FRBSF Economic
Letter
2006-33-34; December 1, 2006
Economic Inequality in the United States
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This Economic Letter is adapted from
the 2006-2007 Economics of Governance Lecture delivered
by Janet L. Yellen, president and CEO of the Federal
Reserve Bank of San Francisco, at the Center for
the Study of Democracy, University of California,
Irvine, on November 6, 2006.
My topic today is the performance of the U.S. economy,
with a focus on how trends for the economy as a whole
have been playing out for our nation's individuals
and families. One area I'd like to examine in particular
is how the income that has been generated by our economy
over the past three decades or so has been distributed
among the various income groups, from the top to the
bottom.
Questions of income inequality, of course, are not
part of the Federal Reserve's dual mandate from Congress,
which is to foster price stability and to promote maximum
sustainable employment. Nonetheless, this has been
an interest of mine for a long time, and not only as
an academic. In addition to my years as an economics
professor at U.C. Berkeley, I've also had several stints
as a macro policymaker, first on the Federal Reserve
Board in Washington, D.C., then on President Clinton's
Council of Economic Advisers, and now at the Federal
Reserve Bank of San Francisco. Much of my interest
in macro policy has been founded on the belief that
it can and should improve the lives of the broad range
of our nation's people. I think of this as happening
through two channels. First, policies that reduce the
frequency and size of the fluctuations in business
cycles can spare people the painful disruptions that
occur during recessions, or, in the worst cases, tragic
events like the Great Depression of the 1930s. Second,
policies that succeed in enhancing the long-run growth
of productivity should help lift the average standard
of living over time.
By many measures, these two channels have been operating
extremely well in our economy for some time. In terms
of the business cycle, for almost two decades we have
been enjoying an era that many economists call the "Great
Moderation"; in other words, recessions have been
less frequent, and the swings have been less severe,
while, at the same time, inflation has come down to
quite moderate levels and itself has been less volatile.
Productivity trends also have been very favorable,
probably in no small part because of the impact of
technological advancements. Growth in labor productivity
has been quite rapid for over ten years now, following
more than a quarter century of stagnation that began
in the early 1970s.
Given these two developments—more macro stability
and more rapid labor productivity growth—it is
tempting to conclude that most Americans are feeling "better
off." But a glance at the newspapers suggests
that this is not necessarily the case. Indeed, poll
after poll shows that many Americans feel dissatisfied
with the long-term direction of the economy and are
worried about the future. Recent polls by the Pew Charitable
Trust, the New York Times and CBS News, and
various labor organizations indicate that growing shares
of respondents feel that they and their children will
experience a diminished quality of life in coming years,
and that, even today, working conditions are marked
by more insecurity and stress than they were a generation
ago (see, e.g., Greenhouse 2006).
Looking beyond the headline numbers on the macro
economy provides some clues to the source of this discomfort.
In particular, over the past three decades, much of
the gain from excellent macroeconomic performance has
gone to just a small segment of the population—those
already in the upper part of the distribution. As a
result, inequality has grown. This inequality, coupled
with increased turbulence in family incomes associated
with job displacement and restructuring, sheds substantial
light on the sources of the disappointment and concern
that show up in the opinion polls.
Today I'd like to examine these trends in a bit
more detail. I will start with a more thorough review
of the facts relating to economic inequality and an
assessment of some of the leading explanations that
have been advanced. Then I will broaden my perspective
to consider other sources of unease, namely, job displacement
and income volatility. Finally, I will turn to some
policy considerations.
Productivity and real
wages
A natural place to begin is by looking at average
real compensation, that is, average wages plus benefits
for an hour of work adjusted for inflation. In the
U.S., the growth in average real compensation has roughly
tracked growth in labor productivity, which measures
the value of output per hour of work adjusted for inflation.
