Welcome to the world of Income Inequality. Today the phrase seems to be on everyone’s lips — Democrats, Republicans, conservatives and radicals, millionaires, billionaires, the broadcast talking heads — and all over your browser and Twitter feed. President Obama has proclaimed Income Inequality “the defining challenge of our time,” and made it clear that Democrats will use it as a political centerpiece in midterm elections. Republicans are scrambling to come up with a vote-saving position that doesn’t betray their hard-on-the-poor principles. And everyone is tossing around putative solutions to Income Inequality that have little probability of anything other than short-term success.
Of course, Income Inequality isn’t “news” to the nearly one in five American households that are continuing to have difficulty meeting their basic needs, are unable to cover their rent or mortgage, are having their phone or utilities cut off, are dealing with the aftermath of eviction, are doing without a doctor or dentist, and are going hungry. It isn’t news to the approximately one in four workers who are pulling down less than $10 an hour.
Income Inequality isn’t “news” for the 43 percent of 25-year-old Americans paying off an average student debt of more than $20,000 while working, or hoping to work, at a lower wage than they had imagined possible when they signed their student loan papers. According to a study by the Federal Reserve Bank of New York, 44 percent of recent college graduates are “underemployed,” holding down jobs that don’t require a college degree. Many of these taxi drivers (15 percent of taxi drivers are grads), baristas, waiters and retail clerks are living at home with their parents, putting off marriage and children, hoping for a better day that may never come. The employment outlook for college grads has actually been in decline since 2000, even before our latest recession.
Income Inequality is also not news among the ranks of the middle-aged, those who are underemployed, unemployed or who’ve opted out of the fruitless search for a job. It’s not news for the 8 million denizens of Slavelandia who are working part-time because they can’t find a full-time job.
It’s not news for the older workers who will be delaying retirement because lower wages, unemployment, disappearing pensions and reduced investment returns have depleted their nest eggs. In 2012, 26.8 percent of seniors aged 65–74 were in the workforce, an increase of 30 percent over 2002. The Bureau of Labor Statistics estimates that number will go up another 18 percent by 2022, when close to a third of seniors will still be toting that barge and lifting that bale.
Working for the man
The US economy grew by more than 18 percent between 2000 and 2011, yet the median income of working families fell 12.4 percent. Workers are no longer sharing in the economic prosperity of their employers: Today, in Slavelandia, the portion of the nation’s GDP going to workers as wages and salaries — 42.6 percent — is at an all-time low while corporate profits are at a record high.
A further boost to the American workers’ downward mobility derives from the fact that in 2011, after a decade of shrinkage in the manufacturing sector, the number of workers in the retail sector — home of the McMinimum wage — topped the number of workers in manufacturing for the first time. According to a 2012 National Employment Law Project study, 21 percent of the jobs lost during the recession were low-wage jobs, but more than half of the jobs created in its wake pay low wages. Similarly, about 60 percent of the jobs lost were middle-income jobs, but just 22 percent of new post-recession jobs pay that well.
This will come as no surprise when you consider that the three largest U.S. public-sector employers in 1960 were General Motors, Ford and AT&T, two manufacturers and a utility that paid their employees a living wage. Today’s employment leaders are Wal-Mart, Yum! Brands (owner of Taco Bell, Pizza Hut and Kentucky Fried Chicken) and McDonalds, who provide their employees advice on how to survive on starvation wages.
It’s not getting better anytime soon
The proposals for ways to fix Income Inequality and its effects on the fabric of American life have begun to multiply and are, as you might imagine, replete with partisan positioning. Raising the minimum wage is one move that is drawing a great deal of attention, though there isn’t unanimity among economists, much less lawmakers, that it’s a true fix. But the issue carries a lot of moral weight and touches citizens at the level of simple fairness. Labor Department statistics put the number of workers earning at or below minimum wage at about 5 percent. But, since the minimum wage serves as a pay marker, as many as 35 million workers earning near the minimum stand to benefit.
Whether a raise in the minimum wage will make a significant difference in the long run remains to be seen. In the short run, perhaps for the next decade, a raise is vital to minimize the hardships of the working poor. Between Washington’s dogma-driven benefit cuts, reduced funding for assistance programs at the state and local levels and continued high unemployment, America’s safety net will be stretched to the breaking point and beyond.
At the December, 2013 meeting of the U.S. Conference of Mayors, a nationwide increase in requests for emergency food and shelter assistance was reported, and even greater demand is expected in the years ahead. Last year, emergency kitchens and food pantries were forced to reduce the quantity of food doled out at each pantry visit or offered in meals served at kitchens. More than three-fourths of the cities had to reduce the number of times an individual or family could visit a food pantry each month. Two-thirds of the cities’ facilities had to turn people away because of lack of resources. In addition, the number of requests for shelter was up in the majority of cities and an average of 22 percent of homeless persons needing assistance did not receive it. It’s worth noting that the report found 19 percent of homeless adults were employed.
Education initiatives and skills development are likely to get significant bipartisan support as a seemingly logical and noncontroversial approach to easing unemployment and lifting low-wage earners higher up the income ladder. Certainly, some individuals will benefit, but education alone will have little impact on the employment picture as a whole. A recent paper published by the National Bureau of Economic Research (by a former chair of the Council of Economic Advisors and the Principal Economist of the U.S. Census Bureau) posits, “Neither industrial nor demographic shifts nor a mismatch of skills with job vacancies is behind the increased rates of unemployment.”
This finding is in keeping with the projections of the Bureau of Labor Statistics in a December, 2013 article frighteningly titled, “The U.S. economy to 2022: settling into a new normal.” Most new jobs from 2012 to 2022, according to its figures, will not require a college degree. About 8.8 million new jobs will require a high school diploma or less. Only about 3.1 million new jobs are projected to be in occupations requiring a bachelor’s degree for entry. As better-educated or higher-skilled workers are forced to accept lower-level jobs, they send lower-skilled workers even further down the occupational ladder.