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The VAT is one of the most regressive forms of taxation, which means that the tax systems of the rest of the developed world are even less progressive than indicated by the income tax comparisons.
Among the seven major developed nations, the official OECD Gini coefficients showed that France had the least income inequality, followed closely by Germany. The United States had the most. The differences in the Gini coefficients for these two countries and the United States implies that France redistributed about 9.9 percent more of its national income than the United States did and Germany 9.6 percent more. When the OECD number is corrected for the transfer payments missing from the US data submission, France’s extra redistribution was only 4.4 percent more and Germany’s 4.1 percent more.
Using a consistent cross-national standard like this one tells us that the supposedly more equal countries actually have 27 percent more of their population living at what is defined as a low-income level in the United States. They may be more equal, but they are equally poorer.
Household income in the United States differs in only one significant way from that in other nations: Americans at all levels have a lot more of it.
Limited foreign competition and strong foreign and domestic consumer demand drove up the demand for US labor. Employers needed workers to meet the demand and were able to bid up wages to attract them.
shows, for example, that in the bottom quintile, the average household had only 0.2 workers per household, partly because 50 percent of bottom-quintile adults were retired and only 45 percent of the households had a prime work-age person.
It is worth noting that unemployment was only 4.4 percent in 2017, one of the six lowest unemployment rates during the preceding half century, so employment for most prime work-age persons was a matter of choice.16 The second quintile also has below-average worker engagement among prime work-age persons, with only 85 percent of its prime work-age adults working.
Clearly, one reason for the rise in earned-income inequality was that the proportion of prime work-age persons in lower-income households who were working declined, while the proportion working in higher-income households increased.
Only one structural change can explain the major decoupling of prime work-age persons in low-income households from the world of work: the near quadrupling (in constant dollars) of government transfer payments to lower-income households.
The 1996 reforms were successful. The number of families receiving payments declined by more than half. Much of the decline was the result of beneficiaries finding employment. As a result, employment among low-income single parents rose.18 Poverty for single-mother families declined and has continued to remain lower than it was before the reforms. Single-mother poverty also declined relative to poverty for other types of families and has remained lower ever since.
For the four years immediately following the reform, the growth in transfer payments slowed to an annual rate of only 0.6 percent because the reforms focused on moving families with children from total dependence on government to greater independence.
in 2017 was actually 18.5 percent lower than in 1996. Yet the proportion of the population receiving food stamps was 36.7 percent greater. Over the same period, the proportion of the prime work-age persons receiving Social Security Disability Insurance benefits increased by almost 50 percent.
This increase in disability beneficiaries occurred when work-related accidents had fallen to an all-time low, medical advances had reduced the impact of many disabilities, and the Americans with Disabilities Act had forced employers to make the workplace more accommodating to those with disabilities.
Prior to the beginning of the twenty-first century, the mantra of US public welfare policy was to assist those in need with the stated goal of promoting their capacity to become self-supporting. It appears that both the objective and the method of outreach started to change around the turn of the twenty-first century. Government has not only raised benefits and lowered the eligibility standards but also started actively to urge people to become more dependent on government.
From 2000 through 2016, the US Department of Agriculture (USDA) conducted aggressive recruitment efforts that it claimed boosted food stamp enrollment by 157 percent.25 USDA spent $40 million annually on advertising to recruit beneficiaries, above and beyond the usual public service announcements concerning the availability of benefits.
Johnson’s stated policy objective, “to allow them to develop and use their capacities,”30 was a commitment to strengthen
this growth in earned income among the nation’s lowest earners. But the exact opposite happened. In the fifty years after the funding for the War on Poverty ramped up in 1967, the bottom quintile’s share of the nation’s earned income fell by more than half.
Incredibly, its share in 2017 was 40 percent below what it had been in 1947. The second quintile’s earned-income share fell by more than a third. These incredible drops in income share were largely the result of a massive decline in the prop...
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Low-income Americans became less likely to “develop and use their capacities” to earn a living, and measures of inequality for earned income rose.
War on Poverty significantly increased dependency and failed in its primary effort to bring lower-income people into the mainstream of America’s economy. Government programs eliminated deprivation but increased idleness and stifled human flourishing.
The average household with prime work-age adults in the bottom quintile earned $6,941, paid $3,512 in taxes, and received $45,377 in transfer payments, resulting in $49,488 of income after taxes.
In an average household in the second quintile, more than twice as many of the prime work-age adults worked (80.8 percent versus 33.0 percent for the bottom quintile). And, on average, they worked almost twice as many hours per week (33.0 versus 18.5).
