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Connecticut’s Rise in Inequality, and What It Means

By Dan Haar

August 30, 2012

Income inequality can be bad or not-so-bad. If it means the richest people are making huge gobs of money while the rest of us are getting ahead nicely, that’s not so bad.

A new report from Connecticut Voices for Children shows that inequality is rising, and not in the good way. From the recession through 2011, high and low earners alike are not doing very well, but — surprise, surprise — those at the top are doing much better than everyone else.

How much better? Since 2006, wages at the 90th percentile in Connecticut — the point where 90 percent of workers make less, and 10 percent make more — rose by 11 percent, adjusted for inflation. That level was $1,915 a week in 2011, based on a 40-hour week.

The median wage, where half earn more and half less, rose by just 2.4 percent, to $811 a week, and the 10th-percentile wage was flat at $361 a week, in 2011 dollars.

Happy Labor Day! The picture is actually worse than that, since the wage data does not include capital gains pulled in at the top, and it does not pay attention to the rising unemployment rate, which — we think — affects low-end workers worse than high-end ones.

Furthermore, it does not account for the fact that, in Connecticut especially, high earners tend to marry each other, so family income is pulling apart even faster.

What does all this mean for income inequality? The report, The State of Working Connecticut 2012: Employment, Jobs and Wages in the Wake of the Great Recession, shows that the wage

differences between the top and the bottom, and between the top and the middle, rose faster here than in other states, between 2007 and 2010.

To repeat, that’s not a bad thing if it means everyone is getting ahead. Ray Dalio, we love you. But we’re not getting ahead. And nationally, the recent numbers were even worse. The 90th percentile wage rose by just 2 percent from 2006 to 2011, and the median and 10th percentile wages actually fell.

The situation is worse still for black and Hispanic wage earners, and the hardship for workers without college is more pronounced in Connecticut than elsewhere.

“The opportunities are just not there,” said Orlando Rodriguez, co-author of the report for Connecticut Voices, which used data crunched by the Washington-based Economic Policy Institute, from the U.S. Census.

Before we get to the question of what to do about it, I asked Rodriguez for the numbers going further back, and he sent a 1979-2011 spreadsheet that paints a broader, and dimmer, picture.

In that long period, the 90th percentile wage in Connecticut rose by 52 percent, adjusted for inflation; the median rose by 28 percent, and the 10th percentile was up by a meager 1.9 percent.

Looking at charts of the ratios between these groups over time makes the picture come clearer.

The charts show that Connecticut’s ratio, especially the difference between the 90th and 10 percentile earners, rises and falls more dramatically than that of the nation. From 1983 until 1995, we were more equal than the nation, by that measure.

But since 1995, we’ve had much less income equality, mostly because the top group pulled away faster in Connecticut than elsewhere.

The charts also show that the ratio between the top and the middle is smaller here than in the nation as a whole, as Connecticut’s median remains healthy.

Generally, good times bring more equality, as lower earners do some catching up, although the picture isn’t that simple.

But a funny thing happened in 2011 — Connecticut’s 90-10 inequality ratio fell sharply. The bad news: It was entirely because the top earners saw a big fall, probably the result of a squeeze in the financial services sector.

What is to be done about all this? The left-leaning Connecticut Voices is pushing for a raise in the minimum wage from $8.35 an hour to at least $10, obviously a controversial measure that opponents say will hurt workers by eroding jobs.

Voices would also like to protect “vital social services from punishing budget cuts.” And the nonprofit group based in New Haven supports boosting worker training and early childhood programs.

None of these measures will move the ball much, against a long-term trend in which work is devalued, and capital and ideas win more and more of the rewards.

Is it a bad thing for the rich to get richer? Of course not. That’s a fake issue.

The problem is when prosperity isn’t being shared. What we need is a combination of measures to allow obscene wealth and support the middle and bottom wage-earners at the same time — and a restoration of respect for labor.

Bill Clinton, come back!