Download - The Growing Divide

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The Growing Divide Inequality & the Roots of Economic Insecurity

March 2016


The Nation at a Crossroads

H Growing Insecurity Layoffs & job instabilityStagnant wagesInsecure pensionsRoller-coaster stock market

H Greater BurdensLonger work hoursLoss of family timeRising costs of housing, health care, education, utilities, and food

H Stress, Isolation & Scapegoating Growing prison populationAnger at immigrants Environmental crisisEndless war


The Trends since 1980

H The Good NewsInflation is moderateInterest rates on loans are low

H The Bad NewsMost growth in income has gone to the top 1%; the gap between highest and lowest paid workers has widened.Real wages have dropped since the 1970s.Wealth gap has widened and the racial wealth gap is growing.High unemployment persists.Poor families not lifted out of poverty.

For a few, the U.S. economy has done well.But the rising tide lifted only a few boats and most of us are struggling to stay afloat.


Workers in the U.S. are Losing Ground

H Household income stagnating

H Persistent high unemployment

H Paying more for health benefits

H Disappearing pensions

H Rising cost of basic necessities

H Deteriorating working conditions

Still waiting for trickle-down . . .


We Grew Apart

70%

60%

50%

40%

30%

20%

10%

+78%

Bottom 20% Second 20% Middle 20% Fourth 20% Top 20% Top 5%

0%

80%

+54%

+26%

+12%

–12%

Top 1%

+185%

Real Family Income Growth by Quintile & for Top 5% & Top 1%, 1979 - 2014

Source: For quintiles and top 5%: US Census Bureau Historical Income Tables, Table F-1 (Income Limits 1947-2014) and Table F-3 (Mean Income 1947-2014). For income threshold for top 1%: “Income Inequality in the United States, 1913-1998” Emanuel Saez with Thomas Piketty, Quarterly Journal of Economics, updated to 2014 in Excel format, June 2015 (TabFig2014prel.xls). For percent growth: of top 1% “Growing Together Growing Apart - Real Income Growth 1979-2012” by Colin Gordon <http://scalar.usc.edu/works/growing-apart-a-political-history-of-american-inequality/index>.

$29,101 -$52,697

$52,698 -$82,032

$82,033 -$129,006

$230,030and upUp to $29,100 $129,007

and up$423,090and up

+3%


Real Family Income Growth from 2009 - 2012

35%

30%

25%

20%

15%

10%

5%

0%

Source: Piketty and Saez (2003), series updated to 2012 in August 2013 using IRS preliminary tax statistics for 2012.

6.0%

Average

0.4%Bottom 99%

31.4%

Top 1%

40%

45%44.8%

Top 0.1%

Growing Apart Even Further since the Great Recession


120%

100%

80%

60%

40%

20%

0%

+116%+100%

+111% +114%+99%

+86%

$9,861 -$16,215

$16,215 -$22,972

$22,972 -$31,632

$31,632 -and up

Bottom 20%

Second 20%

Middle 20%

Fourth 20%

Top 20%

Top 5%

We All Grew

Real Family Income Growth by Quintile & for Top 5%, 1947 - 1979

Sources: Analysis of Census Bureau data from The State of Working America 1994-95, Mishel, Lawrence and Bernstein, Jared, p. 37. Income ranges in 1979 dollars, from March 2000 Census Current Population Survey, Table F-1.

In 1979: up to

$9,861 $50,746 -

and up


$50,000

$40,000

$30,000

$20,000

$10,000

$60,000

1947

Median Family Income by Race, 1947-2010

Racial Income Inequality Persists

White

African American*

Latino**

1969 1979 1989 1995 2000 2007

$27,807

$14,216

$40,910 $40,785

Source: Analysis of Current Population Survey Annual Social and Economic Supplement Historical Income Tables (Table F-5) in The State of Working America <http://stateofworkingamerica.org/chart/swa-income-table-2-5-median-family-income/> Economic Policy Institute. All income in 2011 dollars. * Prior to 1967, data for African Americans included all “non-whites.” ** The Census Bureau uses the term “Hispanic.” We prefer “Latino.” Persons of “Latino” origin may be of any race.

$70,000

2010

$65,138

$39,715


Median Annual Earnings for Women & Men, 1960-2012

$50,000

$45,000

$40,000

$35,000

$30,000

$25,000

$20,000

$15,0001960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Gender-based Income Inequality Persists

Notes: Annual earnings data include self-employed workers; weekly data are for wage and salary workers only. Annual earnings are for people 15 years old and older beginning in 1980 and people 14 years old and older as of the following year for previous years. Before 1989 annual earnings are for civilian workers only. Weekly earnings are for full-time workers aged 16 and older and are not restricted to full-year workers. Data series are derived from the Current Population Survey. Adjustments for data from earlier years to 2012 dollars are computed on the basis of the Consumer Price Index for all urban consumers (CPI-U) for median weekly earnings and the Consumer Price Index Research Series (CPI-U-RS) for median annual earnings published by the U.S. Bureau of Labor Statistics.