When U.S. labor productivity growth slowed sharply
and unexpectedly in the early 1970s and then stayed
sluggish for
the next 25 years, growth in average real compensation
also was sluggish. Then, in the mid-1990s, labor productivity
growth surprised us again, only this time, thankfully,
on the upside: it suddenly took a big jump up—to
over 3% at an annual rate—and it has stayed in
that vicinity ever since. As I mentioned, this development
probably stemmed mainly from technological innovations
and the huge investments businesses made to harness
them for production. How has this affected average
real compensation growth? It has jumped, too, also
hitting a 3% rate.
From this perspective, then, it would seem that
things are looking pretty good. However, the public
mood does not seem consistent with this view. To see
why, we need to dig a little deeper. When we look at
data on the distribution of real wages, which constitute
the bulk of compensation, we find striking evidence
of increasing inequality. For example, economists Dew-Becker
and Gordon (2005) report that, from 1997 to 2001, nearly
50% of productivity gains went to the top 10% of the
distribution. Importantly, they find roughly the same
pattern going back more than 30 years.
Wage inequality
 As
Figure 1 shows, from 1973 to 2005, real hourly wages
of those in the 90th percentile—where most people
have college or advanced degrees—rose by 30%
or more. As I will discuss later, among this top 10%,
the growth was heavily concentrated at the very tip
of the top, that is, the top 1% (Piketty and Saez 2006).
This includes the people who earn the very highest
salaries in the U.S. economy, like sports and entertainment
stars, investment bankers and venture capitalists,
corporate attorneys, and CEOs. In contrast, at the
50th percentile and below—where many people have
at most a high school diploma—real wages rose
by only 5% to 10%.
What I've described so far is the big picture for
wage inequality—the major change over three decades.
However, an interesting twist on the story has occurred
during the last decade, when rapid productivity growth
raised the real wages of workers throughout the distribution
for the first time since the 1960s. During this period,
real wages of the lowest earners—the 10th percentile—actually
rose somewhat faster than those in the middle of the
distribution. The consequence was that wage inequality
among those in the bottom half of the distribution,
which had been widening throughout the 1980s, diminished
during the 1990s. At the same time, real wages at the
upper end continued to soar.
What explains the rising
economic inequality?
 Although
there are a variety of ways to explain trends in wage
inequality, perhaps no cut at the data has been more
revealing than the differences in real wages by education.
As Figure 2 shows, since the early 1980s, the wage
gap between college graduates and those with a high
school education or less has widened dramatically;
the gap between high school graduates and non-graduates
also has widened, but less so. Thus it appears that
the demand for college educated workers has outstripped
the supply. While rising returns to education at the
upper end of the distribution led to a pickup in college
enrollment, the increase in supply has not been sufficient
to reduce the wage gap between college and high school
educated workers.
It's important to recognize, however, that shifts
in the return to education and the educational attainment
of the workforce cannot fully explain the evolution
of inequality over the last 30 years because, even
within groups with the same level of education, the
gap between high and low earners has widened, too.
Indeed, the more advanced the degree, the wider the
gap becomes. A satisfactory theory must therefore explain
not only why the demand for college educated workers
has risen but also why "residual" inequality
has increased, that is, the part that is unexplained
by education and other observable factors.
A primary explanation has focused on the impact
of technology. Over the past three decades, many sectors
of the economy have undergone fundamental change as
a result of technological advancement, most notably
the enormous investments in computers and related technologies.
These technologies have changed what workers need to
know to do their work, and, indeed, they have changed
the nature of the work itself. As a result, there is
a greater demand for, and a greater payoff to, workers
who have the conceptual and organizational skills to
use these technologies most effectively. The necessary
skills are more prevalent among college educated workers,
so they are in greater demand. However, even among
workers with equal educational attainment, skills differ.
For example, consider two college graduates with
liberal arts degrees: the one who has the skills to
use computer power to collect, analyze, and synthesize
data may have a distinct edge in the labor market over
the other who lacks those skills. Similarly, a machinist
with a high school diploma who can use computers effectively
will tend to earn more than a coworker who is a technophobe.
