This past March Regional Economist R. Andrew Bauer presented on behalf of the Federal Reserve Bank of Richmond at the Greater Baltimore Committee LEADERship Program. The presentation was titled “A Look at Inequality in the United States.” Bauer presented findings showing that income inequality is a longstanding and continuing problem in the United States.
The top 1% continues to hold a highly disproportionate amount of wealth, while the bottom percentiles continue to struggle. Bauer credits the growing gap in income and earnings to an economy that puts a premium on the higher skilled and higher educated workers over the majority, made up of lower and moderately skilled workers. This is not a new problem, but one that has been growing over the past 30 years. The inequality is somewhat moderated by progressive taxes, making inequality in income after taxes less dramatic. Bauer also described how the trend is not unique to the United States, but other developed countries like the United Kingdom and Canada are also experiencing an increased gap in income and earnings. Below are some of the highlights of Bauer’s findings:
- The gap between the income and wealth of the poorest and the wealthiest Americans has steadily increased over the past 30 years
- From 1979, the income of the lowest quintile of Americans has grown by only 18%, while the income of the top 1% of Americans has grown by 275%.
- The market income of the lowest income quintiles fell from 2.9% to 2.5% and 10.1% to 7.3% of market shares, while the market income of the highest income quintile rose from 10.5% to 21.3% of all market shares.
- The increase in income equality can be partly credited to technological advances that benefit higher skilled workers over lower skilled workers.
- Technological advances increase the productivity of higher skilled workers, which is reflected in their steadily increased wages.
- Getting higher degrees can translate to higher wages, but only in specialized skill sets.
- Increased labor inequality is not just an American phenomenon; other developed countries such as the United Kingdom, France, and Canada have also seen an increased income gap between the top and bottom percent.
- Inequalities in share of income after taxes of the lowest and highest quintiles still exist, but are less dramatic than the differences in market shares.
This is a guest post by Amy Weiss. Amy is originally from Richmond, Virginia and is a third year law student at the University of Richmond. She graduated from the College of William and Mary in 2007 where she studied history and anthropology.