Source: Institute for Women’s Policy Research, IWPR Fact Sheet #C350, updated September 2013.

$49,398

$36,414 $37,791

$22,094

Men

Women

2012


CEO Pay as a Multiple of Average Worker Pay, 1960-2013

1960 1970 1980 1990 1995 2000 2005 2010

41x

79x

44x

107x

180x

525x

411x

For large U.S. corporations.

Note: 1960-1980 based on Business Week calculations; 1990 & 2000 based on UFE & IPS calculations; 2010 - 2012 from Economic Policy Institute’s State of Working America, 12th edition. 2013 from AFL-CIO’s online PayWatch.

500

400

300

200

100

0

343x

2011

281x

2012

354x

2013

331x


Multiplier of CEO Pay to Average Worker Pay, 2012

350

300

250

200

150

100

50

0

The wage gap in the U.S is out of step with the rest of the world.

U.S. Japan Germany France U.K. Canada Spain Sweden Poland

Sources: AFL-CIO Executive Pay Watch. 2012 U.S. CEO-to-worker pay ratio calculated based on AFL-CIO analysis of average CEO pay at 327 companies in the S&P 500 Index, which disclosed 2012 CEO pay data as of April 1, 2013, as provided by Salary.com. 2012 U.S. rank-and-file worker pay calculated from the U.S. Bureau of Labor Statistics’ Current Employment Statistics Survey—Table B-2: Average hours and earnings of production and non-supervisory employees on private non-farm payrolls. GDP rankings from the IMF.

Countries are ranked by size of per capita GDP,

largest left to right.

354:1

67:1

147:1

104:1 84:1

206:1

127:189:1

28:1


Productivity and Median Family Income, 1947-2013

Since the mid-1970s, income for most families hardly grew while productivity soared!

350

300

250

200

150

1001947 1953 1959 1965 1971 1977 1983 1989 1995 2001 2007 2013

Productivity

Median Family Income

Source: For 1947-2007: analysis of US Census Bureau and US Bureau of Labor Statistics (BLS) in The State of Working America 2008/2009, Figure 1G, by Lawrence Mishel, Jared Bernstein, and Heidi Shierholz, Economic Policy Institute (EPI). For 2007-2011: UFE extrapolation of EPI’s analysis of data from Bureau of Labor Statistics & Bureau of Economic Analysis <www.epi.org/publication/the-top-10-charts-of-2014/?utm_source=Economic+Policy+Institute&utm_campaign=49769a8560-Top_Charts_201412_18_2014&utm_medium=email&utm_term=0_e7c5826c50-49769a8560-55878457>.

400


Ownership of Household Wealth in the U.S., 2012

60.2%

Top 1%

Source: Wealth distribution: Emmanuel Saez and Gabriel Zucman, March 2014. Total net worth: Edward N. Wolff, New York University, 2012.

Bottom 99%

The total net worth of the top 1% = $21.9 Trillion

The total net worth of the bottom 90% = $18.4 Trillion

39.8%


$141,900

African American WhiteLatino

Household Median Net Wealth by Race, 2013

$140,000

$120,000

$100,000

$80,000

$60,000

$40,000

$20,000

$0

Net Wealth isASSETS minus DEBTS

(What You OWN minus What You OWE)

$11,000 $13,700

Source: Pew Research Center tabulations of Survey of Consumer Finances public-use data. African Americans and Whites include only non-Latinos. (Dollar figures are in 2013 dollars.)


$50,000

$40,000

$30,000

$20,000

$10,000

$0$100

$45,400

$120

African American WhiteLatina

Median Net Wealth for Women by Race, 2007

Source: Center for Global Policy Solutions <http://globalpolicysolutions.org/resources/wealth-gap-women-color/>.

Gender- and race-based disparities limit women’s ability to build wealth.


80%

70%

60%

50%

40%

0

Many families are forced to live on the edge.

Percentage of Families Whose Savings Would Run Out in 3 Months or Less

30%

20%

10%

38%

White African AmericanLatino

79%73%

Source: Oliver, Melvin and Shapiro, Thomas M., Black Wealth, White Wealth (2006 edition), p. 89.


Deregulation of mortgage lending drove the amount of mortgage debt sky high!

