Trends Suggest Need for Immediate Action on Minimum Wage

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Harrisburg, PA – In Pennsylvania, the gap between high-income families and poor and middle-income families grew significantly from the early 1980s to the early 2000s, according to a new nationwide study by the Center on Budget and Policy Priorities and the Economic Policy Institute, co-released today with the Keystone Research Center.

Pulling Apart: A State-By-State Analysis of Income Trends, compares data for 2001-03 with 1980-82, a comparable period of recession and slow job growth.

Pulling Apart also highlights income levels and trends in “post-tax income.” This includes the value of the Earned Income Tax Credit that benefits low-income families and also includes the cash value of food stamps, subsidized school lunches, and housing subsidies.

“The story told by this data is that inequality has grown nationally but it has grown even more in Pennsylvania,” said Stephen Herzenberg, an economist and executive director of the Keystone Research Center. “It is striking that Pennsylvanian’s inequality grew more in a period that starts after the job loss of the 1970s had already begun to winnow the Commonwealth’s middle class.”

“Pennsylvania once had a strong middle class and one of the most equal state income distributions. It now has one of the more unequal,” added KRC labor economist Mark Price.  “We know from other data that the gap between the top and the bottom is driven heavily by the affluence of the Philadelphia suburbs and the poverty and economic stagnation of the ‘Other Pennsylvania’ that spans the rural T and parts of the Southwest,” Price added.

Price noted a recent KRC study showing that in 35 of the state’s rural counties, one in five or more workers would benefit directly or indirectly from a raise in the state’s minimum wage because many low-wage workers live in rural areas of the state.

Among the study’s specific findings:

• In Pennsylvania, the average income of the bottom fifth of families grew from $15,167 in the early 1980s to $18,548 in the early 2000s, a rise of 22 percent.  In contrast, the average income of the richest fifth of families grew from $73,273 in the early 1980s to $129,371 in the early 2000s (by 77 percent). 

• Pennsylvania went from having the 16th lowest top-to-bottom ratio out of the 50 states to having the 20th highest one. 

• Of the 11 largest states, only New York and New Jersey experienced a bigger increase than Pennsylvania in the ratio of the average income of the top 5 percent to the average income of the bottom 20 percent. This ratio nearly doubled, from 6.6 to 12.   

• The average income of the middle fifth of households increased from $37,200 in the early 1980s to $48,543 in the early 2000s, an increase of 31 percent.

• Meanwhile, the average income of the top 5 percent of Pennsylvania families rose by 124 percent in the 20-year period. It went from $99,562 in the early 1980s to $223,152 in the early 2000s, an increase of $123,590.

• The income gap between the top and middle fifths of families in Pennsylvania grew faster in the last two decades than in any other state except for Kentucky.

• The top 5 percent of Pennsylvania families as a group enjoyed a larger total dollar increase in income than all families in the middle fifth and bottom fifth combined.

These trends are in marked contrast to the broadly shared prosperity of the late 1940s to the early 1970s. During this period, U.S. income levels doubled in each fifth of the distribution.

“While productivity growth has grown rapidly in the last decade,” said Price, “most of the benefits of that growth continue to go to a thin slice at the top.” 

“Income inequality trends and slow income growth at the bottom are reasons why a raise in Pennsylvanian’s minimum wage is needed. From 1947 to 1968, when a rising tide lifted all Pennsylvania boats, the inflation-adjusted value of the minimum wage more than doubled.  Since 1979, inflation has eaten away 28 percent of the value of the minimum wage.”

The full text of the report, Pulling Apart: A State-By-State Analysis of Income Trends, is available from the Center on Budget and Policy Priorities Web site www.cbpp.org or the Economic Policy Institute Web site www.epinet.org.

A fact sheet summarizing the report’s data on Pennsylvania is available from the Keystone Research Center.