the bottom 99%.
  • In 2011, 15.7% of income went to the top 1% in Wisconsin, a share that has more than doubled since the 1970s.

Over the last hundred years, income inequality has followed a U-shape in Wisconsin, with very high levels of income inequality during the 1920s and 1930s, much lower levels in the middle part of the century as economic gains were made at all income levels, and then climbing again to very high levels. Read more

War on Poverty, or War on the Poor?

Tuesday, November 19, 2013 at 7:13 PM by

2014 is the 50th anniversary of the “war on poverty,” and we can expect a lot of debate and posturing then about that ambitious undertaking. Expect some legislators to use the opportunity to urge that policymakers renew their commitment to fight poverty and reinvigorate some of the elements of that agenda, while others will take that opportunity to declare the war on poverty a failure and a mistake.

Categories: Blog, ECONOMIC SECURITY, economy, income inequality, poverty | Comments Off

New Census Figures Confirm Wide Income Gap

Tuesday, September 17, 2013 at 5:30 PM by

Poverty Remains High, Median Income Remains Low, and Health Insurance Coverage Improves Modestly

Data released today by the U.S. Census Bureau reinforce the recent findings by economists that there is a very wide gap between the rich and the poor.  The new Census figures for 2012 from the Current Population Survey (CPS) show that the painfully slow economic recovery has yet to help a large segment of Americans.    Poverty remained high last year, at 15% nationally, and median income remained low — 8.3% below the 2007 level, before the Great Recession began.     

In a New York Times blog post this afternoon, a graph prepared by Jared Bernstein uses the 2012 Census Bureau data to illustrate the diverging trend lines since 1967 in the household income of low, middle and upper income Americans.  And as Bernstein notes, the divergence would be much wider if the Census Bureau didn’t exclude capital gains income from its data.  Read more

In 2012, Top 10% Take Biggest Share of Income Ever

Wednesday, September 11, 2013 at 10:38 AM by

The top 10% of earners earned more than half the country’s total income in 2012, the highest share since the government started collecting figures a century ago. The top 1% of earners took more than a fifth of all income, one of the highest levels in the last century, according to this article in today’s New York Times.

This new information on income inequality shows that any effect the recession had on slowing the growth of income inequality was short term. Since the recession, the incomes of middle- and lower-income earners have stagnated. Meanwhile, the top 1% captured 95% of income gains that have occurred since the end of the recession.

The study’s authors note that tax policy changes made by Congress, including tax increases on wealthy Americans, likely contributed to a one-time increase in income for top earners, as companies paid larger dividends and investors cashed out. But the article notes that “the temporary tax moves were not the only reason the top 1% did so well relative to everyone else in 2012,” and points out that richer households have disproportionately benefited from recent gains in the stock market. Read more

Categories: Blog, income inequality, JOBS & THE ECONOMY | Comments Off

New Earnings Info Highlights Concerns about Flat Wages and Growing Inequality

Friday, August 30, 2013 at 2:56 PM by

A new resource posted online today helps illustrate Wisconsin’s stagnant earnings for workers in general and a decline for lower wage workers.  posted an interactive database showing state-by-state figures for average and median real wages for each year from 2002 through 2012. 

The user-friendly database graphically displays the trend lines in each state, including not only the wages for people at the 50th percentile (i.e., the median wages), but also the trends for people in the middle of the top half (the 75th percentile) and for the middle of the bottom half of earners (the 25th percentile).  All of the figures are converted to 2012 dollars to adjust for inflation.

The national data show that mean wages have essentially been unchanged  (+0.1%) over the last 5 years (2007 to 2012), when they are adjusted for inflation.  Because much of the wage growth has been at the upper end, the trends are worse when one examines median wages, rather than the mean.  Read more

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