inequality « Washington Policy Watch

October 7, 2011 • 12:08 pm 0

IMF: Income inequality is bad for economic growth

As the Occupy Wall Street protests swell in size and people pay closer attention to the gap between the wealthiest Americans and everyone else, one question is why this divide even matters. One way to look at income inequality, after all, is that it’s no big deal. If a country is growing at a healthy clip and everyone is steadily getting richer, then it’s hardly an outrage that a few titans at the very top are doing freakishly well, right?

But a recent study from the International Monetary Fund suggests that this conventional view is misguided. Excessive income inequality, the authors find, can actually inflict a lot of harm on a country’s long-term economic prospects.

In the IMF’s Finance & Development magazine, the authors, Andrew Berg and Jonathan Ostry, summarize their recent research (see also Josh Harkinson’s piece for Mother Jones). It’s relatively common, the authors note, for countries to experience small growth spurts here and there. But sustained, long-term economic growth, of the sort that the United States and Britain enjoyed after World War II, is rare. Plenty of poorer countries — say, Brazil or Jordan or Cameroon — don’t ever seem to be able to maintain that momentum.

For sustained growth to occur, Berg and Ostry found, the most important factors are a relatively equal income distribution and trade openness. (See the chart on the right.) Having healthy, democratic political institutions matters quite a bit, too. Conversely, having a lot of foreign investment or keeping debt under control, among other factors, aren’t nearly as crucial. In the end, the most important factor is inequality: “a 10 percentile decrease in inequality… increases the expected length of a growth spell by 50 percent.”

Why would inequality be so crushing for a country’s economy? For one, the authors note that inequality tends to be associated with financial crises. When inequality runs rampant, people on the lower end tend to borrow more to keep up, which increases the risk of a major crisis. (Earlier IMF research suggested that this may have contributed to the 1929 and 2008 financial crashes in the United States.)

Forging a more perfect, just union

From the Everett Herald:

John Burbank, Executive Director

One hundred fifty years ago this week South Carolina troops fired on Fort Sumter, beginning the Civil War.

The seeds of war were planted in 1619, when the first Africans were forcefully kidnapped and brought to Virginia. Their status at that time was akin to indentured servants brought over from England. By 1700 they had become slaves for life and “were defined as chattel property, meaning that they had no more rights before the law than any other piece of property, such as a cow or even a plow.” (Virginia Slave Law Summary and Record.)

The United States Constitution counted slaves as three-fifths of a whole person. Congress passed the fugitive slave law, forcing runaway slaves to be returned to their owners. Ten of our first 12 U.S. presidents were slave-holders — the father of our country, George Washington, owned more than 250 slaves.

There is nothing chivalrous or idyllic about slavery. It was not a “peculiar institution” as it is often referred to. It was despotic, dehumanizing and evil. White men who owned slaves determined their work, their sleeping quarters, their food, their clothes. It was illegal for slaves to learn to read. Slave-owners had the right to punish, whip, rape and kill their slaves. They could sell them off, breaking up families, mothers from daughters, fathers from sons. They even sold off their own sons and daughters, the offspring of consensual couplings or rape of slave women. Read the rest of this entry »

Filed under: EOI, civil war, democracy, inequality, middle class, slavery

April 12, 2011 • 12:11 pm 5

Equal Pay Day highlights earnings gap for women, need for paid sick days

Today is Equal Pay Day, which each year highlights the continuing disparity between men’s and women’s earnings. This disparity, commonly known as the ‘wage gap‘, shows just how far we still have to go to achieve gender equity.

Despite making modest gains in hourly earnings, women earn less than men in every sector of the economy, and at every age. From 1990 to 2009, Washington women’s average monthly earnings compared to men’s actually declined from 68% to 63%. In 2009, Washington women on average made $1,815 per month less than men.

As Ellen Bravo points out in a recent article, some argue that the wage gap exists because women – who bear the primary responsibility for providing care to children and older parents – trade income for flexibility. But there’s a flaw in this argument: typically, the lowest paying jobs have the least flexibility – and no paid sick days to cover illnesses or emergencies.

Forward progress for women in the workforce has largely stalled over the past two decades because workplace standards remain mired in outdated assumptions that most workers are men and most families have a full-time caregiver at home. Among Washington’s private sector workforce in 2009, just 41% of firms offered paid sick leave to full time employees, and just 14% offered the benefit to part-time employees.

A critical piece of the pay equity puzzle includes employer recognition of changing family structures. Now more than ever, families rely on two incomes to get by – and women’s earnings are critical to family economic security. But employer practices and benefits often to don’t recognize these changes – and penalize female employees for taking time away from work for maternity leave, to care for sick children, or provide care for an elderly relative.

New legislation that enforces modern workplace standards, protects family care giving roles, and supports early learning and care is needed for women to make the next leap toward gender equality. Without reliable access to paid family leave, paid sick days, and affordable, quality childcare and preschool, career opportunities and earning potential will continue to be limited for the majority of women.

Our children, families, businesses, and communities all pay the price for our failure to step up to the public policy needs of today’s working women.

Filed under: paid sick days, state economy, work and family, equal pay, inequality, Wage, wage gap

April 11, 2011 • 10:05 am 0

Equal Pay Day: Washington women still playing catch-up to men

From the Public News Service:

What men earn in a five-day work week takes women, on average, seven days to earn. This week, Tuesday is “Equal Pay Day,” a date marked every year by workers’ and women’s rights groups as the point at which a woman’s pay “catches up” to a man’s pay from the previous year. In Washington, both sexes earn more per hour than workers do in other states, but the gender gap in their paychecks still exists, and it’s about $5 less per hour for women.

Erin Bennett, with the 9to5, National Association of Working Women, sees this as proof that the 1963 Equal Pay Act has not been taken seriously.

“Women have to work essentially from Jan. 1, 2010, until April 12, 2011, to make the equivalent of what men made working from Jan. 1, 2010, to Dec. 31, 2010.”

Bennett says the pay gap is even larger for women of color: African-American women earn on average 71 cents and Hispanic women 56 cents, for every dollar earned by a white man.

Some believe the pay gap exists not because of widespread discrimination, but as the result of women’s individual career choices and decisions to take time off to raise children.

A new report from the Economic Opportunity Institute (EOI) says Washington women working full-time earn 75 percent of what men earn, and it blames much of the disparity on workplace policies that put women at a disadvantage when juggling jobs and family responsibilities. Bennett says that’s only part of the problem.

Read the full story

“Since the Equal Pay Act passed, the pay gap has only closed by half a cent per year. If it keeps closing at the same rate, we actually won’t reach equal pay for 45 more years – until 2056.”

The EOI report, “The State of Working Washington,” also notes that, while women make less, unemployment and underemployment have hit men harder in the recession. From 2007 to 2009, Washington’s unemployment rate for men jumped from 4.7 percent to 10.3 percent, while for women, it rose to 8 percent.

Read the full story »

Filed under: state economy, equal pay, inequality, wage gap, women

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IMF: Income inequality is bad for economic growth

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Equal Pay Day highlights earnings gap for women, need for paid sick days

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