Most research on rising economic inequality focuses on growing wage gaps between different groups of workers. But of course that is only part of the story. Just as important is the division of the national economic pie between profits going to capitalists and the “labor share” that includes all of the wages and benefits earned by workers. It’s a zero-sum game: the portion of the total national income that is not going to the workers goes to profits for capitalists.
In recent times, U.S. corporate profits have been going up at the expense of workers’ wages and fringe benefits. From 1979 through 2007, labor’s share of national income in the U.S. private sector decreased by six percentage points. What does that mean? Back in 1979, American workers claimed about 64% of national income, and if labor’s share had stayed at this level, the 120 million American workers employed in the private sector in 2007 would have received as a group an additional $600 billion in compensation. That is more than $5,000 extra per worker!
Where did that huge amount of money go instead of into workers’ wallets? It went to corporate profits, mostly benefiting very wealthy individuals. And things did not change with the recent economic recession. Although the big economic downturn of 2009 reduced corporate profits as a share of national income, the effect was short-lived. Since 2010, the golden age of swelling corporate profits has resumed. (more…)
By 1980, the wages earned by African-American women and white women came close to being equal, but since then the gap has nearly tripled. Meanwhile, average wages for African-American men stagnated, and wage inequalities between black and white men remained stubbornly high. In this same period, membership in U.S. labor unions has plummeted – from one in every three private sector workers enrolled in a union in the mid-1950s to just one in twenty today. So it is natural to ask whether such sharp union decline helps to explain racial economic gaps today.
Our research uses 40 years of nationally representative data and a technique sometimes called “counterfactual analysis” to discover what wage trends among blacks and whites, men and women, would have looked like if union membership in the private sector of the U.S. economy had not declined so sharply. The short answer is that union decline has made racial gaps worse, especially among women. (more…)
Reelected to a second term, President Barack Obama is speaking with new force and clarity about the threat of climate change; and he is encouraging the Environmental Protection Agency to take bold steps to reduce dangerous greenhouse gas emissions. To make up for Congressional unwillingness to legislate, the Obama administration seems ready to do all it can through executive actions. Many professional environmentalists are delighted, and will rely on inside-the-beltway lobbying to urge regulators onward. That is fine for the short run, but it would be too bad if efforts to counter damage from global warming stopped at insider advocacy.
The new few years are exactly the right time to build a broad nationwide network of popularly rooted organizations committed to supporting carbon-capping as part of America’s transition to a green economy. To be prepared when the next opening arises in Congress, organizational efforts must reach far beyond the Beltway – to knit together alliances and inspire tens of millions of ordinary Americans to push for change. (more…)
Immigration – and public policies to manage it – arouses strong emotions and fierce social and political battles, not just in the United States but in most other countries across the world. Why is this true? Each nation has its own issues that inspire or enrage, of course, but there are widespread, underlying patterns that can be identified and taken into consideration by reformers.
Reformers trying to facilitate immigration are often locked in battles with groups that want to place limits on international migration. Combatants start from very different world views – not only emphasizing different values but almost speaking different languages. To avoid destructive backlashes, reformers must understand and respect the values and perspectives of all groups involved in public debates, as we can see from a closer look at the United States. (more…)
“The only thing we have to fear is fear itself,” said incoming President Franklin Delano Roosevelt, as he pledged in March 1933 to lead the U.S. federal government in “action—and action now” to meet crises of global upheaval and economic collapse. Subsequent New Deal reforms have been lionized by analysts. But what were the pervasive fears to which Roosevelt pointed, the fears that shaped and informed transformations in U.S. policy and politics in the mid-twentieth century?
Just before his death in 2007, Arthur Schlesinger, Jr., noted that his magisterial Age of Roosevelt had been “conditioned by the passions of my era” and observed that “when new urgencies arise in our own times and lives, the historian’s spotlight shifts, probing …into the shadows, throwing into sharp relief things that were always there but that earlier historians had carelessly excised from collective memory.” Taking this insight to heart, my new book Fear Itself reexamines the New Deal from a perspective informed by the urgencies of the early twenty-first century—with its economic volatility, global religious zealotry, and military insecurity. (more…)
Do Americans care that income gaps between the rich and everyone else are growing by leaps and bounds? When citizens do care, what do they want done about it? Across the political spectrum, debates about these questions have raged with new force since the Occupy Wall Street movement took to the streets in 2011 and the 2012 elections highlighted the issue. To read daily coverage, though, is to hear little more than superficial or partisan assertions. We can do better by tracking public attitudes over many years, which show us both that Americans care about inequality and are very much aware of its negative consequences for all but a sliver at the top. (more…)
In his 2011 State of the Union Address, President Obama invoked “our Sputnik moment.” Recalling U.S. investments in research and education after Russia launched the first space satellite half a century ago, the President called for renewed efforts to meet international competition with investments in education and research, renewable energy, biomedical science and information technologies. Obama’s call to action still matters. (more…)
Over the past two decades, a wage subsidy operating through the tax system called the Earned Income Tax Credit has developed into America’s biggest program specifically dedicated to lifting low-income citizens out of poverty. Many Republicans as well as Democrats support this tax subsidy, which goes to people who work for modest wages. The extra money helps to reduce deprivation among poor families with children—something liberals very much want to do—yet it is the opposite of the sort of no-strings-attached “handout” that conservatives often decry.
As a tool to reduce poverty, the Earned Income Tax credit has a lot going for it. But it also has important limitations. The credit can be improved, and other programs are needed to help poor people find and hold jobs. (more…)
Image by Ken Teegardin via Flickr
“Almost half of all Americans pay no taxes!” That’s the claim bandied about in elections and overheated television talk-fests. It refers only to federal income taxes, from which various groups are exempt. But many other taxes are also collected at the federal, state, and local levels. When all kinds of taxes are added up, almost all Americans pay substantial amounts. In fact, poor and middle-income people frequently fork over higher shares of their incomes than the very rich.
Federal Income and Payroll Taxes
The U.S. federal government relies on two big taxes collected from large numbers of Americans: the federal income tax and payroll taxes regularly deducted from wages and salaries to cover Social Security and Medicare benefits. Income and payroll taxes each contribute about 40% of federal revenues. Almost half of U.S. households currently do not owe federal income taxes, but over three-fifths of these “non-filers” are workers who contribute very substantial payroll taxes. For example, Americans making the lowest incomes pay nearly 9% of their wages in payroll taxes, about the same percentage as middle-income workers pay.
Only about 17% of American households pay neither income nor payroll taxes, because they are headed by people in special sub-groups:
- Elderly men and women, who previously contributed payroll taxes during their working lives, living on their Social Security benefits.
- Students or disabled individuals.
- Workers unable to find jobs. During the recent recession, the numbers of long-term unemployed people not filing income tax returns went up.
- Active-duty members of the U.S. military, who do not have to pay taxes on their combat pay and do not owe income tax after having been deployed. (more…)
Occupy Wall Street has put a public face on the backlash against growing inequality. As most Americans struggle to make ends meet, income and wealth at the very top continue to burgeon, in bad times as well as good. Although rag-tag protesters have been vilified, protests against the widest economic disparities in more than a century resonate with the wider public. For some time, the best research has documented shared American worries about inequality and broad support for steps to enhance opportunity. (more…)