1. Explaining the Sharp Rise in U.S. Economic Inequality Theda Skocpol USW31, Fall 2014

2. U.S. Inequality since the 1950s  Thinking about all kinds of inequalities, not just economic, in what ways has the United States become more equal?  Income and wealth – from great compression (post WWII to 1970s) to divergence (after 1979)  From describing to explaining growing inequalities Various factors may affect different gaps (top one or five percent to upper 20%), upper 5% or upper 20% to middle; middle to bottom Costs and benefits for different groups

4. U.S. Income Growth: The Great Compression, 1947-79, and the Great Divergence, 1979-2010 Economic Policy Institute

5. Income Growth at Top, Middle, and Bottom

7. Source: Hacker and Pierson, p. 23.

9. What Explains Rising Income Inequality?  Gap between bottom and middle?  Gap between middle and top 20%?  Soaring incomes of top 5%, 1%,.1% etc.?

10. Racial gaps in pay: have remained fairly constant, so they do not explain growing income inequality overall Changes in gender roles in families and workplaces: women are doing better, boosting incomes compared to what they might be; some families have two high earners Immigration: has increased, and may keep wages at the very bottom low Trade and outsourcing: may contribute to wage stagnation in the middle and bottom Demand for new skills, college-educated employees: boost women’s income and salaries for the top fifth, but cannot explain skyrocketing incomes at the very top Union decline: Helps explain income stagnation and decline, especially for men in the middle and bottom Changes in values and norms for elites? Role of government: regulations, taxes, social expenditures What Explains Growing Inequalities?

11. U.S. Workers Have Become More Productive, but the Gains Have not Gone to the Middle Class Economic Policy Institute

12. Percent of U.S. Workforce in Unions, 1973-2013 Source: Lawrence Mishel, “Unions, Inequality, and Faltering Middle-Class Wages, “ Economic Policy Institute, August 2012. 2013: 11.3%

13. Source: Hacker and Pierson, p. 61.

14. UNION DECLINE AND RISING WAGE INEQUALITY By Bruce Western and Jake Rosenfeld From 1973 to 2007, wage inequality in the private sector of the U.S. economy increased by 40%. From 1973 to 2007, union enrollment for men fell from 35% unionized to 8%, and for women fell from 16% unionized to 4%. Educational attainment increased at the same time. How are these trends related? –The gap between those with college and those without accounts for about one-third of the increased wage inequality for men, and two-fifths for women. –Declining unionization was associated with about one-third of the increased wage inequality for men, and about one fifth of increased inequality for women. –For male workers, in short, the impact of unionization decline equaled the impact of the college gap. –Union decline powerfully affected wage inequality among nonunion workers in once- highly unionized regions and industries. As unions declined, worker leverage suffered and prevailing wage norms deteriorated for everyone. Source: “Unions, Norms, and the rise in U.S. Wage Inequality,” Amer.ican Sociological Review 76(4) (2011): 513-37.

15. “With Executive Pay, Rich Pull Away from the Rest of America” Peter Whoriskey, The Washington Post, June 18, 2011. CEO 1970s  $1M salary (in 2011 dollars)  Office on second floor of milk distribution center  4 bedroom suburban home in Chicago suburb  Member of country club  Cadillac from the company  Sometimes turned down raises, because making too much was bad for morale CEO 2011  $10 million salary  Office occupies top nine floors of 41-story Dallas tower  $6M home in Dallas; 64 acres near Vail, Colorado  Four golf club memberships  Challenger 604 Jet for his personal and business use

16. What Explains Rising Income Inequality? Government Actions – and Inaction Tax collections and tax breaks -- income taxes, and definitions of “income” -- capital gains taxes -- tax credits and tax breaks Rules for the economy -- minimum wage and maximum hours (and who is covered) -- rules for unions -- financial and business regulations Social expenditures -- Social Security, Medicare – boost the elderly -- Medicaid, new health reform law – can help lower income people -- welfare and other programs targeted on very poor

17. Source: Hacker and Pierson, p. 48.

20. SCHOLARS STRATEGY NETWORK Two-page Briefs on many topics in this course, such as:  $2-a-Day Poverty in the United States, by Kathryn Edin and Luke Shaefer.  Union Decline and Rising Wage Inequality, by Bruce Western and Jake Rosenfeld.  Rising Income Inequality -- And What Can be Done about It, by Christopher Jencks.  Americans Care about Inequality When It Limits Opportunity, by Leslie McCall.  Do Election Reforms Promote Equal Participation?, by Elizabeth Rigby.  Who Gets What They Want from Government?, by Martin Gilens.  How Social Security Encourages Older Americans to be Active Citizens, by Andrea Louise Campbell.  Tax Expenditures: What They are and Who Benefits, by Christopher Howard.