Income Inequality

The Reports of Unions' Death Are Greatly Exaggerated

By Stephen Herzenberg, Third and State

There's a good deal of crowing in conservative circles this week about the new 2012 numbers on union membership. Union membership nationally fell by about 400,000, to 14.4 million. Union membership in Pennsylvania declined 45,000, including 59,000 in the private sector.

Of course, for anyone who cares about, say, the American Dream, democracy, and rising living standards, the newest numbers are bad news. A simple chart put together by the Center for American Progress shows that unions are vital to the middle class. As unions have weakened, so has the share of income going to middle-income workers — and the gap between the 1% and the 99% has mushroomed.

Pennsylvania Tax Giveaways and an Island in the Sun

By Jamar Thrasher, Third and State

A few weeks ago, the Pennsylvania General Assembly fast-tracked a bill in the waning days of the legislative session to allow certain private companies to keep most of the state income taxes of new employees. News reports to follow indicated the new tax giveaway was designed to lure California-based software firm Oracle to State College.

Well, it turns out the CEO of Oracle, which will benefit from the largess of Pennsylvania taxpayers, recently bought his very own Hawaiian island, as CNN reported back in June.

Oracle CEO Larry Ellison, the third richest man in the U.S., purchased about 98% of Lana'i, the sixth largest of the Hawaiian islands. Forbes reported that the deal was rumored to be worth $500 million.

As CNN tells us:

The island includes two luxury resorts, two golf courses, two club houses and 88,000 acres of land, according to a document filed with the Public Utilities Commission.

Which bring us back to Pennsylvania, where Governor Corbett recently signed House Bill 2626, allowing qualifying companies that create at least 250 new jobs within five years to pocket 95% of the personal income taxes paid by the new employees. 

Predatory Payday Lending Bill Flies Out of Cramped PA House Committee

By Mark Price, Third and State

Room 148 of the State Capitol might as well double as a Capitol broom closet. That's where the House Consumer Affairs Committee this morning rushed out amendments to House Bill 2191, which legalizes predatory payday lending in Pennsylvania.

The amendments to HB 2191 were misleadingly pitched as adding more consumer protections to the bill. Even the Navy Marine Corps Relief Society took a look at these amendments and said they do "nothing to mitigate the already harmful aspects of HB 2191," and that one amendment "actually worsens the problem it claims to solve."

One focus of the amendments this morning was language banning renewals or rollovers of a payday loan, as if that was a solution to stopping the long-term cycle of debt. It is not.

Inequality and Infrastructure

By Chris Lilienthal, Third and State

U.S. funding of infrastructure has declined dramatically since the 1960s, and Congress appears to be moving in the direction of even more cutbacks in the years ahead.

There is a bit of irony to this. With borrowing costs still very low and the market still somewhat depressed, now would be an ideal time for government to step up investment in infrastructure. In other words, it costs a lot less to build roads and bridges today than it might down the road if we hold off on the billions of dollars in needed repairs.

Sam Pizzigati laments this irony in a recent op-ed in The Star Ledger of Newark, N.J. And he has an interesting take on why infrastructure is getting short shrift: blame income inequality:

The cost of borrowing for infrastructure projects has hit record lows — and the private construction companies that do infrastructure work remain desperate for contracts. They’re charging less.

Yet our political system seems totally incapable of responding to the enormous opportunity we have before us. Center for American Progress analysts David Madland and Nick Bunker blame this political dysfunction on inequality.

The more wealth concentrates, their research shows, the feebler a society’s investments in infrastructure become. Our nation’s long-term decline in federal infrastructure investment — from 3.3 percent of GDP in 1968 to 1.3 percent in 2011 — turns out to mirror almost exactly the long-term shift in income from America’s middle class to the richest Americans.

March Job Numbers For Pennsylvania and CEO Pay

By Mark Price, Third and State

The Pennsylvania Department of Labor and Industry released new data for March on Pennsylvania's employment situation. According to the household survey, the unemployment rate edged down slightly to 7.5%, and the survey of employers showed healthy growth in nonfarm payrolls of 7,800 jobs.

As always, caution should be exercised in interpreting a month change in employment statistics.

In terms of levels, there were big gains in Leisure and Hospitality (7,000), Trade Transportation and Utilities (4,000) and Manufacturing (2,100). We will not have full information until the fall whether the job losses in the public sector will put a drag on employment growth in 2012, but the March data shows we are off to an uncomfortable start, with 2,500 jobs lost.

Over the last several months, Pennsylvania nonfarm payroll counts have been particularly volatile, showing big one-month gains and losses thanks to a combination of unusually warm weather and some technical issues. On average over the last six months, Pennsylvania has added just under 6,000 jobs a month. We need about 10,000 jobs a month to move back to full employment by March 2015 (three years from now).

While unemployment remains high today and for the foreseeable future, the distance between CEO pay and the pay of the typical worker reached an all time high in 2011.

High CEO Pay Comes Under Fire from Shareholders

By Michael Wood, Third and State

In the news today, a couple of instances of CEOs being taken to task by shareholders over excessive pay.

