Income Inequality

Oppressive Regimes and Income Inequality

Joseph Stiglitz, a Nobel Laureate in economics, has a great essay in the latest issue of Vanity Fair explaining why excessive income inequality in the United States is a problem for everyone — rich and middle-class Americans alike.

In his essay, appropriately titled "Of the 1%, by the 1%, for the 1%," Stiglitz explains that the top 1% of American earners take in a quarter of the nation's income each year and that they control 40% of the nation's total wealth. Just 25 years ago, the top 1% took in 12% of the nation's income and held 33% of its wealth.

In Case You Missed It: Third and State Blog for Week of March 21

This week on Third and State, we blogged about Marcellus Shale trickle down economics, the Affordable Care Act's first birthday, unions and inequality, and much more!

In case you missed it:

  • On the Marcellus Shale, Mike Wood notes that trickle down economics is not helping the local communities across Pennsylvania hosting increased natural gas drilling.
  • On health care, Chris Lilienthal highlights a "consumers' hearing" in the State Capitol Rotunda on the one-year anniversary of the Affordable Care Act's passage. The hearing presented the perspective of Pennsylvanians who have benefited from the law - a perspective that was omitted from a congressional hearing on the landmark law also held at Pennsylvania's State Capitol this week.
  • On federal tax issues, Chris blogs about an interview on WHYY's Fresh Air that explained some of the accounting gimmicks that large corporations use to shelter income overseas and avoid as much as $90 billion a year in U.S. taxes.
  • On wages and income inequality, Mark Price shares research documenting that in economies where more people are covered by unions, there is less inequality.
  • Finally, Mark has this week's Friday Funny: The Daily Show's Jon Stewart takes on new governors, mean stepdads and confusion within the administration of Maine's new governor about what exactly a mural is.

More blog posts next week. Keep us bookmarked and join the conversation!

Where There Are Unions, There Is Less Inequality

I highly recommend you spend some time checking out the website for The State of Working America, the annual checkup on the health of the middle class produced by the Economic Policy Institute. 

One of the interesting graphics researchers put together for this year's edition was a scatter plot of union coverage and inequality in advanced economies.

Unions compress the wage distribution and, thus, reduce inequality. As a result, the more people who are covered by unions in an economy, the less inequality that economy has.

In Case You Missed It: Third and State Blog This Week

This week, we blogged about job growth in Pennsylvania, what message President Obama should send to the U.S. Chamber of Commerce, lessons to learn from other state's fiscal woes and a whole lot more.

In case you missed it:

  • On the economy, Steve Herzenberg explained how Pennsylvania was a big winner in job performance for 2010, while New Jersey was the "biggest loser." Steve also blogged on what message President Obama should be sending to the U.S. Chamber of Commerce and weighed in on the nation's "Swiss Cheese" tax system.
  • On the state budget, Chris Lilienthal highlighted another edition of the Pennsylvania Budget and Policy Center's Fiscal Facts, and talked about lessons to learn from other states' budget challenges.
  • On jobs and unemployment, Mark Price wrote that for the long-term unemployed, the jobs just aren't there. Mark also blogged this week on strengthening the middle class and debunking bogus research on upward mobility and income 

More blog posts next week. Keep us bookmarked and join the conversation!

Switching Places ... or Not: Intragenerational Mobility

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Over the last several decades, income inequality in the United States has increased dramatically. Back in the early 90s, conservatives were looking for ways to demonstrate that inequality had not gotten worse. Glenn Hubbard (who later was one of the architects of the 2003 Bush tax cuts), while on leave from an academic post, released a study from the U.S. Treasury's Office of Tax Analysis which purported to show that:

86 percent of households in the bottom fifth in 1979 had climbed out of poverty by 1988.

Here is Paul Krugman from 1992 explaining the "strange procedure" that produced this result:

Here's what Hubbard's report did: it tracked a group of individuals who paid income taxes in all ten years from 1979 to 1988, and compared their incomes not with each other but with those of the population at large. The restriction to individuals who paid taxes in all years immediately introduced a strong bias toward including only the economically successful; only about half of families paid income taxes in all ten years.

What Obama Should Say to the U.S. Chamber

President Obama addresses the U.S. Chamber of Commerce today as part of his post-election effort to improve relations with U.S. business.

What part of U.S. business does the Chamber represent? Mostly big business and corporate CEOs — people who make many millions, often without risking any of their own money. That’s the only way to explain that the extension of the Bush tax cuts for the very rich was the top Chamber priority last year — even though this won’t benefit the vast majority of businesses.

Strengthening the middle class

On Thursday, Derek Thompson, an associate editor at the Atlantic, wrote a guest post at Ezra Klein’s blog discussing how to rebuild the middle class.  Below is his list of possible interventions to cure what ails the middle class:

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