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The Untold Story of the Income Gap

April 17, 2017

So much of the talk lately is about the income gap – that incomes for the rich are rising much faster than for the poor. Well, wages have risen fast for the top 1 percent of earners for decades. It’s the haves vs. the have nots playing out in chart form:

However, a new report by the Economic Policy Institute identified a potential tipping point. It found that wages grew faster for the poor in 2016 than they did for the rich, as a percentage of income.

Improving economic conditions led to a wage increase for the poorest Americans, white workers in particular. In fact, the poorest 10 percent of white workers saw a 5.1 percent raise. That is more than twice as fast as the richest 20 percent of white workers in the U.S.

The Federal Reserve Bank of Atlanta also found that non-white workers’ incomes are rising faster than for white workers, which reverses a post-recession trend. Perhaps more surprising than reversing decades-long income inequality trends is that wages for high school graduates are growing as fast as those for college graduates. It’s the first time that has happened since 1998.

I think two reasons are driving this situation.

First, unemployment is down. More people are working and thus earning more than not working (or not working enough).

The other reason is minimum wage increases in states around the country. For many low-wage workers, they received instant, and perhaps large, raises.

Can this maintain over time? I’m not sure. But I don’t hear about it in the news, which means the media must not care too much about a story that doesn’t support a particular narrative.

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