Wednesday, April 6, 2011

Stanford study shows grave reality of U.S. inequality


Stanford recently completed a study set out to answer two questions:  1.) Why is the United States so unequal and poverty-stricken? And what can or should be done about it?  The following statistics are startling, but they are not surprising.  Nobel Prize-winning economist Joseph Stiglitz writes, " big part of the reason we have so much inequality is that the top 1 percent want it that way."

From Stanford University:

Wage Inequality
Over the last 30 years, wage inequality in the United States has increased substantially, with overall levels of inequality closing in on unprecedented levels. This overall trend is complicated, however, by somewhat different patterns of change at the top and bottom of the wage distribution. “Lower-tail” inequality is measured here by taking the ratio of wages at the middle of the income distribution (i.e., the 50th percentile) to those near the bottom of the distribution (i.e., the 10th percentile), and “upper-tail” inequality is measured by taking the ratio of wages near the top of the distribution (i.e., the 90th percentile) to those at the middle of the distribution (i.e., the 50th percentile of workers). We find that lower-tail (50/10) inequality rose sharply in the 1980s and contracted somewhat thereafter, while upper-tail (90/50) inequality has increased steadily since 1980.

CEO pay
The ratio of the average pay of the 100 highest-paid CEOs in the United States to the average wage of workers increased from 39:1 in 1970 to 191:1 in 1988 to 1,039:1 in 2000. Put more colloquially, top CEOs in 1970 made 39 times more than the average worker, whereas now they make 1,039 times more than the average worker.

Wealth Inequality
The ownership of wealth among households in the U.S. became somewhat more concentrated in the 1980s and 1990s. The top 10% of households controlled 68.3 percent of the total wealth in 1983 and 71.5% of the total wealth in 2001.

Education Wage Premium
Only college graduates have experienced growth in median weekly earnings since 1979 (in real terms). High school dropouts have, by contrast, seen their real median weekly earnings decline by about 22 percent.

Gender Pay Gaps
Throughout much of the 20th century, the average woman earned about 60% of what the average man earned. Starting in the late 1970s, there was a substantial increase in women’s relative earnings, with women coming to earn about 80% of what men earned. This historic rise plateaued in 2005 and, since then, the pay gap has remained roughly unchanged.

Occupational Sex Segregation
Women and men tend to work in very different occupations. And overall “men’s jobs” are better paid than “women’s jobs.”

Racial Gaps in Education
High-school dropout rates are least among whites and highest among Hispanics, while college enrollment rates are least among blacks and highest among whites. The high-school dropout rate has grown more similar among these three groups, while the college enrollment rate has grown more sharply different.

Racial Discrimination
Racial discrimination continues to be in the labor market. An experiment carried out in Chicago and Boston during 2001 and 2002 shows that resumes with “white-sounding” names, whether male or female, were much more likely to result in call backs for interviews than were those with “black-sounding” names (even though the resumes were otherwise identical).

In the United States, 21.9 percent of all children are in poverty, a poverty rate second only to that of Mexico’s (among rich nations).

Residential Segregation
We all know that the rich in the United States tend not to live in the same neighborhoods as the poor, but it is perhaps less well-known that such residential segregation is on the rise. We can quantify this increase in segregation by asking (a) how likely it is for households in the top fifth of the income distribution to live with households not in the top fifth (in 1960 and 2000), and (b) how likely it is for households in the bottom fifth of the income distribution to live with households not in the bottom fifth (again in 1960 and 2000).

Health Insurance
In 2007, 8.1 million children under 18 years old were without health insurance. Children in poverty and Hispanic children were more likely to be uninsured.

Intragenerational Income Mobility
Intragenerational income mobility can be measured by calculating the rate at which individuals change positions in the income distribution during their work careers. More than half of the individuals in the bottom income quintile in 1994 remained there 10 years later, and less than 4 percent reached the top quintile.

Bad Jobs
About 1 in every 10 workers in February 2005 was employed in an 'alternative' employment arrangement' (e.g., temporary help agency, on-call and day labor, contract company). Nonstandard employment arrangement typically pays low wages and does not include access to health insurance and pension benefits.

Discourage Workers
The number of discouraged workers (i.e., persons who are not currently looking for work because they believe that there are no jobs available for them) increased sharply during the current recession, rising to 717,000 in the first quarter of 2009, a 70-percent increase from the first quarter of 2008. Relative to their share of the labor force, young people, blacks, and, to a lesser extent, Hispanics and men were over¬represented among discouraged workers.

There are 750,000 Americans who are homeless on any given night, with one in five of them considered chronically homeless. The ranks of the sheltered homeless include disproportionate numbers of males, blacks, middle-aged people (i.e., ages 31-50), veterans, and disabled.

Intergenerational Income Mobility
Intergenerational income mobility can be measured by calculating the rate at which individuals move to income quintiles that are different that that of their families of origin. The proportion of sons who remained in the bottom quartile declined between 1961 and 1972 and stayed the same afterward.

Deregulation of the Labor Market
The percentage of all wage and salary workers who are union members has declined from 24% in 1973 to 12.4% in 2008. The decline in the private sector was steeper than the decline in the public sector. At the same time as union membership declined, the real value of the minimum wage also fell by 25% in the 1980s, leading to a weakening influence of the minimum wage on the low-wage labor market. These two developments in combination may be understood as the foundation of the newly “deregulated” U.S. labor market.

Job Losses
Employment fell by 3.1 million jobs during 2008. The job losses were more widespread and severe than during the previous two recessions in 1990-1991 and 2001 and in fact the fall in employment is comparable to that in the deeper recession of 1981-1982.

Immigrants and Inequality
Does immigration to the U.S. bring highly-skilled workers into the labor force or unskilled workers? The answer is both! The education distribution below indicates that immigrants are concentrated in both tails of the skill distribution.

Productivity and Real Income
We are a richer country overall because of a spectacular rise in labor productivity. But who has profited from this rise? Although the growth of labor productivity has expanded total national income, the real income and wages of the median worker have at the same time stagnated.

The facts are stark...
  • Income inequality is extreme and increasing: The top1% of Americans control 23.5% of all the country's income, the highest share controlled by the top 1% since 1928
  • The U.S. is exceptionally unequal:The U.S. ranks #3 among all the advanced economies in the amount of income inequality
  • The poverty rate is extremely high:The U.S. poverty rate, according to the new National Academy of Science index, is estimated at 15.8 percent. Only one advanced economy, Mexico, has a higher relative poverty rate


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