This explanation is summed up in the literature
by the term "skill-biased technological change." It
explains the increased demand for and rising wages
of highly educated workers and also rising "residual" inequality,
because skill differences exist not only across but
also within educational groupings. These skill differences
are observed by employers and rewarded in the marketplace,
but unobservable to researchers.
A related factor accounting for rising inequality
is the increasing globalization of labor markets. The
most basic way in which globalization might affect
inequality is through trade, which has raised substantially
both imports and exports as a share of GDP. Since the
U.S. tends to export goods that use skilled labor intensively
and to import goods that use less-skilled labor intensively,
increased trade has, on balance, raised the demand
for skilled labor and reduced the demand for less-skilled
workers in this country. In the 1980s, the impact of
globalization was especially pronounced for previously
well-paid manufacturing jobs available to U.S. workers
with a high school degree or less. The result has been
job losses and excess supply of less-skilled workers,
a situation that has been intensified by an influx
of immigrants with less than a high school education.
Certainly, globalization has been a factor in the
downsizing of several industries that employ less-skilled
workers—apparel is a good example. And it may
account for part of the increase in inequality over
the last 30 years. But it surely can't be the whole
story because, for much of this time, the shift in
employment toward an increasingly skilled workforce
has occurred across a wide range of industries, whether
they were affected by global trade or not. The logical
conclusion is that skill-biased technological change
has been a dominant force across the industrial spectrum.
In recent years, globalization and skill-biased
technological change may have been working in combination
to particularly depress the wage gains of those in
the middle of the U.S. wage distribution, accounting
for the twist in the trend that I mentioned earlier.
The explanation goes like this. The surge in the use
of new technologies that began in the mid-1990s led
to major changes in the way business was conducted
and organized within the U.S. and globally. Technological
change and globalization, especially outsourcing, complemented
the skills of highly able workers performing non-routine
work requiring problem-solving skills. This explains
the continued rapid increase in real wages at the top
of the distribution. In the middle of the distribution,
however, technology and globalization had the opposite
effect—substituting for workers performing routine
or repetitive tasks and depressing their wages. At
the bottom of the distribution, these developments
have had little impact during the last decade. By that
time, many low-wage jobs that could be eliminated by
technology had already vanished. Most of the remaining
low-wage jobs involve manual and service work that
cannot easily be automated. This may explain why, as
I said, wages in the middle not only rose far more
slowly than those at the top, they also rose more slowly
than those at the bottom of the distribution during
the 1990s.
Let me elaborate with an example from the technology
side. Take the accounting profession. Computers and
telecommunications technologies have increased wages
for accountants, who tend to be at the top end of the
distribution. In contrast, in the middle of the distribution
are workers like bookkeepers, who are being replaced
by technology. At the lower end, the labor market has
already largely adjusted to the impact of skill-biased
technological change. Therefore, the wages of those
workers, who perform manual tasks in sectors like business
services—janitorial work is an example—are
now largely untouched by computers (see, e.g., Autor
et al. 2006 and Autor et al. 2003).
Globalization in combination with advances in technology,
especially communications technology, leads to similar
patterns. At the upper end, it has boosted demand for
those who have the skills to manage large, complex,
global operations. In contrast, an increasing share
of domestic jobs in the middle of the wage spectrum
has experienced lower demand because companies can
now look all over the world for workers able to perform
computer programming tasks, communications tasks, and
similar jobs—even medical services. At the same
time, such outsourcing is far less feasible for manual
jobs and for service jobs that require face-to-face
interactions and lie at the low end of the wage distribution.
These changes in technology and growing globalization
go a long way towards explaining the inequality trends
I have described. And there certainly are other factors
that have also likely played a role. For example, the
fall in the real value of the minimum wage appears
to have especially depressed the wages of less-skilled
women, while declines in unionization particularly
impacted the wages of less-skilled men. However, none
of these factors provides a complete and compelling
explanation for the rapid growth of real wages at the
very top of the distribution, the top 1%, which, according
to IRS data, doubled between 1972 and 2001.
