The American Dream Fraying of the Folklore ~Bruce Springsteen What - - PowerPoint PPT Presentation

The American Dream

Fraying of the Folklore

~Bruce Springsteen

What everyone is talking about…

200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000

1917 1920 1923 1926 1929 1932 1935 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007

Average Income (2008$)

Bottom 90% Top 10% Top 5% Top 1%

Note: U.S. before-tax income. Allegretto 2012 Source: Piketty, T. and Saez, E., The World T

• p Incomes Database.

The not so invisible hand

(Share of U.S. income growth 1979-07)

Source: EPI analysis of Piketty & Saez IRS data 2009 for the U.S. Allegretto 2012

40.1% went to the Bottom 99% Rest of

T

• p 1%

36% went to the T

• p 0.1%

reaped 23.9%

59.9% of all gains went to Top 1%

Astonishing picture of income growth

(Growth in inflation adjusted after-tax income from 1979 to 2007)

18.3% 27.5% 35.2% 43.3% 65.0% 277.5%

0% 50% 100% 150% 200% 250% 300%

Lowest quintile: <20% 2nd quintile: 21%-40% 3rd quintile: 41%-60% 4th quintile: 61%-80% 81st-99th percentiles T

• p 1%

Source: Data for the United States from the Congressional Budget Office 2011. Allegretto 2012

Not a pretty picture for California

(Income growth, 1993-2008)

Source: California Franchise Tax Board. AGI. Allegretto 2012

• 10%

0% 10% 20% 30% 40% 50% Bottom Quintile 2nd Quintile 3rd Quintile 4th Quintile Top Quintile Top 1% Percent Change in Income 1993-2008

The rich are getting richer!

(Change in U.S. wealth,1983-2009)

Source: Allegretto 2011 EPI briefing paper “The State of America’s Wealth 2011”.

• 4.1%
• 2.0%
• 1.4%

5.7% 9.8% 10.2% 41.5% 40.2%

• 0.1

0.1 0.2 0.3 0.4 0.5

Lowest quintile: <20% 2nd quintile: 21%-40% 3rd quintile: 41%-60% 4th quintile: 61%-80% 81%-90% 91%-95% 96%-99% T

• p 1%

Wealth Political access Policies

Allegretto 2012

Falling top-marginal tax rates

1945 94.0% 2011 35.0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1945 1947 1949 1951 1953 1955 1957 1959 1961 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 T

• p marginal income tax rate on ordinary income

Source: Citizens for Tax Justice Allegretto 2012

Allegretto 2012

Work Vs. a call to your broker

(this isn’t a natural result of the ‘free market’) 1945 25.0% 2011 15.0%

10% 15% 20% 25% 30% 35% 40% T

• p Capital Gains Tax Rates

Source: Citizens for Tax Justice Allegretto 2012

Allegretto 2012

CAs widening wedge of wage inequality

70 80 90 100 110 120 130 140

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

I ndex ( 1 9 7 9 = 1 0 0 )

Allegretto 2012

90th 80th 30th 50th 10th

Source: Economic Policy Institute’s analysis of CPS data;, pre-tax wages for California, 1979-2010.

70th

Incomes of typical households in California plunge back to 1998 levels

Source: Sylvia Allegretto’s analysis of U.S. Census data 2012.

$46,202 $49,076 $53,252 $52,823 $49,445 $56,042 $59,274 $59,821 $54,459

$35,000 $40,000 $45,000 $50,000 $55,000 $60,000 $65,000 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Real Median Household Income ( 2010 Dollars)

California United States Recessions

We have the most productive workers in the world!

100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007

I ndex ( 1 9 7 3 = 1 0 0 )

Source: Economic Policy Institute’s stateofworkingamerica.org Allegretto 2012

Average hourly compensation Average hourly wage

Productivity

The only deficit that matters…JOBS

• 10%
• 8%
• 6%
• 4%
• 2%

0% 2%

3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 CA 2 0 0 1 CA today!

• 6 .5 % or -9 9 2 ,0 0 0 jobs

CA 1 9 9 0 US today

• 4 .0 % or -5 .6 m illion

Source: Sylvia Allegretto’s analysis of Current Employment Statistics data. Data as of Jan. 2012.

Is inequality a problem?

Allegretto 2011

Yes, given the degree of inequality in the U.S.

• The wealthy are not taking the rest of us with them—vast riches for

a few are at the expense of the many

• Long run economic growth is stunted as a rising tide that lifts all

boats keeps rising (see Berg & Ostry 2011)

• Everyone—even the wealthy—would be better off with a smaller

slice of a growing economic pie

• The tax system allows well off & Corporations to avoid paying
• Dismantling of public services: especially education
• YOYO Economics for Workers. Wages stagnate, and the burden of

taxes, health care & retirement is shifted to them

• Effect on our Democracy?

Allegretto 2012

Federal government must lead the way



More progressive state income tax structure



Institute progressive inheritance, gift & estate taxes



Institute an oil severance tax



Invest in k-12 and higher education



Strengthen job quality



Increase & index the minimum wage



Get rid of enterprise zones



Strengthen project labor agreements



California bid preferences



Institute a rainy day fund

THE NECESSARY FRAYING OF

THE FOLKLORE

• Hard facts on Mobility
• Rungs on the ladder
• Middle class

Horatio Algiers

• Patriotism
• Religion
• Deterministic

Free Market

• Equal opportunities
• You get what you deserve
• Inequality at the starting gate

Meritocracy

Allegretto 2012

The American Dream

The Fraying of the Folklore

SF-NABE

February 29, 2012 San Francisco, California

Sylvia A. Allegretto, PhD

Center on Wage & Employment Dynamics University of California, Berkeley allegretto@berkeley.edu

Allegretto EARN 2011

 Extra slides

Occupy the Wall across the Street

Jared Bernstein and Sylvia Allegretto, IRLE

Under-employment rates

8.3% 10.5% 16.2% 16.7% 15.9% 9.9% 13.4% 21.1% 22.1% 21.1% 0% 5% 10% 15% 20% 25% 2007 2008 2009 2010 2011

United States California Source: Allegretto’s calculations of BLS CPS U6 data.

Where are all the workers? (Employment rates)

Source: Sylvia Allegretto’s analysis of CPS data, EPOPs or Employment rates.

63.0% 62.2% 59.3% 58.5% 58.4% 62.1% 61.1% 57.8% 56.5% 56.1%

52% 54% 56% 58% 60% 62% 64%

2007 2008 2009 2010 2011

United States California

Allegretto 2012 17.6% 19.7% 31.5% 43.3% 43.7% 16.8% 21.5% 34.9% 46.1% 45.6% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2007 2008 2009 2010 2011 Share of long-term unemployed

United States California Source: Allegretto's calculations of BLS CPS data.

Long-term unemployment