Utah not immune from growing global income inequality gap

By Brice Wallace

If you’re not in the top 1 percent of income-earners and you think you’re being left behind, you’re not alone.

And you’re also correct.

A pair of University of Utah professors told the Salt Lake Rotary Club last week that Utah has been experiencing growing income inequality — a swelling of the gap between those with low incomes and high incomes — for quite a while, and that Utah’s situation is similar to that of other places.{mprestriction ids="1,3"}

“We’re not inoculated or immune from the effects of a yawning increase in inequality here,” Norman Waitzman, professor and chair of the Department of Economics at the UofU, told the luncheon crowd.

“The bottom line of many of the things that we want to transmit to you is that a lot of the things that are happening in Utah, in Salt Lake City, in our community, are really mirrored by the national and international trends in inequality,” said Rudi von Arnim, associate professor of economics at the UofU.

That has been the case roughly since the “Reagan/Thatcher Revolution” of the 1980s, he said. Statistics show that the top 1 percent of income-earners accounted for about 22 percent of the country’s income share shortly after World War II. That figure at one point dwindled to as low as 10 percent but has rebounded to above 20 percent today.

“Inequality has increased drastically in recent decades in the U.S., and this phenomenon really is mirrored in other countries … as well as in Utah,” von Arnim said.

A study of all U.S. households showing real income changes over the prior 34 years indicates that in the three decades before 1980, the poorer you were, the stronger your real income grow was. That trend  has reversed “very radically,” he said, noting that since 1980, the poorest households have had the lowest income growth and the highest growth was among those with higher incomes.

“The fact is that the bottom 50 percent, bottom 60 percent, of the income distribution households in the U.S. have not seen any income growth in the last three or four decades — none,” von Arnim said.

Generally speaking, Utah and other states have followed national income inequality trends since the 1920s, “so when inequality goes up in the country, so does it in Utah,” Waitzman said. Any variations likely have resulted from certain demographic and cultural reasons, he said. But while the nation’s inequality gap peaked in the 1920s, Utah has exceeded its peaks of the past century, he added.

The bottom 5 percent of income-earners in Utah saw their real income slip by more than 10 percent from 1990 to 2014. The median Utah household saw no change in real income at all during that period, but the upper 1 percent saw an increase above 75 percent, among the highest rates for that group in the U.S.

As an example, public school teachers nationwide earn 76 percent of what their counterparts with college degrees earn. In Utah, teachers earn 68 percent — eighth-lowest in the nation — and their real salaries have dropped by nearly 6 percent since 2000.

But what to do about shrinking the gap? While rising inequality is not a local phenomenon and Utah is part of national trends, that does not mean nothing can be done locally to address the trends and their effects, the men said.

Von Arnim said the causes for the gap fall into two categories. One involves automation, technology, globalization and innovation — things considered to be “natural” and that cannot be changed. The other involves institutional elements manufactured by society and therefore can be changed, he said. They include a weakening of workers’ ability to bargain for fair wages, the erosion of real minimum wages, deregulation, financialization and concentration (power being accumulated by the nation’s largest corporations).

“All of these [latter] factors are subject to policy and societal choices on these issues,” he said.

Waitzman noted that the nation’s growing gap in income inequality can result in lower intergenerational upward mobility, which can harm the nation’s psyche and fundamental values of people believing in the “American Dream.”

“This is certainly an issue, I think, that many people are recognizing that families are grappling with around the country,” he said, “so the erosion there and the prospects for intergenerational mobility is a great concern.”