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Class Inequalities: Impact on Our Lives

“The Inequality Express” by Barry Bluestone:

• Inequality in the United States is on the rise

-by the late 1980s, family income inequality was higher than at the end of World War II

• Source of economic inequality:

-Changes in the distribution of wages and salaries clearly a primary factor in rising inequality.

-Demographic trends, such as the rise in the number of dual income couples and single-income parent families.

-Racial and gender discrimination also a basis of large earnings differences.

• Differences in education and skill have had a great impact on wages:

-In 1963, mean annual earnings of those with at least four years of college made more than twice (2.11) than those who had not completed high school.

-In 1987, the ration was almost three to one (2.91).

-The trend continues to grow today.

-3 out of 4 U.S. workers have not completed college

-More than half of all U.S. workers have no more than a high school diploma.

• U.S. vs. the World:

-All nations now face nearly identical pressures from technological change and global competition.

-Not all are experiencing the same degree of growing income inequality.

-Countries with stronger unions, national wage solidarity agreements, generous social welfare programs, and more vigorously pursued industrial and trade policies have greater wage equality than countries pursuing pure free-market strategies

• Possible Remedies:

-Legal restriction of immigration is a possible way of reducing wage inequality

-Canada has a point system designed to produce a more skilled immigrant labor pool. Legal immigrants in Canada have 1.3 more years of education than native Canadians.

-Educating and training the public

-Education reduces the surplus of low skilled workers, and can improve wages.

-Very costly. U.S. would need to spend $284 billion to restore mail high school dropouts to the 1979 income level.

-Tax and transfer programs are the centerpiece for adjusting incomes

-On paper, a progressive set of tax rates with generous transfer assistance can radically redistribute incomes.

-When put in action, don’t produce desirable results.

-The possible remedies can contribute to reducing inequality, but they are no match for the forces driving the labor market.

“Savage Inequalities” by Jonathan. Kozol:

Most of the city’s employed white residents migrated to more prosperous suburban communities.

Population shrunk by 12% from 1960-1990. Population change resulted in lack of funds and an increased tax burden.

By 1990, East St. Louis was 98% African American.

A crumbling economy and a decreasing population created an almost 30% unemployment rate. Despite its bleak situation, East St. Louis has shown tremendous will and resolve. Many local residents are now actively involved in neighborhood revitalization.

Miscellaneous Facts:

August 2000 Study

• CEO pay jumped 535% in the 1990s

• The pay gap between CEOs and the President of the United States has grown from 2:1 to 62:1 since 1960, reports the Institute for Policy Studies and United for a Fair Economy in Executive Excess 2000.

• If average pay for production workers had grown at the same rate as it has for CEOs during this boom, instead of barely outpacing inflation, their 1999 annual earnings would have been $114,035 instead of $23,753. If the minimum wage had risen as fast as CEO pay, it would now be $24.13 an hour, instead of $5.15.

• While the CEO pay explosion disturbs most Americans, the issue is largely absent from the Presidential campaign. “Particularly with Richard Cheney on the Republican ticket, we shouldn’t be surprised that the major candidates are ignoring the problem of excessive CEO pay,” says IPS Fellow Sarah Anderson. Cheney received compensation worth an estimated $38 million, including future stock options presenting a conflict of interest, when he retired recently as chairman of oil services firm Halliburton, the nation’s fifth largest military contractor

• Recent studies demonstrate that excessive CEO pay instead lowers employee morale, undermines the corporate bottom line, and exerts a burden on taxpayers.

• The fortune of Michael Eisner, CEO of Disney, sums up this recent history pointedly. Eisner led all CEOs in 1998, with a total compensation package of $576 million. Eisner was also the highest paid executive 10 years earlier, when his pay package topped $40 million. Consider what happened to average worker pay over this period: it inched up from $22,952 a year in 1990 to $29,267 eight years later.1

• In 1999, Microsoft CEO Bill Gates, Berkshire Hathaway CEO Warren Buffett, and Microsoft alumnus Paul Allen had combined wealth of $156 billion.2 This topped the combined GNPs of the poorest 43 nations on earth.3 By 1999, the world’s 475 billionaires had combined wealth of over $1.7 trillion, well above the combined incomes of the world’s poorest half of humanity.

• Since blue-collar workers received, on average, only 2.7 percent more in 1998 than the year before, the wage gap has scaled unprecedented heights. The average executive now makes 419 times the average blue collar worker, a gap which outrages growing legions of Americans

• Charles Lazarus was the third-highest-paid CEO in 1992 with a total pay package of over $64 million made primarily off the backs of workers in China, where it is not uncommon to work 20-hour shifts for less than 20 cents an hour.

• Eastman Kodak led the lay-off pack with announcements of over 20,100 workers in 1997. They have made additional lay-off announcements in 1998. CEO George Fisher didn’t get a bonus in 1997, but he exercised stock option gains worth $8.7 million, increasing his total 1997 compensation by 96%. Fisher’s total compensation of $10.7 million is equal to the pay of 487 average US workers

• The 1996 Executive Excess survey found that top managers at the leading 30 downsizers saw an average 67.3% pay increase

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