The market forces of changing technology and rising
globalization, broadly understood, may matter to some
degree for this group. For example, these forces have
substantially increased the size of the markets that
American companies serve. This has, in turn, increased
the impact of individuals who are at the very top end
of the talent and skill distributions—and who
tend to be in very short supply. These individuals
include so-called superstars, such as top entertainers
and athletes, highly successful investment bankers
and venture capitalists, and perhaps CEOs, although
the latter point is hotly debated. For example, people
had a high demand to see Michael Jordan perform—far
higher than the demand for even a large number of average
NBA players—and technology enabled his performances
to be broadcast to a very large worldwide audience
at relatively low cost. It's not surprising that he,
and other superstars, could earn very large incomes
(Rosen 1981).
The superstar argument is less clear-cut with CEO
salaries, in part because a CEO's contribution to the
bottom line of a corporation is difficult to measure.
Some argue that CEO compensation has been driven up
by market forces, like the large increase in the size
of many American companies, which increases the potential
benefit of hiring the right CEO from the limited pool
of candidates (Gabaix and Landier 2006).
Another possible explanation is the so-called "tournament" model,
in which the CEO's direct contribution to the bottom
line is not so much of an issue. This model suggests
that large pay differentials for those at the top of
an organization function as incentives for lower-ranked
executives to compete for those positions, in other
words, to work harder in order to win the top spots
themselves one day. The resulting increase in effort
generates benefits for the company that go well beyond
the direct contribution made by the CEO (Lazear and
Rosen 1981).
While such competitive factors may matter, I cannot
ignore the concerns that have been raised of late regarding
corporate standards for executive pay-setting. Some
observers have argued that corporate boards are increasingly
beholden to the CEOs whose salaries they determine;
as a result, CEO salaries may be inadequately monitored
and sometimes set higher than market conditions or
company performance merits. Critics of rising executive
compensation also have pointed to inappropriate reliance
on compensation schemes that hide payments from shareholders
and the market—for example, the backdating of
stock options for top executives, which increases executive
payouts without properly reflecting the resulting costs
in corporate balance sheets.
The hidden nature of these payouts may reflect an
imbalance in the setting of executive pay relative
to shareholder returns and worker pay more generally.
Issues like these quite naturally raise concerns for
the public and contribute to feelings of dissatisfaction.
Job displacement and
income instability
Another contributor to feelings of discontent is
the perception that job stability has declined. Globalization
and technology appear to have played roles in these
trends as well, since they represent changing market
conditions that are causing dislocations in previous
patterns of labor demand.
It's important to note first that our economy is
always subject to large amounts of job turnover. Indeed,
this is one hallmark of a dynamic, flexible economy,
and it is not necessarily a bad thing on net. Data
on worker flows—movements into and out of jobs—indicate
that about 1 out of 3 job matches are dissolved each
year, with a comparable rate of worker matching to
new jobs (see Davis, Faberman, and Haltiwanger 2006).
Over half of this job churning is voluntary, reflecting
worker desires to find a job with higher wages, better
working conditions, or a different location. Moreover,
the degree of job creation and destruction has declined
somewhat over the past 15 years, creating a picture
of a more stable labor market.
However, involuntary displacement from permanent
jobs, due to layoffs or downsizing, is important and
has been on the rise over the past two decades. In
particular, rates of worker displacement are up relative
to measures of overall labor market conditions, such
as the unemployment rate. For example, in the 2001
recession, which was relatively short and shallow,
there was about as much worker displacement as in the
early 1980s, when the economy went through the biggest
recession in post-war history.
In addition, the distribution of displacement has
shifted towards the highly educated: workers holding
a college degree saw nearly a 50% increase in their
displacement rates between the early 1980s recession
and the most recent one in 2001, while workers with
a high school degree or less actually saw a slight
decline in displacement rates. Of course, job displacement
still remains a more significant issue for low-paid
workers, but the instability that they have always
faced has increasingly spread to higher-income groups.
