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U.S. Income Inequality Hits a Disturbing New Threshold

An analysis of 17 years of census data shows that even a better education won’t close the gap for women and African-Americans.
Kapstream's Goldman See Limited Signs of Wage Growth

U.S. wage growth remains slow and uneven, with African-Americans and women still at a clear disadvantage while the wealthiest are accumulating more money than ever, a new analysis of census data shows.

Median real wages grew only 0.2 percent over the past year, according to a report released Thursday by the Economic Policy Institute, a progressive think-tank. Wages for African-Americans declined in most wage brackets, while women with graduate degrees made less money than men with only college degrees. 

By contrast, those in the 95th wage percentile saw an average pay hike of 1.5 percent over the past year.

The report had some positive news, however. The strongest wage growth came among workers in the bottom tenth of the distribution, where minimum wage hikes in some states helped average pay climb 3.7 percent. That’s a departure, however, from the overall trend since 2000. Generally, wages have risen fastest for those already paid the most, further exacerbating broad income inequality in the U.S.

The past 17 years have been marked by slower growth for black workers compared with whites in every wage bracket, according to the report. The gender wage gap also remains stark, though among women, the differential between rich and poor was smaller than among men. Women in the 95th percentile made 5.5 times what those in the tenth percentile made, whereas similarly situated rich men made 7 times as much as their poorer brethren.

The wage gap between workers with college degrees and those without them narrowed a bit over the past year, but the “college premium” remains wider than it was in 2000. The EPI said those with a degree now reap a regression-adjusted premium of almost 50 percent. But that premium, EPI contends, isn’t enough to explain the widening U.S. wage inequality. In fact, at the bottom half of the wage distribution for workers with college degrees, wages are lower today than they were in 2007 or 2000.

“We’re looking at nominal wage growth that is still slower than you would expect in a full employment economy, slower than you would expect if you thought there were any sort of inflation pressures from wage growth,” said Elise Gould, senior economist at EPI and author of the report.

Years after the official end of the Great Recession, EPI argues wage growth remains too weak to consider the economy at full employment—or to warrant further interest rate hikes as Federal Reserve Chair Jerome Powell signaled are likely this year.

You do see college wages rising faster than high school wages, but that differential is not nearly large enough to explain rising wage inequality in the economy today,” Gould said. And when it comes to education, she said it’s far from enough to cure inequality.

You can’t educate yourself out of gender or racial wage gaps,” she said.

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