So, after working more than four times as much, the average second-quintile household had only $1,686 more money for living than the average bottom-quintile household. From the additional income that they earned compared with the bottom quintile, the average second-quintile household got to keep only 7 cents of every additional dollar, an extremely small economic incentive to work more.
With these strong government financial disincentives to work, it is a tribute to American workers that most have not succumbed to the temptation to take a slightly lower income for a lot less work.
Average hourly earnings for women rose more rapidly than for men as their skill and education levels increased more rapidly and the percentage of women in high-paying occupations grew faster. As a result, the overall earning differential between men and women declined rapidly.
By 1987, women earned 50.4 percent of master’s degrees, and that percentage hit 60.3 percent in 2007, where it stabilized. Doctorates earned by women (including advanced professional degrees in medicine and law) reached 50.1 percent in 2005 and continued to climb to 53.8 percent by 2017, the last year for which data are available.
only 1.1 percent of households would have had two college graduates. In fact, 5.2 percent of households had two college graduates—nearly five times as many as would have resulted from random selection of spouses.
By 2017, 29.5 percent of all households were headed by two college graduates, and 74.2 percent of all
The incidence of the super two-earner households had exploded from only one in twenty househo...
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households alone accounted for 8.1 percent of the increase in the inequality of earned household...
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When political activists denounce the rise in earned-income inequality, they are neglecting the fact that a significant portion of the phenomenon they decry has arisen from the individual efforts of women and their greater participation in the economy. Not surprisingly, increased equality of opportunity and the atte...
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Despite significant gains in earnings for women, if one compares the median annual earnings for women who worked full-time year-round in 2020 with those for men, women earned 17 cents less per dollar earned by men.47 This difference has sometimes been labeled the “gender pay gap.”
the largest factor explaining this pay gap is the amount of time that the individuals work.
Within the full-time category, on average, men worked 2.0 hours more per week than women. If full-time women had worked the same number of hours as men without any
change in their hourly earnings, then the resulting pay gap would have been 4 cents smaller.
On average, teachers report working only 38 weeks per year. But Census changes the actual weeks reported by teachers in the survey to 52 weeks per year for calculation and reporting. That converts all teachers to year-round workers, even though on average they work less than three-quarters of a year.
The majority of teachers are women, so the Census changes to reported teacher hours adds at least another 1 cent to the gender earning difference.
Among full-time workers who worked less than 40 hours per week, women earned 4 cents more than men. Among part-time workers, women made 6 cents more.
only place where an actual “pay gap” existed was for those working 40 or more hours per week. For those working fewer hours, women made more.
Just as more experience creates pay inequality in the population generally, experience accounts for a significant part of the gender pay gap. Women, on average, have worked fewer years than men of the same age. Women between the ages of forty-three and fifty-one, on average, had nearly three fewer years of work experience compared with men of the same age, giving men 13 percent more experience and adding another 5 cents to the pay gap.
Women work at almost every type of job, but they are still more likely to work in occupations that on average pay less. Of course, it would be equally true that men, on average, work in the occupations that pay more.
Women are, as a matter of fact, less likely to hold jobs in areas such as commission sales and finance that have greater financial risk of periods with lower earnings, although in the long run the pay may be higher.
Similarly, there are fewer women in jobs that entail greater physical danger and offer significant premium pay.
Men are nine times more likely to hold a job with known physical risks, seventeen times more likely to hold jobs exposing them to fumes, eight times more likely to work in extreme weather, and almost five times more likely to hold jobs exposing them to high levels of noise.
As a result, men have twelve times the workplace fatality rate of women and 50 percent more workplace injuries.
women than men selected nine of the ten lowest-earning majors.
The data show that differences in earnings by men and women arise quite naturally from the operation of a competitive market. If employers could, in fact, hire women at 83 cents on the dollar for the same job, women would have all the jobs they wanted and no unemployment.
That means that the difference in the amount of work performed by households between 1967 and 2017 accounted for almost half of the total Gini coefficient increase of 26.6 percent.
second-largest contributor to the increase in the inequality of earned income was the increase in disparities in educational attainment.
Finally, between 1967 and 2017, the premium in earnings received for having a college degree nearly doubled. We can compute the effect of that higher premium by adding the premium increase to the average hourly earnings for each quintile’s college graduates. The result of all these changes to the 1967 data (proportion of people working, hours worked, educational attainment, and college premium) is a Gini coefficient of 0.572, an increase of 29.2 from 1967, which means that adding the higher college premium explains about a 5.2 percent increase in earned-income inequality.
