Income and wealth inequality

Income and wealth inequality

Income and wealth inequality The end of industrialization and Reaganomics Income inequality Wealth inequality Poverty

Income and wealth inequality The end of industrialization and Reaganomics Income inequality Wealth inequality Poverty

The End of Industrialization Slide 9 Manufacturing jobs disappeared from the Northeast and Midwest in the 1980s Factories gave way to a service economy This was particularly hard for blacks and Puerto Ricans E.g., between 1979 and 1984, half of all black men working in durable goods manufacturing in major Midwest metropolises lost their jobs.

Slide 10 Federal assistance was being altered dramatically under Reagan: The Idea of Trickle Down Economics Tax cuts for the wealthy Capital investments increase Production increases More jobs created Prices fall Consumption is stimulated The poor benefit

Results of Reagan s Economic Strategy Slide 11 Top 1% 15% tax cut Top 10% 5% tax cut Middle 40% Relatively unaffected Bottom 50% Tax increases Bottom 20% Incomes drop by 10% Discussion: Does trickle-down trickle down? Increased gap between rich and poor and between whites and nonwhites

Income and wealth inequality The end of industrialization and Reaganomics Income inequality Wealth inequality Poverty

income The gap between white wages and nonwhite wages has narrowed over the last 20 years. (see next slide)

There are significant household income differences by race and ethnicity. In 2010, the household income of Asians was over twice that of Blacks. In 2006, Latino household income was 70 percent of white households.

Income inequality For every dollar white man earns, black man earns 75 cents. The gap narrows substantially when accounting for important characteristics such as education, employment experience, immigrant status, and hours worked. The gap does not disappear. The average salary of black college-educated women is $25,914, while the average salary of white men with a high school diploma is $28,266

Could high levels of immigration explaining racialized income inequality? High levels of immigration lead to racial disparities in income levels? The argument: Employers replace native-born workers with an immigrant labor force. This drives down wages, widening the income gap.

Could high levels of immigration explaining racialized income inequality? Researchers have found that immigration has little effect on income inequality Because the labor force is racially segregated, immigrants primarily compete with other immigrants for jobs in immigrant dominated labor sectors (like domestic service), not with poor blacks and poor whites.

Segregated labor force 48% of Hispanics work in mostly Hispanic jobs 44% of blacks work in mostly black jobs 25% of workplaces are exclusively white Wages are lower in majority nonwhite jobs. Nonwhite jobs are also lower in prestige E.g., janitors and gardeners Once a job s status declines, so too, does its wages

Income and wealth inequality The end of industrialization and Reaganomics Income inequality Wealth inequality Poverty

wealth Black middle-class workers earned roughly 70 cents for every dollar earned by white middle-class workers However, they possess only $.15 for every dollar of wealth possessed by white middle-class workers (see next slide) Poor whites possess equal wealth as welloff blacks White poverty and black poverty are usually not the same thing

Median Net Worth, 2007 Wealth differences by race is much greater than differences by income.

wealth The average net worth of collegeeducated whites is $74,922, while the average net worth of college-educated blacks is only $17,437

Transformative Assets, the Racial Wealth Gap, and the American Dream Thomas M. Shapiro

The creation of the black middle class For many black Americans, middle class status was earned between the mid-1960s and early 1980s (as measured by income, occupation, and education, but not by assets).

Why is racial inequality increasing in this new era? Wealth is necessary to achieve social mobility These inheritances amount to transformative assets. This involves the capacity of unearned, inherited wealth to lift a family economically and socially beyond their own achievements, jobs, and earnings would place them. Wealth has racial and class consequences for: the homes they buy the communities they live in the quality of schools their children

Why is racial inequality increasing in this new era? Family inheritance and continuing discrimination in really vital areas like home ownership are reversing gains earned in schools and on the job and making racial inequality worse. It is virtually impossible for people of color to earn their way to equal wealth through wages

Why is racial inequality increasing in this new era? Because blacks have fewer assets, middle class status is more precarious than it is for whites A white middle-class family on average could survive at the poverty line for an entire year; whereas the average middle-class black family could survive less than a month.

Closing the racial wealth gap Not enough to close the racial wealth gap eliminating job discrimination improving schools improving employment opportunities

Present-day institutional racism Banks more likely to offer credit to whites than nonwhites Commercial banks turn down black and Hispanic applicants two to three times more often than white applicants. The poorest white applicant has a better chance of getting his or her mortgage application approved than the highest paid black applicant.

Income and wealth inequality The end of industrialization and Reaganomics Income inequality Wealth inequality Poverty

The Poverty Line 2008-09 Slide 19 Persons in Family Unit 48 States and D.C. Alaska Hawaii 1 $10,830 $13,530 $12,460 2 $14,570 $18,210 $16,760 3 $18,310 $22,890 $21,060 4 $22,050 $27,570 $25,360 5 $25,790 $32,250 $29,660 6 $33,270 $41,610 $42,560 7 $37,010 $46,290 $42,560 8 $37,010 $46,290 $40,940 Each additional person add $3,740 $4,680 $4,300

Slide 20 Note the figure $10,830 in the preceding slide Could you live on $10,830/yr.? How much do you pay for rent? How much do you spend on food? How much do you spend on doctors? How much do you spend on clothes? Do you have a car? How much is your tuition and books? How much do you spend on going out?

Slide 21 Percentage of Group Living below Official Poverty Line U.S. Census Bureau, 2007

Slide 22 Percentage of Children Living below the Official Poverty Line by Race and Hispanic Origin, 2006 35 30 25 20 15 10 5 0 White Black Hispanic Asian

In 2010, 9.9% of non-hispanic whites, 27.4% of blacks, and 26.6% of Hispanics were poor.

Slide 24 Structural Causes of Poverty Capitalism produces a pool of unemployed laborers With deindustrialization, mid-level jobs have all but disappeared, giving us an hourglass-shaped economy One-third of breadwinners make less than $10 an hour U.S. devotes a smaller percentage of its wealth to antipoverty programs than any other developed country

Black Poverty (see inner-city black poverty slides) Black ghetto Concentrated poverty Everyday establishments scarce Pandemic unemployment Explanations Spatial mismatch thesis Residential segregation Brain drain Slide 25

Slide 26 Poverty and Affluence Black poverty and affluence Many blacks live in desperate conditions today 75% of blacks are middle or upper class Money can lift up many African Americans -- but not always above the veil of racism Native American poverty and affluence There is an elite group of tribes successful with casinos and antipoverty programs But Native American unemployment is around 50% Their poverty rate is 3.5 times the national average Best way to overcome reservation poverty is to support tribal sovereignty

Income and wealth inequality The end of industrialization and Reaganomics Income inequality Wealth inequality Poverty