Involuntary job loss frequently inflicts dire consequences,
which have grown more severe over time. Involuntary
job losers typically are unemployed for at least four
months, about 70% longer than those who enter unemployment
voluntarily. As such, the rising share of permanent
job losers among the overall unemployed has helped
keep the typical length of an unemployment spell stubbornly
high over the past few decades (Valletta 2005). The
picture looks even gloomier when you recognize that
some job losers withdraw from the labor force and are
no longer counted as unemployed, so their observed
unemployment spells understate the severity of the
jobless experience. Put these factors together and
it's clear that periods without earnings can be quite
lengthy and costly for job losers. Moreover, when displaced
workers do find new jobs, they're taking a pay cut
of about 17% on average. The size of this wage loss
in the early 2000s was the highest in at least 20 years.
Job displacement also has adverse consequences for
health insurance coverage. Gruber and Madrian (1997)
show that job loss substantially reduces access to
health insurance over extended time periods, an effect
only partially offset by federal COBRA guidelines,
which require employers to make continued coverage
available—at its full cost—to
separated employees. The connection between displacement
and the loss of insurance coverage reinforces a more
general trend towards declining coverage through employment-based
health insurance programs. For example, between 2000
and 2005, health coverage through employer-based programs
fell about 4% nationwide, representing a loss of health
insurance for several million Americans that was only
partially offset by increased coverage through government-provided
insurance.
Given the increase in job displacement and earnings
losses that I described above, it is not surprising
that yearly fluctuations in individual earnings and
family incomes have increased sharply since the 1970s
(Hacker 2006). Indeed, between the 1970s and the early
2000s, the gaps between the highs and lows in a typical
family's yearly income rose substantially: in the 1970s,
a typical family might have seen its income vary from
a high of $60,000 to a low of $30,000 over the decade,
while in the more recent decade a family seeing that
same high would tend to see a low of about $15,000.
Among families seeing declines in annual income, the
size of the typical loss has increased: for example,
the chances that an American family will see at least
a 50% drop in its yearly income has more than doubled
since the early 1970s, rising to about 1 in 6 families
in recent years.
The increased risk associated with these income
fluctuations is likely to reduce perceived well-being
substantially, even if family incomes on average are
growing over time. As with the risk of job loss, these
income risks are most severe for less-educated Americans.
However, during the 1990s, income instability rose
relatively more for families with high educational
achievement, consistent with the spread of involuntary
job loss to highly educated individuals.
Policy options
My focus thus far has been on the problems facing
Americans in the labor market and not on potential
solutions. It is natural to ask, then, whether anything
can be done to alter these disquieting trends. Since
technology and globalization have been identified with
growing inequality, it might seem natural to look at
these areas for possible solutions. While I sometimes
feel like smashing my own computer, I wouldn't recommend
this as a national policy! However, it's not uncommon
to hear proposals to put up barriers to trade as a
way to mitigate economic disruption and inequality.
I don't think that is the way to go. By providing for
specialization in production across countries, trade
enhances the size of the economic "pie" here
and abroad, and in doing so, enhances overall economic
welfare. I think we should look to other policy tools
to address inequality, and I will attempt to provide
a useful overview of some key considerations.
I will begin with education. There can be little
doubt that programs that support investment in education,
broadly conceived, are worthwhile. Increasing skill
has been a significant source of productivity growth.
Moreover, since the gap between the earnings of workers
with more and less skill in part represents the return
to education, a widening of that gap clearly signals
the need for such investment to increase the supply
of higher-skilled workers.
