Three important economic distributions and the politics that shape them CEPR Basic Economics Seminar John Schmitt September 29, 2005.

Three important economic distributions and the politics

that shape them

CEPR Basic Economics Seminar John Schmitt

September 29, 2005

Today’s talk

• Three important economic distributions

•Wages

•Incomes

•Wealth

• Political forces shaping these distributions

Table 1: Hourly wage distribution, 2004

Percentile

10 50 90 95

All 6.80 14.00 30.46 37.34

Table 4: Hourly wage distribution , by race and gender, 2004

Percentile10 50 90 95

All 6.80 14.00 30.46 37.34

White 7.28 14.94 32.39 38.74 Black 6.80 12.14 25.28 31.11 Hispanic 6.55 10.62 23.30 28.45

Women 6.80 12.45 27.18 33.61

White 6.80 13.11 28.01 34.31 Black 6.36 11.65 24.27 29.13 Hispanic 6.07 9.71 21.51 26.77

Men 7.28 15.53 33.61 40.05

White 7.77 17.26 35.27 42.01 Black 7.01 12.91 26.89 33.61 Hispanic 6.80 11.09 24.27 29.56

Figure 1: Real hourly wage growth, all, 1979-2004

80

90

100

110

120

130

140

150

1973 1983 1993 2003

1979

=10

0 .

10th 50th 90th

Figure 2: Real hourly wage growth, men, 1979-2004

80

90

100

110

120

130

140

150

1973 1983 1993 2003

1979

=10

0 .

10th 50th 90th

Figure 3: Real hourly wage growth, women, 1979-2004

80

90

100

110

120

130

140

150

1973 1983 1993 2003

1979

=10

0 .

10th 50th 90th

Table 7: Annual family income distribution, 2001

LowerLowest Second Middle Fourth Limit of

Fifth Fifth Fifth Fifth Top 5%All 24,000 41,127 62,500 94,150 164,104

White 26,000 44,000 65,283 97,185 169,501Black 14,256 26,350 42,400 67,523 110,977Hispanic 16,000 28,000 41,600 66,040 113,374

Figure 4: Real median family income, 1947-2003

0

20,000

40,000

60,000

80,000

1947 1957 1967 1977 1987 1997

$200

3

Figure 5: Annual growth real family income, 1947-2003

20th 40th 60th 80th 95th0.0

1.0

2.0

3.0

4.0

5.0

3.735596867705273.906723653066644.005964285599024.13102174966819

3.88527139948738

0.2658625746043920.470499302112142

0.7325554162782950.88016209831537

1.29548656640708

1947-19731973-2003

Percentile of family income distribution

Ave

rage

an

nu

ali p

erce

nt

grow

th

Figure 6: Share of wealth, by wealth level, 1962-2001

33.4 33.837.4

33.4

15.616.518.719.1

0

10

20

30

40

50

1962 1983 1989 2001

Per

cen

t

Top 1% Bottom 80%

Table 9: Average wealth, by wealth class, 1962-2001

Wealth class 1962 1983 1989 1998 2001

Top fifth 638.2 939.3 1,105.1 1,224.2 1,604.7Top 1% 5,271.5 7,795.8 9,889.0 11,086.4 12,962.1Next 4% 834.6 1,289.5 1,427.0 1,565.9 2,453.0Next 5% 390.1 560.8 614.5 677.4 937.4Next 10% 220.4 302.8 343.2 374.7 490.3

Bottom four-fifths 37.5 53.9 54.5 61.0 74.0Fourth 105.7 145.2 163.0 175.3 215.3Middle 42.8 60.3 63.9 66.3 75.0Second 7.5 13.6 11.1 12.1 13.9Lowest -5.8 -3.5 -20.0 -9.6 -8.2

Median 42.2 59.3 63.5 65.9 73.5

Figure 7: Households with zero or negative net wealth, 1962-2001

23.6

15.517.9 17.6

30.131.8

29.7

34.3

0

10

20

30

40

1962 1983 1989 2001

Per

cen

t

Zero or negative Less than $10,000

Figure 8: Share of gains in wealth, 1983-2001

32.8 31.2

25.2

9.4

1.4

0

10

20

30

40

50

Top 1% Next 4% Next 15% Next 20% Rest

Per

cen

t

Policies lowering bargaining power ofworkers, relative to their employers

• Decline in purchasing power of minimum wage

• Decline in unionization rate• Economic deregulation• Privatization (state and local)• Welfare Reform• Recessionary macroeconomic policy• Pro-corporate globalization

Figure 10: Real value of the minimum wage, 1955-2004

3

4

5

6

7

1955 1965 1975 1985 1995

$200

0

Figure 9: Share of workers in unions, 1948-2004

0

10

20

30

40

1948 1958 1968 1978 1988 1998

Per

cent

Table 6: Health-care coverage rates, by wage quintile 1979-2002

1979 1989 2002

Lowest 37.9 26.4 26.6 -11.5 0.2 Second 60.5 51.7 48.8 -8.8 -2.9 Middle 74.7 67.5 62.7 -7.2 -4.8 Fourth 83.5 78.0 72.1 -5.5 -5.9 Top 89.5 84.7 78.5 -4.8 -6.2

Percentage-point change

1979-1989

1989-2002

Table 8: Distribution of household wealth, 1962-2001

Wealth class 1962 1983 1989 1998 2001

Top fifth 81.0 81.3 83.5 83.4 84.4Top 1% 33.4 33.8 37.4 38.1 33.4Next 4% 21.2 22.3 21.6 21.3 25.8Next 5% 12.4 12.1 11.6 11.5 12.3Next 10% 14.0 13.1 13.0 12.5 12.9

Bottom four-fifths 19.1 18.7 16.5 16.6 15.6Fourth 13.4 12.6 12.3 11.9 11.3Middle 5.4 5.2 4.8 4.5 3.9Second 1.0 1.2 0.8 0.8 0.7Lowest -0.7 -0.3 -1.5 -0.6 -0.4

Total 100.0 100.0 100.0 100.0 100.0

Figure 11: Prison and jail population, 1980-2003

1980 1985 1990 1995 2000 .00

.25

.50

.75

1.00

1.25P

erce

nt o

f po

pula

tion

16-6

4

Reading List• John Schmitt. “Labor markets and economic inequality in

the United States since the end of the 1970s,” International Journal of Health Services, vol. 35, no. 4, pp. 655-673. [Available in Working Paper form: http://www.noapparentmotive.org/papers/schmitt_ijhs.pdf.]

• John Schmitt. “How Good is the [US] Economy at Creating Good Jobs?” Center for Economic and Policy Research Briefing Paper, October 2005. [http://www.cepr.net/publications/labor_markets_2005_10.pdf]

• Lawrence Mishel, Jared Bernstein, and Silvia Allegretto. The State of Working America 2004-2005. Ithaca, New York: Cornell University Press, 2005.

Three important economic distributions and the politics

that shape them

John SchmittCenter for Economic and Policy Research

www.cepr.net