USA Today reports that at Citigroup, 55% of shareholders rejected or abstained from rubberstamping a $25 million payday for their CEO Vikrom Pandit. The vote is only advisory, unfortunely, but is still described as being "historic" for Wall Street firms in the aftermath of the recession. The report notes:

Wall Street's massive compensation packages have raised the ire of shareholders for years, especially when they appear to have little relation to the performance of specific executives. ...

"Citigroup is one of most egregious example of disconnect between incentives of top management and value creation of shareholders," said Mike Mayo, bank analyst at brokerage firm CLSA and author of the book "Exile on Wall Street."

"The owners of the big banks, namely the shareholders, are finally taking a greater amount of responsibility by speaking up."

Closer to home, the Pittsburgh Post-Gazette has a story this morning about discontent at Pittsburgh-based EQT's annual shareholder meeting. Again, executive compensation seems to be at the heart of this dispute — as well as unease about natural gas production. 

A Recovery for the 1%

By Jheanelle Chambers, Intern, Third and State

Even in a Down Year, Top 1% Have More Total Income Than Bottom 50 Percent CombinedWhile many middle-class Americans are still struggling in a down economy, the 1% is doing quite well.

The Center on Budget and Policy Priorities has an eye-popping chart (right) showing that in 2009, despite the weak economy, the top 1% of households captured $1.32 trillion in gross income while the bottom 50% earned $1.06 trillion.

Economist Chuck Marr explains further at Off the Charts:

The long-term trend in the United States has been towards much greater income concentration at the top. But the trend isn’t perfectly smooth: high-income people tend to benefit more from economic expansions than other income groups but tend to get hit harder by recessions. The swings are particularly pronounced in financial booms and busts...

At the height of the previous expansion, in 2007, the top 1 percent had 87 percent more total [adjusted gross income] than the bottom 50 percent. But even the 2009 gap of “only” 25 percent — the difference between the $1.32 trillion earned by the top 1 percent and the $1.06 trillion earned by the bottom 50 percent — is pretty staggering.

One Year and Still Going Strong

Third and State celebrated its one-year anniversary this week. We launched on February 1, 2011, and 350 posts later we're still going strong.

We couldn't do it without our readers, so we thought it would be fun to take a look back at what posts you liked the most. And so we bring you a countdown of the top 10 most viewed blog posts at Third and State.

10. Governor Corbett Unveils 2011-12 Budget Proposal, March 9, 2011:

By taking direct aim at schools and higher education, the Governor’s plan disregards a fundamental principle of economic growth — businesses locate and expand in states with an educated workforce and academic centers of innovation.

There is a better choice. Lawmakers can choose to take a more balanced approach that makes targeted cuts, improves accountability and raises revenue.

9. 2011-12 State Budget Highlights, June 28, 2011:

State legislative leaders and Governor Tom Corbett agreed on a 2011-12 state budget deal this week, and on Tuesday, the state Senate approved it on a 30-20 party-line vote. The bill heads to the House of Representatives next. ...

The biggest cuts, in both dollars and percentages, are in education programs, including PreK-12 and higher education.

8. Marcellus Shale, Unemployment and Industrial Diversity, August 3, 2011:

A Must Read: Inequality Matters

A blog post by Mark Price, originally published at Third and State.

A debate has been simmering in this country since the early 1980s about rising inequality, a debate aided by more powerful computers and readily available income data that labor economists use to analyze inequality trends.

The debate has oscillated between two camps — the first arguing inequality trends are troubling, the second arguing a combination of there is no rise in inequality and even if there were it is OK or even good (for the vitality of our economy, for example). The battle of ideas spurred new research using new datasets, but the debate always breaks down in the same way.

Part of the argument about inequality being OK has been that what matters is intergenerational mobility. As long as people born of modest means have the opportunity to vault into the top of the income distribution, the American Dream of widespread mobility is alive and well.

In telling this story, Americans often compare themselves favorably to class-bound Europe where, according to the standard narrative, millions toil generation after generation eating gruel under the jackboot of cheese-eating aristocrats. A New York Times story this morning provides fresh evidence that, well, actually there is less intergenerational mobility here in the U.S. than in Europe. The story even has some conservative voices suggesting maybe this is a problem. (Side note: could Rick Santorum maybe let Eric Cantor know about this problem?)

OK, here's a tough one. Now that we agree that the American Dream is on life support, what's the conservative plan to revive it?

Have You No Shame, Sir (Plus Mary)?

A blog post by Stephen Herzenberg, originally published at Third and State.

The Central Pennsylvania Business Journal this week published the list of the highest-paid 10 executives in the region in 2010. Nine of these executives are men. The tenth was Mary F. Sammons, the former Chairman and CEO of Rite Aid.

Some of the salary information in The Business Journal is not new. (See, for example, the CEO pay list in Table A1, starting on page 21 of The State of Working Pennsylvania 2011.) What is new is that The Business Journal also published these executives’ pay in 2009, allowing us to look at the change in pay from 2009 to 2010 for a group of Pennsylvania executives. (Earlier, we only had information on change in executive pay from 2009 to 2010 for U.S. CEOs.)

