“The State of Working America, 12th Edition” finds that policy-driven inequality has undercut low- and middle-income workers for past three decades

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Low- and middle-income workers and their families would have had far better income growth over the past 30 years if economic policies had not directed the fruits of economic growth to the highest-income Americans, a new Economic Policy Institute book, “The State of Working America, 12th Edition” finds. For example, had there been no growth in income disparities since 1979, annual income for a middle-income household would have been $88,875 in 2007, $18,897 higher than the $69,978 it actually was. The median household lost wealth between 1983 and 2010 and had just $57,000 in net worth in 2010, rather than the $119,000 it would have had if wealth had grown equally across all households over this period.

Like the 11 previous editions of “The State of Working America” that EPI has released since 1988, the new edition provides a comprehensive, data-based answer to the question, “How well has the economy worked for American families?” In the 12th edition, the first published in four years, economists Josh Bivens, Elise Gould, Lawrence Mishel and Heidi Shierholz analyze data on income, mobility, wages, jobs, wealth and poverty. Their analyses illuminate the economic experience of working Americans since the 1970s, when compensation and productivity growth diverged. For the first time, the entire book, including the full text and all of the charts, is available online and fully downloadable, along with summary fact sheets that include the book’s key findings. Additionally, the feature “Open Data” enables researchers to download additional data on selected income, jobs and wages charts. The username for the website is media and the password is $18,897. The website is under embargo until 12:01 a.m. EDT on Tuesday, September 11.

“The State of Working America, 12th Edition” explains that economic policies, including policymakers’ actions and failures to act, have undercut the ability of workers to benefit from economic growth in the United States. Its primary findings include:

  • America’s vast middle class has suffered a “lost decade” and faces the threat of another. The wages of typical Americans, including college graduates, are lower today than they have been in over a decade. Because hourly wages and compensation failed to grow after the 2001 recession, household incomes had declined even before the Great Recession. Furthermore, forecasts of high unemployment for many years ahead suggest that another lost decade for typical American workers and their families, as measured by wages and income, has already begun.
  • Income and wage inequality have risen sharply over the last 30 years. Income inequality has grown sharply since 1979, a fact that is universally recognized by researchers. The trends that have driven this growing inequality in overall incomes are growing concentration of both capital income (the returns to financial assets) and labor income (wages and benefits), as well as a shift from labor income toward capital income.
  • Rising inequality is the major cause of wage stagnation for workers and of the failure of low- and middle-income families to appropriately benefit from growth. The typical worker has not benefited from productivity growth since 1979, though there has been sufficient economic growth to provide a substantial across-the-board increase in living standards. Instead, higher earners have reaped a disproportionate share of wage income, and the top one percent of households have received a disproportionate share of all income growth. Aside from the period of strong growth in the late-1990s, wages for low-and middle-wage workers were stagnant from 1979 to 2007, and incomes for lower- and middle-class households grew slowly.
  • Economic policies caused increased inequality of wages and incomes. Inequality between the very top wage earners and all others grew from 1979 to 2011 except during stock declines, driven by growing executive compensation and an expanded and increasingly highly-paid financial sector. Inequality between the top wage earners and middle-wage earners also grew from 1979 to 2011. A number of policies played a role in this growth, including those that: (1) targeted rates of unemployment too high to provide reliably tight labor markets for low- and middle-wage workers; (2) hastened global integration of the U.S. economy without protecting U.S. workers; (3) failed to manage destructive international trade imbalances; (4) allowed employer practices hostile to unions to flourish; (5) privatized and deregulated industry, including the financial sector; and (6) eroded labor standards. Inequality between middle-wage earners and the lowest wage earners grew only in the 1980s, fueled by the erosion of the purchasing power of the minimum wage and, again, the targeting of rates of unemployment that were too high. Tax and budget policies have compounded the inequalities that have been generated in market-based, pre-tax incomes.
  • Claims that growing inequality has not hurt middle-income families are flawed. Some recent studies have suggested that measures of comprehensive income since 1979 show that middle-income families have seen adequate income growth. Rather, incomes for the middle class have not grown as fast as average incomes, and middle-income growth was much slower between 1979 and 2007 than it was between 1947 and 1979. Furthermore, more than half of the income growth between 1979 and 2007 was made up of government transfers, which reflects the strength of programs like Social Security, Medicare and Medicaid, not the strength of the labor market. In fact, higher household labor earnings can be traced to increasing work hours, not higher wages. Finally, the data on comprehensive incomes are technically flawed because they count rapidly rising health expenditures made on behalf of households by employers and the government as income, without taking excessive health care inflation into account.
  • Growing income inequality has not been offset by increased mobility. There is no evidence that mobility—changes in economic status from one generation to the next—has increased to offset rising inequality, and some research shows a decline.
  • Inequalities persist by race and gender. Key economic measures, including unemployment, wealth, and poverty (particularly child poverty), continue to show staggering disparities by race and ethnicity. Gender disparities also persist, and while gaps in labor market outcomes have closed in recent decades, a number have done so because men lost ground, not because women gained it.

“The State of Working America, 12th Edition” includes new and compelling data on:

Income

  • the components of the Congressional Budget Office’s “comprehensive income” growth for the middle class (health care insurance, wages, pensions, work hours, government benefits)
  • the growth of capital income by income group and the growing concentration of capital incomes

Mobility

  • the stagnation of economic mobility
  • the poor performance of the U.S. economy in international rankings of mobility

Wages

  • flat or falling wages for college graduates in almost every occupation over the past 10 years
  • wage trends by education, decile, gender, and race/ethnicity
  • the growth of wage inequality for the three key wage gaps: between the top one percent and others, between the top and middle (95/50 wage gap), and between the middle and bottom (50/10 wage gap)
  • the impact of rising health care costs on wage growth and wage inequality
  • the factors driving the gap between productivity and median hourly compensation growth
  • the role of the financial sector and CEO compensation in fueling the top one percent’s income growth

Jobs

  • the extent to which changes in the labor force participation rate are due to the weak economy or are structural/demographic
  • why current unemployment is cyclical and not structural

Wealth

  • the decline of median wealth between 1983 and 2010 (while wealth at the top grew strongly)
  • the collapse of wealth in African American and Hispanic households
  • the role of housing equity’s collapse on middle class wealth
  • the increasing concentration of stock ownership

Poverty

  • the factors driving high poverty and low-end wages
  • the large role income inequality plays in growing poverty (as opposed to demographic factors like family formation)
  • the contribution of longer work hours to low-income families’ income
  • the relatively small role tax and transfer policy plays in reducing poverty in the U.S. in comparison to peer countries
  • high child poverty rates in comparison to peer countries

Bivens, Gould, Mishel and Shierholz will hold a press call at 11:00 a.m. EDT on Tuesday, September 11, to discuss their findings and answer questions. To RSVP, please email news@epi.org.

If you would like a copy of the printed book “The State of Working America, 12th Edition” when Cornell University Press publishes it in November, please contact news@epi.org.

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