There’s no debate: Measurable income inequality has skyrocketed in recent decades
This is an excerpt from an op-ed that originally ran in CNN. Read the full op-ed here.
In recent years, researchers have debated the simple question of whether inequality has risen a lot or a little in the United States over the past half-century. Lots of arguments in this debate surround highly technical issues like, “Should the income of owners of ‘pass-through businesses’ be reported as wages or business profits?” or “Is income that is not reported on tax returns mostly earned by rich or middle-class households, and how do you know?”
But we’ve identified available data that sidesteps nearly all these complexities and demonstrates that inequality has indeed risen enormously: what individual Americans earn in the labor market.
State and local governments have only spent about half of American Rescue Plan funds as critical deadline nears
2024 is the last opportunity for state and local governments to make spending decisions on funds provided by the American Rescue Plan Act (ARPA). Many states, localities, and school districts still have considerable unspent ARPA funds. At a time when the public sector has still not fully recovered from the job losses of the pandemic, governments should use remaining ARPA funds to shore up public services and invest in education.
ARPA allocated $350 billion to state and local governments (State and Local Fiscal Recovery Funds, or SLFRF). While governments do not need to spend those funds until 2026, they must be obligated by December 31, 2024. ARPA also provided an additional $122 billion to school districts and state education authorities (Elementary and Secondary Schools Emergency Relief, or ESSER III). That money must be obligated by September 30, 2024, and must be spent by January 28, 2025.
The latest SLFRF spending data, covering the period ending June 30, 2023, show that roughly half of fiscal recovery funds had yet to be spent. The amount is even higher for local governments, with more than 56% of funds unexpended.
Youth subminimum wages and why they should be eliminated: Young workers face pay discrimination in 34 states and DC
In 2023, the issue of child labor re-emerged as a national crisis. Federal data on the rise of child labor violations and numerous investigative reports of widespread illegal youth employment garnered sustained media attention, sparking outrage from the public and lawmakers alike. At the same time, EPI has documented an ongoing, coordinated effort to roll back existing child labor protections that is gaining momentum in states across the country. Legislative proposals to weaken child labor protections—some of which have already been enacted—allow employers to hire teens for more dangerous jobs or extend the hours young people can work on school nights.
What has received far less attention is the long-standing system of pay discrimination against young workers under federal and state laws. These laws allow employers to pay youth less than adults in the same jobs and, in many cases, exclude young workers from the minimum wage protections that cover most adult workers.
In states across the country, advocates and lawmakers are working to eliminate subminimum wages for low-wage tipped or disabled workers. Amid increased child labor violations and a growing movement to roll back protections for working youth, lawmakers should also work to eliminate youth subminimum wages. Age-based pay discrimination is unfair and harms workers of all ages.
December jobs report caps another year of strong job growth
Below, EPI senior economist Elise Gould offers her insights on the jobs report released this morning, which showed 216,000 jobs added in December. Read the full thread here.
Job Openings and Labor Turnover Survey: Quits, layoffs, and hires all continued to trend down in November
Below, EPI senior economist Elise Gould offers her insights on today’s release of the Job Openings and Labor Turnover Survey (JOLTS). Read the full thread here.
Twenty-two states will increase their minimum wages on January 1, raising pay for nearly 10 million workers
On January 1, 22 states will increase their minimum wages, raising pay for an estimated 9.9 million workers. In total, workers will receive $6.95 billion in additional wages from state minimum wage increases. In addition, 38 cities and counties will increase their minimum wages on January 1 above their state’s wage floors, adding to the number of workers likely to see increased earnings. In the absence of federal action, states and localities continue to take the lead in advancing fairer wage floors via legislation, ballot measures, and automatic inflation adjustments.
The minimum wage continues to be a vital policy for creating a more equitable economy. According to our analysis:
- Women make up more than half (57.9%) of workers getting an increase on January 1.
- The minimum wage increases will also disproportionately benefit Black and Hispanic workers. Black workers make up 9.0% of the wage-earning workforce in the states with increases, but are 11.1% of the affected workers. Similarly, Hispanic workers are 19.6% of the workforce in these states, but 37.9% of the workers receiving wage increases.
- These increases will also bring important benefits to working families. More than a quarter (25.8%) of affected workers are parents, or more than 2.5 million people. In total, 5.6 million children live in households where an individual will receive a minimum wage increase.
- The increases will provide critical support to workers and families in need. Almost one in five (19.7%) workers getting a raise have incomes below the poverty line, and nearly half (47.4%) have incomes below twice the poverty line.
- More than half (51%) of workers getting minimum wage increases are in California, Hawaii, and New York, all high cost-of-living states.
Biden administration moves to protect vulnerable nursing home residents and workers
The Biden administration has issued a proposed rule setting minimum hours of care by registered nurses and nurse aides in nursing homes. Since nursing home owners can boost profits by reducing staffing levels to dangerous levels, this is a critical step toward protecting residents and workers.
The industry lobby says that low staffing levels aren’t due to profit-seeking, but rather a shortage of workers. However, the supposed “shortage” is self-inflicted. As we explained in a public comment on the proposed rule, nursing home workers are grossly underpaid and overworked. Declines in nursing home employment also reflect a shift toward home- and community-based services (HCBS) that accelerated in the wake of the COVID-19 pandemic, which devastated nursing home residents and staff.
The teacher shortage shows small signs of improvement, but it remains widespread
Key findings:
- New School Pulse Panel data show that educators’ feelings of being understaffed fell by eight percentage points in the past year, suggesting an improvement from pandemic heights of understaffing stress amid a widespread teacher shortage.
