Why Is Inequality Increasing?

content courtesy of www.frondebaliste.org data census.gov Inequality is Increasing: Do We Know Why? .48 .46 0.44 0.42 0.4 0.38 0.36 0.34 2008 2006 2004 2002 2000 1998 1996 1994 Nixon 1992 1990 Carter 1988 1986 R eagan 1984 1982 1980 B ush 1978 1976 Clinton 1974 1972 Bush W 1970 A Need for New Measures of Economy? The watermark is an illustration of Gini (fed inequality measure) trend by presidential term Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

Why is inequality increasing? • The following slides paint a picture of continuing increase in inequality. In this case, inequality calculated based on household Income • Charts revealing relationship between Income Growth and Wage Growth are also included. This wage vs. income comparison is first in a series of examinations of the origins of increase in inequality. • The goal of this presentation is to illustratehighlight metrics that reveal root cause relationships, the understanding of which should guide development of solutions. Inequalities - C Comparison of Income Growth: before and after 1980 Increasing Inequality? $200,000 • Split screen of: $180,000 • Pre circa 1980 income $160,000 stratification $140,000 • Post circa 1980 $120,000 income stratification. $100,000 $80,000 Growth Ratio Top vs. Lowest Growth Ratio Top vs. Lowest • Income stratification EVEN 400% itself has many causes. $60,000 The focus of the $40,000 presentation is on $20,000 increasing inequity, $0 not simply 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 1968 1970 1972 1974 1976 1978 1980 1982 stratification Lowest 20% Middle 20% Top 20% Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

Charts based on Census Data – Income Surveys Inequalities - Income Growth: before 1980 $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 Growth Ratio Top vs. Lowest $40,000 EVEN $20,000 $0 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 Lowest 20% Middle 20% Top 20% Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

Income Growth Trends Inequalities - Income Growth: before 1980 $200,000 • Chart illustrates income growth from $180,000 $160,000 1967 to 1981 for low, middle, and top $140,000 income groups $120,000 $100,000 Growth Ratio $80,000 • This period saw16% growth in income for Top vs. Lowest EVEN $60,000 the mid income group 1967 1968 $40,000 1969 1970 1971 $20,000 1972 1973 1974 $0 1975 • And, over the same period, 14% growth 1976 1977 1978 1979 for the top income group 1980 Lowest 20% Middle 20% Top 20% 1981 • If this trend continued, inequality would • Income growth reported in census data is have decreased over time. based on annual reports of household • Before 1980 growth in income for low and middle 20% households was above or equal to growth for high income households • Mid 20% growth rate per annum: 1.9% • Top 20% growth rate per annum: 1.4% Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

Charts based on Census Data – Income Surveys $200,000 Inequalities - Income Growth: after 1980 $180,000 $160,000 $140,000 $120,000 $100,000 Growth Ratio Top vs. Lowest $80,000 400% $60,000 $40,000 $20,000 $0 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Lowest 20% Middle 20% Top 20% 2005 2006 2007 2008 Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

Origins of Wealth Gap? Inequalities - Income Growth: after 1980 • Chart illustrates income growth from $200,000 1982 to 2008 for low, middle, and top $180,000 income groups $160,000 $140,000 Growth Ratio $120,000 • From 1982 to 2008, the gap between Top vs. Lowest 400% $100,000 growth in income for mid vs. top income $80,000 groups grew to nearly 400% 1982 $60,000 1984 1986 1988 $40,000 1990 1992 1994 $20,000 • Mid Income Group growth = 13% 1996 1998 2000 $0 2002 2004 2006 Lowest 20% Middle 20% Top 20% • Top Income Group growth = 46% 2008 • After 1980, income growth for low income and • Summary: 1967 to 2008 income growth middle income groups remains basically flat and is less than that for the period before 1980 for the top group was sustained, while growth for Mid Income Group decreased • In high income groups there is steep sustained from; 1.9% per year, to essentially growth (Reagan Tax Reforms?) non-existent • Mid 20% annual growth rate: .03% • Top 20% annual growth rate: 1.3% Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

Origins of increasing inequality – Part One: Wage growth stalling? • The following slides illustrate a shift when comparing wage rate trends to top and mid income growth. This shift in relationship also begins circa 1980. • Illustrations comparing growing inequality to change in wages begin an examination of the root cause of increasing inequality. The presentation ends with a series of questions to be addressed in subsequent presentations. Inequalities - Comparison of Wage vs. Top & Mid Income pre-post 1980 Wages vs. Income 110% • Split screen: compares 108% • Pre circa 1980 income vs. wage growth 106% • Post circa 1980 income 104% vs. wage growth. 102% • The chart reveals a 100% change in relationship 98% between wages and income for the top 96% Wage Growth Top & Wage income group. Top vs. Mid Growth Exceed 94% EVEN Mid Income • Mid income basically 92% tracks wage growth, 90% while top income shifts 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 1968 1970 1972 1974 1976 1978 1980 staying consistently Mid Income Wages Top Income higher. Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