Total Mortgage Debt, 1960-2015

Source: For 1960 - 2008: Capitalism Hits the Fan - Richard Wolff on the Economic Meltdown, Media Education Foundation (DVD, 2009) <www.mediaed.org>. Original source data: <http://www.census.gov/compendia/statab/past_years.html>. For 2010 - 2015: Mortgage Debt Outstanding, Board of Governors of the Federal Reserve <http://www.federalreserve.gov/econresdata/releases/mortoutstand/current.htm>.

$12,000

$10,000

$8,000

$6,000

$4,000

$2,000

$01960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

(Billions)

$14,000

2015


Student Debt on the Rise

Student debt has outstripped credit card debt for the first time.

$1,000

$800

$600

$400

$200

$02000 2002 2004 2006 2008 2010

Source: Mother Jones: College Tuition and student debt charts and graphics <http://motherjones.com/contributor/2011/09/student-debt-charts>. “Why Student Loans are Creating a Permanent U.S. Underclass” by Derek Royden, March 1, 2016 <nationofchange.org>.

(Billions)

Student-loan debt

Credit card debt

2012 2014

$1,200


The Power Shift Since the 1970s

On the RiseBig Campaign Contributors

Corporate Lobbyists

Corporations

Banks & Big Investors

CEOs

Wall Street

In DeclinePopular Political

Movements

Voters

Labor Unions

Wage Earners

Employees

Main Street


Rule Changes Since the 1970s

Policy changes reflect and reinforce the power shift.

Unions: Anti-union climate weakens the power & voice of workers.

Trade: Global treaties benefit corporations, not workers or communities.

Taxes: Taxes shifted from big investors and corporations to workers.

Budget: Public services cut. Corporate subsidies expand.

Minimum Wage: Not raised to keep up with inflation & increased cost of living.

Privatization: Government outsourcing plus no-bid contracts hurts taxpayers, workers, and public safety.

Big $ in Politics: PACs & other major campaign contributors have undue influence on legislators and increasingly undermine democracy.


The Wheel of Misfortune

• Scapegoating• Divided communities

• Individualism• Escapism

Rule changes that

favor the top 1%

Power shifts to

corporations & big investors

Greater economic inequality

• Big $ in politics• Longer work hours

• Rising personal debt

Decline in political

participation


Percentage of the Workforce in a Union, 1930-2015

35%

30%

25%

20%

15%

10%

5%

0%1930 1940 1950 1960 1970 1980 1990 2000 2010

Anti-union policies weaken the power & voice of workers.

1981: Reagan Breaks

PATCO

1937: Wagner Act

1936: Sit-Down Strike

in Flint, MI

Manufacturing Declines in U.S.

1947: Taft-Hartley Act

Source: Bureau of Labor Statistics

“Right-to-work” rules Expand to 25 states

2015: 11.1% Unionized


The aim of treaties such as NAFTA is to reduce “barriers” to trade. The worldwide result:• Jobs shifted to low-wage countries• Lower wages and living standards• Weakened worker rights• Environmental damage

• Weakened economies in developing nations• Cuts in social safety nets• Rise in poverty

New trade & investment agreements, such as the Trans-Pacific Partnership (TPP) . . .• permit foreign corporations operating in the U.S. to ignore

U.S. laws that protect the environment and workers’ rights;• threaten laws that protect community lending, health and

safety, pay equity, pro-human rights government purchasing rules, public control of water & education, etc.

“Free” Trade Treaties Help Corporations, Not Workers or Communities

FORSALE


Federal Tax Rates for the Top 1% and the Median Family 1947-2014

Big tax breaks for the wealthy - No tax relief for working families

80%

70%

60%

50%

40%

30%

20%

10%

0%1947 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2014

90%

91%

Top 1%70%

50%

Median Family

19%

31%

40%

35%

22%25%28%25%

Source: Tax Foundation <http://www.taxfoundation.org/files/federalindividualratehistory-200901021.pdf>.

Note: In 2013, the Bush tax cuts were made permanent for all taxpayers except individuals earning $400,000 or more and families earning $450,000 or more.

39.6%


Top Tax Rates on Wealth & Investment

Income

Top Tax Rate on Work

0%

– 25%

– 50%– 50% – 46%

+ 8.5%

Estate Tax Capital Gains Tax

Payroll Tax

Change in Top Federal Tax Rates on Wealth & Work since 1980

Sources: For Payroll Tax: UFE calculations from Tax Policy Center data <www.taxpolicycenter.org> “Historical SS Tax Rates” for 1980, and IRS Publication 15 (Circular E) <www.irs.gov> for 2011. For Capital Gains Tax: UFE calculations from Tax Policy Center data, “Individual & Corporate Capital Gains 1955-1999” for 1980, and Wall Street Journal, “Tax Changes for 2011: A Checklist” for 2011. For the Estate Tax: UFE calculations from the IRS, “The Estate Tax: Ninety years and counting” for 1980, and HR. 4853 - Title III of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010” for 2011.

