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):
- Economic inequality has worsened significantly in the United States and some other countries.
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
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
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.
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
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
A new resource posted online today helps illustrate Wisconsin’s stagnant earnings for workers in general and a decline for lower wage workers. Governing.com 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
Recent Tax Policy Choices Have Widened Disparities; More Cuts Could Do the Same
Martin Luther King Day is a good occasion to think about disparities in income and wealth, and the policy decisions that contribute to the growing chasm between the rich and poor. We need to think carefully about which policy choices can reduce that gap, which will make it wider, and what the failure to address the problem means for the economy.
A new report issued by the Working Poor Families Project examines the widening economic gap. Their analysis of Census Bureau data found that the current economic recovery is leaving many working families behind. The number of working families who were low income (below 200% of the poverty level) grew to 10.4 million in 2011, which was 32% of all working families, and they included 23.5 million children.
In Wisconsin, there were 174,000 low-income working families in 2011, comprising 29% of all working families in our state. Read more
The income disparity between Wisconsin’s richest and poorest families continues to widen, according to a new report by the Center on Wisconsin Strategy (COWS) and the Wisconsin Budget Project. The analysis finds that Wisconsin’s richest residents have experienced dramatic increases in inflation-adjusted income since the mid-1990s, while middle- and lower-income Wisconsinites saw their incomes stagnate or decrease.
Between 1996 and 2010, the bottom 40% of Wisconsin earners experienced an average decrease of $2,407 in their adjusted gross income, measured in 2012 dollars. The top fifth of income tax filers saw an increase in earnings of more than $17,000 over this period. The top 1% of filers experienced tremendous gains, with incomes that grew an average of $168,773 per tax return, an increase of more than $12,000 per year between 1996 and 2010, as shown in the table below.
Table 1: Income Per Tax Return of the Poorest and Richest Wisconsinites
Change in adjusted gross income, 1996-2010, in 2012 dollars
|Bottom 40%||Top 20%||Richest 1%|
|Income in 1996||$16,002||$130,997||$595,497|
|Income in 2010||$13,595||$148,824||$764,270|
|Average change per year||-$172||$1,273||$12,055|
The new analysis follows on the heels of a report last week by Center on Budget and Policy Priorities and the Economic Policy Institute, which found that income inequality has been widening in Wisconsin and across the county since the mid-1970s, though Wiscosnin’s gap remains smaller than all but five other states. Read more
New Data Show Many Wisconsinites Haven’t Benefited Yet from the Slow Economic Recovery
Two years into the nation’s slow recovery from the Great Recession, Wisconsin’s working families are finally beginning to experience some signs of an improving economy. But the new Census Bureau figures released today (from the American Community Survey) reveal that the gradual economic gains have not been evenly distributed and have yet to benefit many of Wisconsin’s most vulnerable households. For example:
- Median household income was $50,395 last year, almost 8% below the 2007 level ($54,737).
- Median income for Black households in the state was just $24,399 in 2011, less than half the $52,444 earned by White households.
- Wisconsin’s child poverty rate was 18.2% in 2011, which represents an improvement from 19.1% in 2010, yet that difference was not statistically significant, and the rate remains far above the 13.4% level in 2008.
- The Black child poverty rate (49% in 2011) was nearly four times the rate for White children in Wisconsin.