Building an Economy that Works for Everyone

Economic mobility is changing in an inequality society

Obama (REUTERS/Jim Young)

Photo: REUTERS/Jim Young

In tonight’s State of the Union address, President Obama is expected to focus on the crisis of income inequality, fueled by stagnated wages, regressive tax codes and diminishing public resources for education, unemployment insurance and retirement.

The President outlined the growing disparity between the rich and poor in a recent speech to the Center for American Progress.

Since 1979, when I graduated from high school, our productivity is up by more than 90 percent, but the income of the typical family has increased by less than eight percent.  Since 1979, our economy has more than doubled in size, but most of that growth has flowed to a fortunate few.

The top 10 percent no longer takes in one-third of our income — it now takes half.  Whereas in the past, the average CEO made about 20 to 30 times the income of the average worker, today’s CEO now makes 273 times more.  And meanwhile, a family in the top 1 percent has a net worth 288 times higher than the typical family, which is a record for this country…

The problem is that alongside increased inequality, we’ve seen diminished levels of upward mobility in recent years.  A child born in the top 20 percent has about a 2-in-3 chance of staying at or near the top.  A child born into the bottom 20 percent has a less than 1-in-20 shot at making it to the top.  He’s 10 times likelier to stay where he is.  In fact, statistics show not only that our levels of income inequality rank near countries like Jamaica and Argentina, but that it is harder today for a child born here in America to improve her station in life than it is for children in most of our wealthy allies — countries like Canada or Germany or France.  They have greater mobility than we do, not less.

EOI recently published Chutes and Ladders: How economic mobility is changing in an inequality society. The report analyzed statewide trends in education, job growth and income gains. The report found that Washington workers are facing ever-higher barriers to economic mobility, with stagnating wages, sky-rocketing education costs and little retirement savings. In fact, Washington workers are more likely to experience downward economic mobility.

In Washington and across the country, the gap between the rich and the poor continues to grow while middle-class, family-wage jobs disappear. According to the report, overall Washington state job growth has been strong over the past decade – expanding by 34 percent from 1990 to 2012, compared to 22 percent nationally. But growth has been concentrated at the very top and very bottom rungs of the economy. High-income tech jobs have grown immensely, but low-income jobs – in sectors like food service, accommodation and hospitality/leisure – are outpacing overall job growth. In those low-wage sectors, jobs grew by 45 percent from 1990 to 2012, compared to total nonfarm job growth of 34 percent over the same period. Without middle-income jobs, income disparity has widened over the past half-century.

Hourly wages by selected decileBoth in D.C. and here in Washington state, leaders must champion policies that support a strong and widening middle-class through a strong minimum wage, smart social assistance programs, equal pay for equal work, expanded Social Security benefits and paid family and sick leave programs.

Read the full Chutes and Ladders report here and check out the SOTU tonight and let us know your thoughts.

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