Increasing Inequality Its happening it matters and we

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Increasing Inequality: It’s happening, it matters, and we can do something about it. Jared

Increasing Inequality: It’s happening, it matters, and we can do something about it. Jared Bernstein (bernstein@cbpp. org) Ben Spielberg (bspielberg@cbpp. org) The Center on Budget and Policy Priorities Updated: 1/6/2015

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. • …is a problem we can combat with the right policy solutions.

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. • …is a problem we can combat with the right policy solutions.

Earnings Inequality Social Security Administration data 1947 1979 2012 Top 1%: $131, 072 $255,

Earnings Inequality Social Security Administration data 1947 1979 2012 Top 1%: $131, 072 $255, 760 $648, 541 Bottom 90%: $14, 392 $27, 110 $31, 741 Ratio: 9. 1 9. 4 20. 4 Source: Wage data, tab 3

Earnings Inequality Bureau of Economic Analysis: National Income and Product Accounts data Source: Table

Earnings Inequality Bureau of Economic Analysis: National Income and Product Accounts data Source: Table 1. 12

Income Inequality Census data Source: Tables F-1 and F-5

Income Inequality Census data Source: Tables F-1 and F-5

Income Inequality Congressional Budget Office data Source: Calculations from Supplemental Data

Income Inequality Congressional Budget Office data Source: Calculations from Supplemental Data

Income Inequality Congressional Budget Office data Source: Calculations from Supplemental Data

Income Inequality Congressional Budget Office data Source: Calculations from Supplemental Data

Income Inequality Internal Revenue Service tax data Source: “Piketty and Saez”

Income Inequality Internal Revenue Service tax data Source: “Piketty and Saez”

Wealth Inequality Survey of Consumer Finances data Source: Federal Reserve Bulletin

Wealth Inequality Survey of Consumer Finances data Source: Federal Reserve Bulletin

Wealth Inequality Internal Revenue Service tax data and Federal Reserve Flow of Funds data

Wealth Inequality Internal Revenue Service tax data and Federal Reserve Flow of Funds data Source: “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data ”

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. • …is a problem we can combat with the right policy solutions.

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. • …is a problem we can combat with the right policy solutions.

1. Inequality may have negative macroeconomic effects. Mechanisms: A. Different spending propensities B. The

1. Inequality may have negative macroeconomic effects. Mechanisms: A. Different spending propensities B. The bubble/bust syndrome Evidence:

1. Inequality may have negative macroeconomic effects.

1. Inequality may have negative macroeconomic effects.

1. Inequality may have negative macroeconomic effects. Mechanisms: A. Different spending propensities B. The

1. Inequality may have negative macroeconomic effects. Mechanisms: A. Different spending propensities B. The bubble/bust syndrome Evidence: • Cynamon and Fazzari • Kumhof and Ranciére • Mian and Sufi

2. Inequality matters because it creates a “wedge, ” channeling growth away from the

2. Inequality matters because it creates a “wedge, ” channeling growth away from the typical worker. Mechanisms: A. Globalization B. Technological change C. Decreased worker bargaining power D. The tax code, financial deregulation, and corporate compensation Evidence: Source: Economic Policy Institute

2. Inequality matters because it creates a “wedge, ” channeling growth away from the

2. Inequality matters because it creates a “wedge, ” channeling growth away from the typical worker. Mechanisms: A. Globalization B. Technological change C. Decreased worker bargaining power D. The tax code, financial deregulation, and corporate compensation Evidence: • Bernstein • Danziger • Mishel, Bivens, Gould, and Shierholtz • Saez

3. Inequality matters because it undermines the democratic process. Mechanism: Evidence:   The influence

3. Inequality matters because it undermines the democratic process. Mechanism: Evidence:   The influence of money in politics makes the political system more responsive to the wealthy and less responsive to everyone else Source: Gilens and Page

3. Inequality matters because it undermines the democratic process. Mechanism: Evidence:   The influence

3. Inequality matters because it undermines the democratic process. Mechanism: Evidence:   The influence of money in politics makes the political system more responsive to the wealthy and less responsive to everyone else Source: Gilens and Page

3. Inequality matters because it undermines the democratic process. Mechanism:   The influence of

3. Inequality matters because it undermines the democratic process. Mechanism:   The influence of money in politics makes the political system more responsive to the wealthy and less responsive to everyone else Evidence: • Bartels • Bernstein • Gilens

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A.

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A. Residential segregation by income B. Educational investment barriers C. Direct effects Source: Reardon presentation at the Boston Federal Reserve, October 17 -18, 2014

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A.

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A. Residential segregation by income B. Educational investment barriers C. Direct effects Source: Yellen

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A.

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A. Residential segregation by income B. Educational investment barriers C. Direct effects Source: Duncan and Murnane

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A.

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A. Residential segregation by income B. Educational investment barriers C. Direct effects Source: Bradbury and Triest

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A.

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A. Residential segregation by income B. Educational investment barriers C. Direct effects Source: Pew Economic Mobility Project

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A.

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: Evidence: A. Residential segregation by income B. Educational investment barriers C. Direct effects Source: Sherman, Parrott, and Trisi

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A. Residential

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A. Residential segregation by income B. Educational investment barriers C. Direct effects Evidence: • Bradbury and Triest • Chetty, Hendren, Kline, and Saez • Pew Economic Mobility Project • Reeves and Sawhill • Sard and Rice

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. • …is a problem we can combat with the right policy solutions.

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. • …is a problem we can combat with the right policy solutions.

Inequality is a problem we can combat with the right policy solutions. • Full

Inequality is a problem we can combat with the right policy solutions. • Full employment Source: Baker and Bernstein

Inequality is a problem we can combat with the right policy solutions. • Full

Inequality is a problem we can combat with the right policy solutions. • Full employment • Collective bargaining Source: Furman

Inequality is a problem we can combat with the right policy solutions. • Full

Inequality is a problem we can combat with the right policy solutions. • Full employment • Collective bargaining • Other labor standards Source: Gould

Inequality is a problem we can combat with the right policy solutions. • Full

Inequality is a problem we can combat with the right policy solutions. • Full employment • Collective bargaining • Other labor standards • Access to quality education Source: Smeeding

Inequality is a problem we can combat with the right policy solutions. • Full

Inequality is a problem we can combat with the right policy solutions. • Full employment • Collective bargaining • Other labor standards • Access to quality education • Regulation and Improved Fiscal Policy Source: CBPP

Inequality is a problem we can combat with the right policy solutions. • Full

Inequality is a problem we can combat with the right policy solutions. • Full employment • Collective bargaining • Other labor standards • Access to quality education • Regulation and Improved Fiscal Policy • Safety Net Programs Source: CBO

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines

Inequality… • …has risen sharply since the late 1970 s. • …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. • …is a problem we can combat with the right policy solutions.

Thank You! Jared Bernstein (bernstein@cbpp. org) Ben Spielberg (bspielberg@cbpp. org) The Center on Budget

Thank You! Jared Bernstein (bernstein@cbpp. org) Ben Spielberg (bspielberg@cbpp. org) The Center on Budget and Policy Priorities