America Worries as Income Gap Widens

by James Parks, Dec 14, 2006

The ever widening gap between rich and poor has become a serious national concern for an overwhelming number of Americans, according to a recent poll. Nearly three-quarters of the public believe inequality is a major issue, versus 24 percent who don’t think so, according to a new Bloomberg/Los Angeles Times poll.

One reason the gap is growing: Current job growth is the slowest of any previous recovery that has lasted this long (see chart), according to a study by the nonprofit Economic Policy Institute (EPI). Jared Bernstein, senior economist at EPI and the author of the study, says:

This uniquely weak performance in employment growth is one reason why the benefits of the expansion have been slow to reach many working families, who are only now beginning to see some real gains.

In a recent Point of View guest column on the AFL-CIO website, Bernstein, author of All Together Now: Common Sense for a Fair Economy, says:

As any economic cheerleader from Wall Street or Washington will tell you, we’ve been posting some impressive economic statistics, the most important of which is faster productivity growth. These same boosters will stress that faster growth of output per hour is the main channel through which we achieve higher living standards.

But over the past few years, that channel has been blocked, and economic growth is failing to reach many, if not most, working families. Real wages for most workers, after rising for the first few years of the 2000s, have fallen lately, and despite 14 percent higher productivity, a typical worker’s real weekly earnings are down 3 percent over this expansion. Median family income is down about $1,500 since 2000, and more than 5 million people have been added to the poverty rolls.

The U.S. Census Bureau reports the portion of national income earned by the top 20 percent of households grew to 50.4 percent last year, up from 45.6 percent 20 years ago. The bottom 60 percent of U.S. households received 26.6 percent, down from 29.9 percent in 1985. At the same time, the average CEO of a Standard & Poor’s 500 company made $13.51 million in total compensation last year, according to an analysis by The Corporate Library and the AFL-CIO Executive PayWatch.

The public’s anxiety about the growing rich-poor divide crosses income and political divisions, according to the Bloomberg/Times poll. Among those earning less than $40,000 a year, more than four in five called the gap a serious problem, with more than half describing it as “very serious.”’ Among those earning more than $100,000, more than three in five said it’s a serious concern. Those in the middle-income group who make between $40,000 and $60,000, were almost as concerned as the least wealthy. The concern also crosses political party lines with a majority of Democrats, Republicans and independents calling the situation serious.

The AFL-CIO has called for several measures to reduce the gap in wealth, including increasing the minimum wage and increasing the freedom of workers to join unions, which has been shown to be one of the best ways to raise incomes.

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