Charts based on Census Data – Income Surveys Inequalities - Wage Growth vs. Income Growth pre 1980 40% 35% 30% 25% 20% 15% 10% 1968 1969 1970 1971 5% 1972 1973 1974 1975 0% 1976 Wages Income 1977 1978 1979 Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

Shift in Wage vs. Income Growth? Inequalities - Wage Growth vs. Income Growth pr • Chart compares Wage trends to Top 20% Income growth from 1967 to 1980. 40% • Wage rate growth during this period: 35% 34% 30% 25% • Top Tier income growth for this period: 20% 15% 15% 10% 1968 1969 1970 • From 1967 to 1980 purple bars = 1971 5% 1972 1973 1974 Wage growth, completely covers blue 1975 0% 1976 1977 Wages Income 1978 bars = Top Tier Income growth 1979 • The chart focuses on the top 20% income group • Wage Rates increased faster than Top to highlight the shift in relationship between top Tier Income, an indication of success of tier income and wage. This shift is illustrated in policies aimed at protecting & the next slide. diversifying the workforce? • Pre 1980 Mid tier income averaged 5% Related research: http://www.aei.org/paper/23920 greater growth than top income group. (Nixon Affirmative Action Reforms?) Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

Charts based on Census Data – Income Surveys Inequalities - Wage Growth vs. Income Growth post 1980 50% 45% 40% 35% 30% 25% 20% 1982 15% 1984 1986 1988 10% 1990 1992 1994 1996 5% 1998 2000 2002 0% Wages Income 2004 2006 2008 Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

Shift in Wage vs. Income Growth? Inequalities - Wage Growth vs. Income Growth post 1980 • Chart compares growth in Wage rates to 50% Top 20% income growth from 1981 to 45% 2008. 40% 35% 30% • Wage rate growth during this period: 25% 34% 20% 1982 15% 1984 1986 1988 • Top Tier income growth for this period: 10% 1990 1992 1994 1996 5% 45% 1998 2000 2002 0% Wages Income 2004 2006 2008 • 1981 to 2008 Top 20% Income growth caught up with, then exceeded growth in • The shift in relationship in which top tier income Wages, i.e., the blue bars began outstrips wage growth persists, and widens. peaking above the purple bars.. • The trend for mid income is the opposite, The highest cumulative growth for mid tier occurs • In contrast, Mid 20% income trends fell 1999 to 2001 at 34% (Clinton Jobs Reforms?) behind wage rate growth. • This shift is indication of higher wage growth Relevant Article: “We Have To Tolerate Inequality” rates for high wage earners, and increase in passive income as a component of top tier income. Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

Inequalities - C Comparison of Income Growth: before and after 1980 Why is Inequality Increasing: $200,000 $180,000 $160,000 $140,000 Symptom $120,000 $100,000 Growth Ratio Growth Ratio $80,000 Top vs. Lowest Top vs. Lowest EVEN 400% • Increasing difference in growth trends of $60,000 $40,000 income groups $20,000 $0 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 1968 1970 1972 1974 1976 1978 1980 1982 Lowest 20% Middle 20% Top 20% income Cause 110% I n e q u a l it ie s - Comparison of Wage vs. Top & Mid Income pre-post 1980 1 0 8% • Income disconnects from – grows faster 10 6 % 104% than - wage rate 1 0 2% 1 00 % 98% 9 6% Effect W ag e G ro w th Top & W age T o p v s . M id 94% Growth Ex ceed EV EN Mid Income 92% 90 % 1968 1970 1972 1974 1976 1978 1980 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 • Continually increasing inequality M id I n c o m e W age s T op I ncom e wage .48 Solution 0.44 .46 0.42 0.4 • ‘Work In Progress…. 0.38 0.36 0.34 2008 2006 2004 2002 2000 1998 1996 rising 1994 Nixon 1992 1990 Carter 1988 1986 R eagan 1984 1982 1980 inequality B ush 1978 1976 Clinton 1974 1972 Bush W 1970 Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

content courtesy of www.frondebaliste.org data from national exit polls Dimensions in the data; questions on measures1: • Is Income properly defined? 0.48 0.46 0.44 0.42 0.4 • How do Wages and Income differ? 0.38 0.36 0.34 2008 2006 2004 2002 2000 1998 1996 1994 Nixon 1992 1990 Carter 1988 1986 R eagan 1984 1982 1980 Bush 1978 1976 Cl inton 1974 1972 Bush W 1970 • How are Productivity and Wage related? Bush W Clinton Bush Reagan Carter Nixon • Does Growth always produce Inequality? 1. Subsequent presentations will examine trends in wealth, and trends in productivity. Each analysis is based on looking at variation in rates of change vs. comparison of absolute values. This “systems thinking” approach is employed in hopes of magnifying signals in the data that illustrate the impact of economic policy decisions, highlighting what works, and what does not. Copyright © rhesa jenkins July - September 2009 , fronde baliste, all rights reserved, please site source when reproducing any portion of this slide

Why Is Inequality Increasing?

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