- Some improvement in feelings of being understaffed may be linked to American Rescue Plan (ARP) funds. SPP data show that 37% of public schools created positions with ARP funds.
- Of these schools, 15% created positions for academic interventionists, 14% for mental health professionals, and 6% for academic tutors.
- But disparities filling teaching vacancies remain: While difficulty filling vacancies declined in majority white schools and in schools in higher-income neighborhoods, it increased in schools in lower-income neighborhoods and in schools with greater than 75% minority students.
The COVID-19 pandemic greatly exacerbated a long-standing and widespread teacher shortage in schools. By mid-2022, several indicators of teaching shortages and staffing stress were at record highs. Recent data from the School Pulse Panel (SPP) show that understaffing stress in schools has relented somewhat in the past year, though progress remains modest and uneven. The SPP also indicates that funding from the American Rescue Plan (ARP) has helped close some of these staffing gaps and address pressing needs in the nation’s schools.
While schools have been struggling to fill vacancies long before the pandemic due to chronic low pay and compensation, the stress of teaching during the pandemic made the teacher shortage even worse. A RAND 2022 report showed that 73% of teachers reported having “frequent job-related stress” compared with 35% of working adults, which can contribute to otherwise qualified potential teachers taking positions in other fields. This degradation of non-wage-related working conditions means that schools need to pay teachers more to retain them and adequately staff schools, yet this salary increase has not happened. In 2022, the teacher pay penalty—the gap in pay between teachers and similarly educated workers in other professions—hit a new high of 26.4%.
New School Pulse Panel data allow us to assess how school staffing has fared in the aftermath of the pandemic. Administered by the National Center for Education Statistics, the SPP has sampled school and district staff on a monthly basis since 2021. In August 2023, they surveyed 3,998 public elementary, middle, and high schools about staffing needs. Given the long-standing teacher shortage, the latest SPP data can be seen as an indicator of how effective the nation has been in alleviating long-run school staffing stress over the past year.
Congress and President Biden should not trade away human rights and asylum protections for temporary defense funding
The Senate, House, and White House are embroiled in down-to-the-wire negotiations to trade harmful changes to the asylum system and draconian immigration enforcement measures in exchange for approving a one-time defense supplemental funding package. We urge members of Congress and the White House to reject any such deal.
If Congress passes the one-time defense supplemental, the money will likely run out in just a few months. But the major anti-immigrant policy changes that Congress and the White House are reportedly considering will be permanent. These policies include an updated version of Trump’s Title 42 policy, mandatory detention of migrants and asylum seekers while they adjudicate their claims (likely including children), increased power to deport people encountered beyond the border areas of the United States with little to no due process (known as “expedited removal”), and changing the legal standard for asylum to make it more difficult to prove an initial claim.
If passed, the measures under consideration would go even further than some of the Trump administration’s harsh and brutal actions—and because they will carry statutory weight, it’s unlikely that immigrant rights advocates will have a path to challenge them in court. Further, it should be apparent to any reasonable legislator or administration official that these policy changes will not improve the situation at the southern border and will have harmful impacts on migrant and U.S. workers alike.
Wage inequality fell in 2022 because stock market declines brought down pay of the highest earners: But top 1% wages have skyrocketed 171.7% since 1979 while bottom 90% wages have seen just 32.9% growth
Key findings:
- Average inflation-adjusted annual earnings fell across the board in 2022, but the losses were far smaller among the bottom 90% of wage earners. The disproportionate losses for the highest earners—driven by stock market declines—led to a compression in the overall wage distribution over the year.
- Over the pandemic labor market, annual earnings growth was fairly consistent for high earners and the bottom 90%, averaging about 2.6% between 2019 and 2022.
- Over the long run, however, earnings growth has been vastly unequal. From 1979 to 2022:
- Wages for the top 1% and top 0.1% skyrocketed by 171.7% and 344.4%, respectively.
- Wages for the bottom 90% grew just 32.9%.
- The top 1% earned 12.9% of all wages in 2022—up from 7.3% in 1979. The bottom 90% received just 60.1% of all wages in 2022, far lower than their 69.8% share in 1979.
Newly available wage data from the Social Security Administration (SSA) allow us to analyze wage trends through 2022 for the top 1% and other very high earners, as well as for the bottom 90%. Average earnings for all groups fell in 2022, likely due to unusually high inflation. Year-over-year inflation was 8.1% because of supply chain bottlenecks, shifting demand during the pandemic, and energy price shocks from the Russian invasion of Ukraine which began in February 2022.
Table 1 shows average annual earnings by wage group for each of the business cycle peaks since 1979, as well as for the last two years (in 2022 dollars). Average real earnings for the bottom 90% of the wage distribution experienced the smallest losses in 2022 (–0.2%), 10 times smaller losses than the 90th-99th percentile (–2.2%) and 70 times smaller losses than the top 1% (–14.3%). This is consistent with other research finding that low-wage workers had the strongest hourly wage growth over the last three years, leading to significant wage compression.
At the very top of the earnings distribution, however, the losses far exceed what would be expected from this period of high inflation alone. SSA pay not only includes wages, salaries, commissions, bonuses, and severance pay; it also includes exercised stock options, which is not a small share of very high-end compensation. Given that 2022 saw stock prices fall considerably (especially relative to strong growth in 2021), these stock market declines pulled down top 1% pay in the SSA data and also explain why CEO pay fell in 2022.