The state-level research series of the Occupational Employment Statistics provides some revealing comparisons, across states, of occupational wages. The map shows the regional patterns with, unsurprisingly, wages generally lower in southern states and in less urbanized settings. The “bar and whisker” graph at right shows the distribution–and range–around the median state for each occupation.
This month’s jobs report was widely celebrated for showing that—after adding 217,000 jobs in May 2014—the United States had finally returned to the December 2007 (pre-recession) level of employment. This is a useful comparative benchmark, underscoring the unusual depth and duration of this downturn: measured against other postwar business cycles (see graphic below), the 2007–9 downturn cost us a bigger share of jobs, and the subsequent recovery took much longer to gain them back.*
Meanwhile, the December 2007 jobs threshold has been rendered meaningless by over six years of economic and demographic change. Since the labor force has grown substantially over the last six-and-a-half years, the current rate of unemployment is still far above the pre-recession benchmark. The first goal, then, should be to return the December 2007 rate of unemployment—and by this measure [see graphic below], we’re still 2 million jobs in the hole.
This measure of the jobs deficit is incomplete, however, because the unemployment rate does not include those who have given up looking for work. If we set our goal at a return to pre-recession unemployment and labor-force participation rates, the jobs deficit swells to over 9.5 million.
But this still sets a low bar. Rates of employment and labor-force participation in December 2007 were not nearly as strong as they had been a decade earlier. If we aim for those “full employment” targets (the unemployment and labor-force participation rates of the late 1990s), we are running a deficit of a couple of million jobs before the recession even starts. From there, the lost jobs and missing workers pile up quickly, reaching—and plateauing at—a jobs deficit of over 11 million. Some recovery.
Needless to say, the book has incurred its share of criticism—some substantive, some silly. But of all the theoretical and methodological issues with Piketty’s sweeping account that reviewers have raised, I think the singular lingering weakness is this: the political and institutional sources of American inequality (and of American exceptionalism) are given short shrift. Piketty devotes surprisingly little attention to the policy shifts that unshackled incomes at the top and destroyed bargaining power at the bottom. “It’s like saying slavery is an inequality of assets between slaves and slaveholders,” as Suresh Naidu put it in Jacobin,“without describing the plantation.”
The graphic below takes a longer view, tracing real (inflation-adjusted) wages in key productive sectors since the 1930s and 1940s. The sectors covered here, like meatpacking or automobiles, are those for which decent wage data can be assembled for this full sweep of over seventy years. Importantly, they are also those sectors that we have historically relied upon for living-wage employment. Into the 1970s, as the uniform growth in real wages suggests, jobs in these industries were a ticket to the middle class. Since the late 1970s, however, wages in these industries have flattened at best—and in some cases fallen off substantially.
This graphic summarizes the key inequality and policy trends (for the U.S.) traced in Thomas Piketty’s Capital in the Twenty-First Century. Scrolling through the inequality metrics suggest the key themes in Piketty’s examination of the U.S. case: the now-familiar “suspension bridge” of income inequality, dampened only by the exceptional economic and political circumstances of the decades surrounding World War II; the growing share of recent income gains going to the very high earners (the 1% or .01%); the stark inequality within labor income (see the top 1% and top 10% wage shares) generated by the emergence of lavishly-compensated “supermanagers”; and a concentration of wealth that fell little over the first half of the twentieth century and has grown steadily since then.
Scrolling through the policy metrics suggests some of the causal forces at work: a precipitous decline in the top inheritance and income tax rates (lifting the ceiling on high incomes); and the collapse of labor standards and bargaining power (lowering the floor for everyone else). I have added here one data series—the trajectory of union density—on which Piketty is curiously silent (his chapter on income inequality uses the minimum wage as a surrogate for bargaining power more generally).
Before Social Security, almost 80 percent of American seniors lived in poverty. As Social Security contributions and payments became established early in the postwar era, poverty among seniors began to fall—and continued to do so under the Great Society, abetted by the passage of Medicare in 1965. Since the program’s growth slowed in the 1980s and 1990s, poverty among seniors has leveled out at about 10 percent.
Cuts to social programs have only widened the gap between poor Americans and everyone else—especially the retreat from AFDC since 1996. By any measure, the TANF program is aweak substitute for the program it displaced. By the mid to late 1970s, AFDC reached about a third of all poor families, and over 80 percent of poor families with children. With the implementation of TANF, this coverage shrank almost immediately (1996-1997) to about half of all poor families and about two-thirds of those with children. By 2010-2011, only 20 percent of all poor families, and just over 27 percent for those with children, were receiving TANF assistance. Between 1992 and 2010 alone, one million more American children slipped below the poverty line. The share of Americans living in severe poverty (below 50 percent of the poverty line) has almost doubled since 1972.
As a rule, social insurance programs (like Social Security pensions) are generous but poorly targeted [see graphic below], while means-tested programs are well-targeted but meager. As a result, American social policy closes most of the poverty gap for elderly families and individuals, for whom social security benefits flow to rich and poor alike. But it accomplishes progressively less for single-parent, two-parent, and childless families—for whom means-tested benefits are both less generous and less universal. The gap is especially acute for non-elderly childless families who—regardless of their income—rarely meet the eligibility threshold for public assistance.
Across the OECD, the net redistributive impact (cash benefits received minus direct taxes paid) of social policy for low income households stands at about 40 percent of market income. But it is barely half that in the United States, making our rate of redistribution one of the lowest in the industrialized world. Much the same pattern holds for other kinds of social spending, including such in-kind benefits as education or public health care. Indeed, in each category of social spending, the United States spends significantly less than its peers [see graphic below]—the only exception being health care, a reflection of unusually high U.S. health costs rather than more generous coverage.
The latest numbers from the OECD—which compare inequality, incomes, and poverty rates across its member countries, before and after the impact of taxes and transfers—present yet another reminder of the United States’ dismal ranking among its peers. They also make a remarkable case for the power of social policy to combat inequality. At the pre-transfer or market rate of poverty, the U.S. poverty rate is pretty close to those in other settings [see graphic below]. But after taxes and transfers—that is, after social policies and the mechanisms for paying for them have kicked in—the U.S. poverty rate leaps ahead of its peers.