From California to the New York Island, Top Incomes Are on the Rise

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Today the Economic Analysis Research Network released The Increasingly Unequal States of America: Income Inequality by State by Estelle Sommeiller of France and yours truly. With apologies to the great Woody Guthrie, you can summarize the report's findings this way:

From California to the New York island; from the Redwood Forest to the Gulf Stream waters, the incomes of the highest earning 1% grew faster than for you and me.

This project originally began as Dr. Sommeiller's dissertation at the University of Delaware, which she completed by 2006. About a year ago, I reached out to her to see if she would be interested in updating her time series. She generously agreed, and as result, we have this handy interactive summary of recent trends in income in every state. 

State-level data on incomes are readily available from many sources since the 1980s, but this time series allows us to peak all the way back to the eve of the roaring 1920s. As a result, we get the remarkable picture below taken from my summary of the Pennsylvania findings.

This figure presents the incomes of the 1% and the bottom 99% indexed to their levels in 1917, the beginning of our time series. The figure identifies two distinct periods: the first following the end of World War II from the late 1940s to the 1970s, and the second beginning in the early 1980s.

In the first period, the average income of the bottom 99% in Pennsylvania grew from $22,377 to $41,060 by 1973, an increase of 83%. The top 1% in Pennsylvania didn’t do as well but did see their incomes grow over this period by more than $104,000 to $395,561, an increase of 36%. Since that 1973 peak, these income trends more than reversed as the bottom 99% saw their income climb by just 6% to $43,399, while the top 1% saw their incomes rise to $882,574, an increase of 123%.

What could have changed in America between these two eras?

In a word, power. Working families have seen their bargaining power sapped by policy choices that have shifted increasing amounts of the fruits of productivity growth to a narrow sliver of finance and executive occupations here and across the country.

We have come to a point where this unbalanced growth in incomes is now feeding itself as activist billionaires here in Pennsylvania and across the country use their vast wealth to bankroll campaigns to further weaken the connection between productivity growth and earnings. 

Consider one simple example: paid sick days. Most low-wage workers don't have paid sick days. This means in practice that many parents are just a sick kid away from losing either their job or a day's pay. No matter how good their intentions, most low-wage employers will not provide paid sick days if their competitors down the street don't also offer them.

As a result, policymakers in cities like Philadelphia have proposed ordinances to level the playing field and require employment to include a modest number of paid sick days. As my colleague Diana Polson explains, a national operation has now come to Pennsylvania to push legislation that prevents local governments from enacting ordinances that expand coverage of paid sick days to all workers.

On this and many other issues, a ragtag band of advocates often face off against high-priced lobbyists in Harrisburg. As you can see in the Pennsylvania summary of top income data, the match so far is going very well for the top 1% of Pennsylvania taxpayers.

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