Here’s what we found. The dollar increase in pay for these executives ranged from $2.55 million for Michael Lockhart of Armstrong World Industries to less than a million dollars (about $900,000) for Neil Shah, the President and COO of Hersha Hospitality Trust. The average increase was $1.64 million.

The percent increase in pay ranged from a mere 14% for Peter Carlino, Chairman and CEO of Penn National Gaming Incorporated, to nearly 100% for John Standley, the current President and CEO of Rite Aid.

What the 99% Are About One More Time: The Social Impact of Inequality

A blog post by Stephen Herzenberg, originally published at Third and State.

This past week, in a response to U.S. House Majority Leader Eric Cantor, this blog addressed the gap between the myth of equal opportunity in America and the reality of increasing immobility. New York Times columnist Charles Blow was on a similar theme this past weekend in a column called “America’s Exploding Pipe Dream."

Blow's column summarizes the results of a new study that ranks the 31 Organization for Economic Co-operation and Development (OECD) countries on eight indicators of social well-being. As well as the affluent European countries, Japan, Australia, and New Zealand, the OECD includes a dozen countries that have average income and wealth levels far below the U.S., sometimes a small fraction of U.S. levels: Chile, the Czech Republic, Greece, Hungary, Ireland, Mexico, Poland, Portugal, Slovakia, South Korea, Spain, and Turkey.

Yet the U.S. overall Social Justice ranking is 27th.

The U.S. ranking on the eight individual measures is listed below:

Income Inequality on the Rise

A blog post by Mark Price, originally published at Third and State.

The Pittsburgh Post-Gazette runs with a story this morning on the latest data from the Congressional Budget Office on income inequality in America (PDF).  

If you thought it took millions to land in the top 1 percent of earners targeted by demonstrators, you should know the actual threshold is $343,927, according to IRS statistics for the calendar year 2009, the latest available ...

After-tax income for the richest 1 percent of Americans almost tripled from 1979 to 2007, according to a report from the Congressional Budget Office.

At the same time, people in the middle of the scale saw their incomes grow by just under 40 percent and those in the bottom 20 percent saw a gain of about 18 percent.

"The distribution of after-tax household income in the United States was substantially more unequal in 2007 than in 1979," the CBO said.

For some additional context, a household income of $349,850 or higher will land you in the top 1% of Pennsylvania tax filers, according to 2009 tax data from the state Department of Revenue. 

Bailouts for the Banks and Cake for the 99%

A blog post by Mark Price, originally published at Third and State.

What is good for the financial sector is good for the 99% 1%.

For the financialization of America wasn’t dictated by the invisible hand of the market. What caused the financial industry to grow much faster than the rest of the economy starting around 1980 was a series of deliberate policy choices, in particular a process of deregulation that continued right up to the eve of the 2008 crisis. Not coincidentally, the era of an ever-growing financial industry was also an era of ever-growing inequality of income and wealth. Wall Street made a large direct contribution to economic polarization, because soaring incomes in finance accounted for a significant fraction of the rising share of the top 1 percent (and the top 0.1 percent, which accounts for most of the top 1 percent’s gains) in the nation’s income. More broadly, the same political forces that promoted financial deregulation fostered overall inequality in a variety of ways, undermining organized labor, doing away with the 'outrage constraint' that used to limit executive paychecks, and more.

The Pittsburgh Post-Gazette reviews employment law in Pennsylvania and notes that there are two sets of rules, the rules for the rest of us (we are employed at will and rarely get a severance) and the rules for top executives.

The Senate Chooses to Do Nothing About the Economy and You Should Root for GE

A blog post by Mark Price, originally published at Third and State.

The economic news this morning makes you feel like you are watching Major Kong (from the movie Dr. Strangelove — the picture on the left) ride the bomb like a mechanical bull to our mutual total economic destruction. But our economic situation is more similar to that of Otto (played by Kevin Kline in A Fish Called Wanda — on the right).  At first we are amused with the idea of being run down by a steamroller moving 2 miles per hour. But then we realize that we have stepped in wet cement and are thus destined to be run down by the U.S. Senate a one-eyed man with ketchup stains round his nostrils.

In short, our problem is a lack of aggregate demand and the solution is well within our grasp, but our politics are paralyzed and millions are destined to be run down by years of needless misery.

The Middle Class ‘Under Attack’

A blog post from Mark Price, originally published on Third and State.

At the Keystone Research Center, we have been chronicling for years the forces that are putting a tighter and tighter squeeze on middle-class Pennsylvanians.

Last week, we released a new report in partnership with the national policy center Demos that takes the temperature of the state's middle class in the wake of the Great Recession. I'm sorry to say, once again, the patient is not well.

The state's annual unemployment rate is the highest it has been in nearly three decades and the cost of going to college is on the rise.

According to the report, times are particularly tough for Pennsylvania's young people, with state budget cuts to 18% of public university funding and a 7.5% tuition hike in Pennsylvania's State System of Higher Education. Pennsylvania's young people already bear the seventh highest rate of student debt in the nation — at approximately $28,000 on average.

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