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… 1,600,000 Top 1% 1,400,000 Average Income (2008$) 1,200,000 1,000,000 800,000 600,000 Top 5% 400,000 Top 10% 200,000 Bottom 90% 0 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 Note: U.S. before-tax income. Allegretto 2012 Source: Piketty, T. and Saez, E., The World T op Incomes Database.

The not so invisible hand (Share of U.S. income growth 1979-07) 59.9% of all gains went to 36% went to 40.1% went Top 1% the T op 0.1% to the B ottom 99% R est of T op 1% reaped 23.9% Source: EPI analysis of Piketty & Saez IRS data 2009 for the U.S. Allegretto 2012

Astonishing picture of income growth (Growth in inflation adjusted after-tax income from 1979 to 2007) 300% 277.5% 250% 200% 150% 100% 65.0% 43.3% 50% 35.2% 27.5% 18.3% 0% Lowest 2nd quintile: 3rd quintile: 4th quintile: 81st-99th T op 1% quintile: <20% 21%-40% 41%-60% 61%-80% percentiles Source: Data for the United States from the Congressional Budget Office 2011. Allegretto 2012

Not a pretty picture for California (Income growth, 1993-2008) 50% Percent Change in Income 1993-2008 40% 30% 20% 10% 0% -10% Bottom Quintile 2nd Quintile 3rd Quintile 4th Quintile Top Quintile Top 1% Source: California Franchise Tax Board. AGI. Allegretto 2012

The rich are getting richer! (Change in U.S. wealth,1983-2009) 0.5 41.5% 40.2% 0.4 0.3 0.2 10.2% 9.8% 0.1 5.7% 0 -1.4% -2.0% -4.1% -0.1 Lowest 2nd quintile: 3rd quintile: 4th quintile: 81%-90% 91%-95% 96%-99% T op 1% quintile: 21%-40% 41%-60% 61%-80% <20% Source: Allegretto 2011 EPI briefing paper “The State of America’s Wealth 2011”.

Wealth Political Policies access Allegretto 2012

T op marginal income tax rate on ordinary income Falling top-marginal tax rates 100% Source: Citizens for Tax Justice 10% 20% 30% 40% 50% 60% 70% 80% 90% 0% 1945 1947 94.0% 1945 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 Allegretto 2012 Allegretto 2012 2002 2004 2006 2008 35.0% 2011 2010

Work Vs. a call to your broker (this isn’t a natural result of the ‘free market’) 40% 35% op Capital Gains Tax Rates 30% 1945 25.0% 25% 20% T 15% 2011 15.0% 10% Allegretto 2012 Source: Citizens for Tax Justice Allegretto 2012

CAs widening wedge of wage inequality 140 130 90th 120 I ndex ( 1 9 7 9 = 1 0 0 ) 80th 110 70th 100 50th 30th 90 10th 80 70 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Economic Policy Institute’s analysis of CPS data;, pre-tax wages for California, 1979-2010. Allegretto 2012

Incomes of typical households in California plunge back to 1998 levels $65,000 Real Median Household Income ( 2010 Dollars) $59,821 $59,274 $60,000 $56,042 $55,000 $54,459 $53,252 $52,823 $50,000 $49,076 $49,445 $46,202 $45,000 California $40,000 United States Recessions $35,000 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 Source: Sylvia Allegretto’s analysis of U.S. Census data 2012.

We have the most productive workers in the world! 450.0 400.0 Productivity 350.0 I ndex ( 1 9 7 3 = 1 0 0 ) 300.0 250.0 Average hourly compensation 200.0 150.0 Average hourly wage 100.0 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 Source: Economic Policy Institute’s stateofworkingamerica.org Allegretto 2012

The only deficit that matters…JOBS 2% CA 2 0 0 1 CA 1 9 9 0 0% 0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 -2% -4% US today -4 .0 % or -5 .6 m illion -6% CA today! -6 .5 % or -9 9 2 ,0 0 0 jobs -8% -10% Source: Sylvia Allegretto’s analysis of Current Employment Statistics data. Data as of Jan. 2012.

Is inequality a problem? 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 2011

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  Allegretto 2012

T HE NECESSARY FRAYING OF THE FOLKLORE Horatio • Hard facts on Mobility • Rungs on the ladder Algiers • Middle class • Patriotism Free Market • Religion • Deterministic • Equal opportunities Meritocracy • You get what you deserve • Inequality at the starting gate 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

 Extra slides Allegretto EARN 2011

Occupy the Wall across the Street Jared Bernstein and Sylvia Allegretto, IRLE

Under-employment rates 25% 22.1% 21.1% 21.1% 20% United States 16.7% California 16.2% 15.9% 15% 13.4% 10.5% 9.9% 10% 8.3% 5% 0% 2007 2008 2009 2010 2011 Source: Allegretto’s calculations of BLS CPS U6 data.

Where are all the workers? (Employment rates) 64% 63.0% 62.2% 62.1% United States 62% 61.1% California 60% 59.3% 58.5% 58.4% 57.8% 58% 56.5% 56.1% 56% 54% 52% 2007 2008 2009 2010 2011 Source: Sylvia Allegretto’s analysis of CPS data, EPOPs or Employment rates.

Long-term unemployment 50% 46.1% 45.6% 43.7% 45% 43.3% United States 40% California Share of long-term unemployed 34.9% 35% 31.5% 30% 25% 21.5% 19.7% 20% 17.6% 16.8% 15% 10% 5% 0% 2007 2008 2009 2010 2011 Allegretto 2012 Source: Allegretto's calculations of BLS CPS data.