Income and
wealth
inequality
Income and wealth inequality
 The
end of industrialization and
Reaganomics
 Income inequality
 Wealth inequality
 Poverty
Income and wealth inequality
 The
end of industrialization and
Reaganomics
 Income inequality
 Wealth inequality
 Poverty
Slide 9
The End of Industrialization

Manufacturing jobs
disappeared from the
Northeast and Midwest in
the 1980s

Factories gave way to a
service economy

This was particularly hard
for blacks and Puerto
Ricans

E.g., between 1979 and
1984, half of all black
men working in durable
goods manufacturing in
major Midwest
metropolises lost their
jobs.
Slide 10
Federal assistance was being altered dramatically
under Reagan: The Idea of Trickle Down
Economics
Tax cuts for the wealthy
Capital investments increase
Production increases
More jobs created
Prices fall
Consumption is stimulated
The poor benefit
Slide 11
Results of Reagan’s
Economic Strategy
Top 1%
15% tax cut
Top 10%
5% tax cut
Middle 40%
Relatively unaffected
Bottom 50%
Tax increases
Bottom 20%
Incomes drop by 10%
Discussion: Does trickle-down
trickle down?
Increased gap
between rich and
poor and between
whites and
nonwhites
Income and wealth inequality
 The
end of industrialization and
Reaganomics
 Income inequality
 Wealth inequality
 Poverty
income
 The
gap between white wages and
nonwhite wages has narrowed over the
last 20 years. (see next slide)
There are significant household income differences by race and ethnicity.
In 2010, the household income of Asians was over twice that of Blacks.
In 2006, Latino household income was 70 percent of white households.
Income inequality



For every dollar white man earns, black man
earns 75 cents.
The gap narrows substantially when
accounting for important characteristics such
as education, employment experience,
immigrant status, and hours worked.
The gap does not disappear.

The average salary of black college-educated
women is $25,914, while the average salary of
white men with a high school diploma is $28,266
Could high levels of immigration
explaining racialized income
inequality?
 High
levels of immigration lead to racial
disparities in income levels?
 The argument:


Employers replace native-born workers with
an immigrant labor force.
This drives down wages, widening the
income gap.
Could high levels of immigration
explaining racialized income
inequality?
 Researchers
have found that immigration
has little effect on income inequality

Because the labor force is racially
segregated, immigrants primarily compete
with other immigrants for jobs in immigrant
dominated labor sectors (like domestic
service), not with poor blacks and poor
whites.
Segregated labor force





48% of Hispanics work in mostly Hispanic jobs
44% of blacks work in mostly black jobs
25% of workplaces are exclusively white
Wages are lower in majority nonwhite jobs.
Nonwhite jobs are also lower in prestige


E.g., janitors and gardeners
Once a job’s status declines, so too, does its
wages
Income and wealth inequality
 The
end of industrialization and
Reaganomics
 Income inequality
 Wealth inequality
 Poverty
wealth
 Black
middle-class workers earned roughly
70 cents for every dollar earned by white
middle-class workers
 However, they possess only $.15 for every
dollar of wealth possessed by white
middle-class workers (see next slide)
 Poor whites possess equal wealth as welloff blacks
 White poverty and black poverty are
usually not the same thing
Median Net Worth, 2007
Wealth differences by race is much greater than differences by income.
wealth
 The
average net worth of collegeeducated whites is $74,922, while the
average net worth of college-educated
blacks is only $17,437
Transformative
Assets, the
Racial Wealth
Gap, and the
American
Dream
Thomas M. Shapiro
The creation of the black
middle class
 For
many black Americans, middle class
status was earned between the mid-1960s
and early 1980s (as measured by income,
occupation, and education, but not by
assets).
Why is racial inequality
increasing in this new era?

Wealth is necessary to achieve social mobility


These inheritances amount to transformative
assets. This involves the capacity of unearned,
inherited wealth to lift a family economically
and socially beyond their own achievements,
jobs, and earnings would place them.
Wealth has racial and class consequences for:
the homes they buy
 the communities they live in
 the quality of schools their children

Why is racial inequality
increasing in this new era?
 Family
inheritance and continuing
discrimination in really vital areas like
home ownership are reversing gains
earned in schools and on the job and
making racial inequality worse.

It is virtually impossible for people of color to
earn their way to equal wealth through
wages
Why is racial inequality
increasing in this new era?

Because blacks have fewer assets, middle
class status is more precarious than it is for
whites
A
white middle-class family on average could
survive at the poverty line for an entire year;
whereas the average middle-class black family
could survive less than a month.
Closing the racial wealth gap
 Not
enough to close the racial wealth
gap



eliminating job discrimination
improving schools
improving employment opportunities
Present-day institutional racism
 Banks
more likely to offer credit to whites
than nonwhites


Commercial banks turn down black and
Hispanic applicants two to three times more
often than white applicants.
The poorest white applicant has a better
chance of getting his or her mortgage
application approved than the highest
paid black applicant.
Income and wealth inequality
 The
end of industrialization and
Reaganomics
 Income inequality
 Wealth inequality
 Poverty
Slide 19
The Poverty Line
2008-09
Persons in
Family Unit
48 States
and D.C.
Alaska
Hawaii
1
$10,830
$13,530
$12,460
2
3
$14,570
$18,310
$18,210
$22,890
$16,760
$21,060
4
5
6
7
8
Each additional
person add
$22,050
$25,790
$33,270
$37,010
$37,010
$3,740
$27,570
$32,250
$41,610
$46,290
$46,290
$4,680
$25,360
$29,660
$42,560
$42,560
$40,940
$4,300
Slide 20
Note the figure $10,830 in the preceding slide
Could you live on $10,830/yr.?
 How
much do you pay for rent?
 How much do you spend on food?
 How much do you spend on doctors?
 How much do you spend on clothes?
 Do you have a car?
 How much is your tuition and books?
 How much do you spend on going out?
Slide 21
Percentage of Group
Living below Official Poverty Line
U.S. Census Bureau, 2007
Slide 22
Percentage of Children Living
below the Official Poverty Line
by Race and Hispanic Origin, 2006
35
30
25
20
15
10
5
0
White
Black
Hispanic
Asian
In 2010, 9.9% of non-Hispanic whites, 27.4% of blacks,
and 26.6% of Hispanics were poor.
Slide 24
Structural Causes of Poverty
 Capitalism
produces a pool of
unemployed laborers
 With
deindustrialization, mid-level jobs
have all but disappeared, giving us an
hourglass-shaped economy
 One-third
of breadwinners make less than
$10 an hour
 U.S.
devotes a smaller percentage of its
wealth to antipoverty programs than any
other developed country
Slide 25
Black Poverty (see inner-city black
poverty slides)
 Black



ghetto
Concentrated poverty
Everyday establishments scarce
Pandemic unemployment
 Explanations



Spatial mismatch thesis
Residential segregation
Brain drain
Slide 26
Poverty and Affluence
 Black



poverty and affluence
Many blacks live in desperate conditions today
75% of blacks are middle or upper class
Money can lift up many African Americans -- but
not always above the veil of racism
 Native




American poverty and affluence
There is an elite group of tribes successful with
casinos and antipoverty programs
But Native American unemployment is around 50%
Their poverty rate is 3.5 times the national average
“Best way to overcome reservation poverty is to
support tribal sovereignty”
Income and wealth inequality
 The
end of industrialization and
Reaganomics
 Income inequality
 Wealth inequality
 Poverty