Study finds income gap widening

Somerset Daily American

In the U.S. the rich keep getting richer and the poor are staying stagnant.

According to Census Bureau figures, last year saw the widest income gap between the rich and the poor. The study found that income inequality was at its highest level since the bureau started tracking household incomes in 1967.

“There has been a slow growth in income wages,” said Mark Price, a labor economist for the Keystone Research Center in Harrisburg. “But top groups of households have captured an increasing share of that economic growth.”

Census figures show that the top-earning 20 percent of Americans — those making more than $100,000 annually — received 49.4 percent of all income in the U.S. That is compared with the 3.4 percent earned by those below the poverty line. The ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double the low of 7.69 in 1968.

Price said that had incomes kept pace with the growth in average wages and the inequality had not grown, a full-time worker in Pennsylvania would make between $3,000 to $3,5000 more a year.

“Our view is that wages have to rise as productivity rises,” Price said. “The trick is when productivity is rising it has to show up on people’s paychecks, but it’s not.”

Matthew Marlin, an economics professor at Duquesne University, said the wide gap between rich and poor incomes reminds him of the recession in 2001.

“When the economy rebounds employment usually goes up. We see it happening more and more with businesses,” he said.

But Marlin said that after the most recent recession workers are being replaced by technology.

“A real good example is the local Giant Eagle grocery store. How many of the lanes are self-check out now?” he said. “Before, as soon as business picked up they hired more workers. Now it’s picking up and they’re hiring more scanners.”

Other factors that have increased the income gap include the emergence of international trade; the decline in union membership, which is supposed to help boost bargaining power; and the imbalance that minimum wage has not kept on pace with average wages.

Price said that Pennsylvania follows the same pattern as the national trend.

According to the Pennsylvania Department of Labor and Industry, about 3,900 Somerset County residents are unemployed, or 10 percent of the labor force. A county resident earns an average annual income of $28,928.

The top 1 percent of workers in Pennsylvania (about 59,000 people) accounted for 68 percent of growth in personal income between 2001 and 2006, according to the Keystone Research Center. A person has to make more than $300,000 a year to be considered in the state’s top 1 percent. The center also predicts the state would need to add about 300,000 jobs to boost employment and replace the jobs that were lost when the recession began in late 2007.

The Census Bureau’s findings state that the U.S. also has the greatest income gap among Western industrialized nations.

“The American dream is to go from rags to riches and for some people that’s a motivating factor,” Marlin said.

The Keystone Research Center has recommended ways to reverse the expanding income gap — or at least slow it down. Price said some suggestions are to extend benefits for jobless workers, extend a program that creates subsidized jobs, make it easier for workers to unionize, raise the minimum wage and advocate higher tax rates on the highest incomes.