The good news is that incomes are growing. The not so good news is that income growth for the top 1% of wealthy Americans continues to far outpace growth for the rest of us.
A study conducted by Emanuel Saez, economics professor at the University of California, Berkeley, found that bottom 99% incomes grew by 3.9% from 2014 to 2015, the best annual growth rate since 1999. Top 1% incomes, however, grew even faster by 7.7% from 2014 to 2015.
â€śA number of factors may help explain this increase in inequality,â€ť says Saez. â€śNot only underlying technological changes, but also the retreat of institutions developed during the New Deal and World War II —- such as progressive tax policies, powerful unions, corporate provision of health and retirement benefits, and changing social norms regarding pay inequality,â€ť he adds.
Saez also poses that we need to decide if this is acceptable as a society, and if not, what mix of institutional and tax reforms should be developed to counter it. â€śIt seems unlikely that U.S. income concentration will fall much in the coming years, absent more drastic policy changes.â€ť
Income Gap By Race
While as a whole, the bottom 99% struggle to rebalance income inequality, when you break it down by race and gender, the income gap is huge within the 99%.
According to the Bureau of Labor Statistics:
- Black median household income is $35,481 vs $53,657 for all races
- All Black workers 2015 weekly earnings was $624 vs $803 for all races
- Black men weekly earn $652 vs $899 for all men
- Black women weekly earnings: $608 vs $721 for all women
â€śThis is a really troubling trend, particularly for black womenâ€ť says Valerie Rawlston Wilson, director of the Economic Policy Instituteâ€™s Program on Race, Ethnicity, and the Economy.
â€śA lot of this has to do with how different workers responded to the recession. While other groups may have stayed out of work after a job loss, African American women had to maintain stronger attachment to the labor market because of their different levels of wealth and savings. There has been more job growth in lower paying occupations, and these are the jobs African American women have been forced to take,â€ť she adds.
Like Saez, Wilson agrees that it will be up to policymakers and institutions to make it a priority to come up with reforms that will can help level the playing field for all.