Taxes have been shifted from wealth to work


21%

77%

17%

80%

12%

84%

9%

87% 87%

10%

Corporations Individuals1962 1970 1980 1990 2000

70%

60%

50%

40%

30%

20%

10%

0%

80%

Source: Congressional Budget Office, “Revenues by Major Source, 1962 to 2004.” For 2013: Center for Budget & Policy Priorities <http://www.cbpp.org/cms/?fa=view&id=3822>.

Taxes:Percent of Federal Tax Collections from

Individuals & Corporations

Taxes have shifted from corporations to individuals.

81%

10%

2013


Payroll Tax Rates, 1950 & 2015

In 2015, only the first $118,500 in earned income will be taxed for Social Security at 6.2%. The effective Social Security tax rate drops as income rises.

7%

6%

5%

4%

3%

2%

1%

0%$0 - 3,000 $7,000 $100,000 $0 - 118,500 $250,000 $5 million

2015 Effective Rates

1950 Effective Rates

1%.4% .03%

6.2%

2.6%

.01%

Annual Earned Income (from wages & salaries only)

Source: Social Security Administration <www.ssa.gov>.


Despite profits of over $5 billion in 2010, GE paid no income taxes!

In 2008, Goldman Sachs, had 29 subsidiaries located in offshore tax havens and reported profits of over $2 billion. It paid federal taxes of just $14 million on those profits.

Boeing received a total of $8.7 billion in subsidies from the Washington State legislature in 2013.

Corporate Welfare Expands While Neccessary Programs are Cut


The Minimum Wage and the “Living Wage,” 1968-2015

$11.00

$10.00

$9.00

$8.00

$7.00

$6.00

$5.00

$4.00

$3.00

$2.00

$1.00

$0

The federal minimum wage does not keep pace with the rising cost of living.

Living Wage $1.71

Minimum Wage $1.60

196894% of the “living wage”

Minimum Wage $2.90


Living Wage $3.56

Sources: Living wage is calculated by dividing that year’s poverty threshhold for a family of four by 2080 hours (52 weeks x 40 hours). Poverty threshholds for 1968 and 1979 from U.S. Census Bureau, Historical Poverty Tables, Table 1. Poverty threshholds for 2015 from the U.S. Census Bureau, Poverty thresholds by Size of Family and Number of Children.

Minimum Wage $7.25

Living Wage $11.60



Privatizing Public Services Helps Investors, Hurts Consumers and Workers


• Cooperation• Social cohesion

• Interdependence• Celebration of

diversity

• More time for democracy• Meaningful

elections• Strong unions

Political participation

rises

Broadly shared

prosperity

Rule changes

that benefit everyone

Power shifts to ordinary people

The Wheel of Shared Prosperity


Principles of a Fair Economy

H Equity in all dimensions (race, class, ethnicity, gender, etc.)

H Solidarity and Cooperation

H Political & Economic Democracy

H Sustainability

H Pluralism and Diversity

H Accountability

H Respect & Dignity for People and Planet


Program for a Fair Economy

HEducate & Change the Conversation

HCampaign to Build Power & Change the Rules

HConnect the Dots & Build a Movement


We Need New Rules to Reduce Wealth & Income Inequality

Lift the Floor for Lower Income PeopleH Establish Living Wage standardsH Raise the Federal minimum wage

H Invest in job creation & trainingH Increase the supply of affordable housing

Level the Playing Field for EveryoneH Fair taxes that treat income from investments and work the sameH Postal banking services H Medicare for AllH Trade policies that benefit wage-earners, consumers, & the environmentH Quality education as a Constitutional right

Address the Concentration of Wealth and PowerH Progressive taxation of wealth and incomeH Reduced subsidies for excessive CEO payH Campaign finance reform to get big money out of politicsH Accountability for corporations receiving public subsidies


What You Can Do Today

Educate Yourself and OthersH Host a UFE Popular Economics

Education workshop. H Learn to lead UFE workshops.H Educate yourself — look at the

resources on our list.

Influence the MediaH Write articles or letters to the editor. H Organize a writers’ group. H Stage a flash mob creative action.

Build PowerH Use your religious congregation as an

organizing base.H Join or support a labor union.H Get involved in coalitions or civic groups.

Support United for a Fair EconomyH Make a donation and become a UFE member.H Encourage friends and colleagues to join.H Organize a fund raising house party.H Help us reach out to a specific constituency.

Join Campaigns to Change the RulesH Support progressive tax proposals, such as the Robin Hood Tax.H Support local Living Wage campaigns and raising the federal minimum wage.H End deferral of taxes on income of U.S.-controlled corporations abroad.

Download - The Growing Divide

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