Here's another example of how complicated it is to combat America's rising income inequality. Economists know that inequality is much lower for younger households than for older households. But unless the reasons for that are clear, formulating appropriate policy aimed at alleviating income inequality is extremely difficult. A key question regarding the cause of income inequality is whether it's caused by differences in ability or luck. Does enhanced skill, training or education put some groups on higher income growth paths than others? Or is it because for some people, temporary changes in income arising from negative factors such as unemployment or a spell of bad health create setbacks that they never fully recover from, while for others positive shocks, such as the good fortune to find a great job, push their incomes higher? Regarding the second condition, for most people, the shocks are generally small and roughly balance over time. But for others -- the lucky and the unlucky -- … [Read more...] about Why income inequality grows as people age
WASHINGTON - Income inequality is taking a toll on state governments. The widening gap between the wealthiest Americans and everyone else has been matched by a slowdown in state tax revenue, according to a report being released Monday by Standard & Poor's. Even as income for the affluent has accelerated, it's barely kept pace with inflation for most other people. That trend can mean a double-whammy for states: The wealthy often manage to shield much of their income from taxes. And they tend to spend less of it than others do, thereby limiting sales tax revenue. As the growth of tax revenue has slowed, states have faced tensions over whether to raise taxes or cut spending to balance their budgets as required by law. "Rising income inequality is not just a social issue," said Gabriel Petek, the S&P credit analyst who wrote the report. "It presents a very significant set of challenges for the policymakers." Stagnant pay for most people has compounded the pressure on states to … [Read more...] about How income inequality is squeezing state budgets
NEW YORK - When Jayson Seaver thinks about why he makes so much money while some Americans can't catch a break, he thinks of the sacrifices he's made, the jobs he worked to pay for college, the 12-hour days he spends at the office now. And he thinks of his youngest sister, Jackie, whom he practically begged to go to college and how she refused and is "paying for it" now, watching with envy while he flies around on vacation and enjoys his wealth. At least that's how he sees it. She has a different view. But they don't talk much. "I'm disappointed in her," says Jayson, 37. "I think it's distanced us." It's a story as old as humankind: People raised in the same home, at the same time, by the same parents, who as adults land in vastly different financial circumstances. Experts see a growing trend. The same forces that have increasingly separated the richest Americans from everyone else is dividing brothers and sisters, too. It's given rise to a mix of often conflicting emotions -- … [Read more...] about Income inequality can divide families, too
It remains to be seen whether President-elect Donald Trump will make rising income inequality a priority when he takes office in January. At least, his tax plan indirectly aims to ease inequality by making wealthy Americans “pay their fair share.” In Portland, Oregon, lawmakers aren’t holding their collective breath. In a move that made international headlines, Portland’s City Council voted earlier in December to approve a first-of-its-kind tax on public companies that pay their chief executive officers more 100 times their median workers’ pay. According to Portland Commissioner Steve Novick, the tax aims to address growing income inequality by targeting “the phenomenon of outrageous CEO pay.” Some economists, said Novick, argue that escalating CEO pay is more than just a symbol of income disparity in the U.S. but has actually contributed to the nagging problem. Novick sponsored the ordinance authorizing the new tax. “If we can do … [Read more...] about Taking on income inequality with a CEO pay tax
Income inequality has become a hallmark of the modern economic era, and it’s not only U.S. citizens who are experiencing the trend. Widening inequality has been called “one of the key challenges of our time” by the World Economic Forum. It cites the negatives associated with a growing gap between rich and poor: weaker social networks, rising crime and weaker democracies. The ratings agency S&P Global Ratings has cited the income gap as a long-term trend that threatens America’s economic growth. While the rich have gotten richer, many Americans have been left behind, especially those who lack college degrees. On the campaign trail, President Donald Trump vowed to help revitalize the careers of many of those workers, pointing to what he claimed are trade and labor imbalances with foreign countries such as China and Mexico. To combat such imbalances, Mr. Trump has raised the possibility of enacting tariffs on Chinese-made goods, which would likely … [Read more...] about U.S. vs. China: Whose income inequality is worse?