But investment in education takes resources, which
complicates the debate: the resources are limited and
to a large degree should be directed to where they
will pay the highest return. At the college level,
one possibility is just to "let the market work." If
college pays off, more young people will enroll. Indeed,
the rising returns to education at the upper end of
the earnings distribution did precede an increase in
college attendance through the mid-1990s, suggesting
that market forces may have worked as expected. Since
then, however, despite further growth in the returns
to college and advanced degrees, college attendance
has flattened out. For example, enrollment rates among
recent high school graduates hovered around 65% between
1996 and 2004, after increasing noticeably in the preceding
decade (NCES 2005).
Does this imply that the highest priority for public
funding for education should be the college level?
Not necessarily. There certainly is a lot of public
discussion by educators and politicians about problems
with the quality of K-12 education in the U.S., and
international comparisons show that U.S. students rank
relatively low on standardized tests in science and
math, the very kinds of skills that earn higher rewards.
But there is yet another contender for the scarce
public funding for education. For example, Carneiro
and Heckman (2003) have argued that these funds should
be targeted at even younger children. Family background
factors are critically important in student achievement,
and recent evidence suggests that the cognitive and
social skills associated with college attendance are
developed very early in life. Moreover, skill acquisition
is a cumulative process that works most effectively
when a solid foundation has been provided in early
childhood. As such, programs to support early childhood
development, such as preschool programs for disadvantaged
children, not only appear to have substantial payoffs
early but also are likely to have lifelong payoffs.
But what about struggling adults, especially those
who find that their skills have become outmoded due
to technological change or globalization? Should the
highest priority for public funding of education be
the expansion of federally subsidized retraining programs,
such as those associated with the Job Training Partnership
Act, the Comprehensive Employment and Training Act,
and the Job Corps program for disadvantaged youth?
Krueger (2003), among others, views the outcomes of
these programs as evidence that training investments
often have high returns, especially for the economically
disadvantaged, who cannot finance educational and training
investments on their own.
Proponents of this view argue that these programs,
which have been sharply curtailed over the past few
decades, should be revived. In contrast, Heckman and
others, looking at the same evidence, note the high
cost of these programs relative to early childhood
interventions and K-12 education, implying that retraining
is financially unsound on a large scale. At this point,
then, the evidence is unclear regarding the exact conditions
under which adult education and retraining programs
are cost-effective. However, it seems reasonable to
consider providing workers buffeted by powerful economic
forces a fair shot at retooling and finding new careers.
Beyond education and training, the U.S. has long
deployed an array of policy tools to combat inequality
and diminish economic insecurity. One example is the
earned income tax credit, which supplements the earnings
of low-income workers. Unemployment and disability
insurance cushion family income in the face of job
loss and illness, while Social Security shelters many
elderly households from poverty. Indeed, inequality
in consumption among U.S. families is notably lower
than inequality in pre-tax income due to these programs
and others that involve the direct provision of services
such as healthcare, housing, childcare, and food stamps
to families in need. The real question is whether government
should and can do more.
To assess the value of and potential need for additional
government intervention, it is instructive to draw
some comparisons between the U.S. and other countries.
In regard to inequality, over the past few decades
it has risen more in the U.S. than in most other advanced
industrial countries in the Organization for Economic
Cooperation and Development (OECD). Indeed, by most
measures, the U.S. ranks near the top (some might say
the bottom) in terms of household income inequality.
The inequality gap in the United States is associated
with higher levels of overall and child poverty relative
to a majority of OECD countries.
This high and growing level of relative inequality
in the U.S. reflects, in part, differences in the "social
safety net." Among the 30 OECD countries, the
U.S. ranks above only Mexico, Korea, and Ireland in
gross public social expenditures as a share of GDP
spending, and it does the least to target government
taxes and transfers towards moving families out of
poverty. Not surprisingly, outcomes such as infant
mortality and life expectancy are worse in the U.S.
than in most advanced industrial countries. As for
workplace protections, unemployment insurance in the
U.S. replaces a smaller share of income and offers
benefits of shorter duration, while the minimum wage
is quite low relative to average wages in the U.S.
Moreover, U.S. firms face far fewer restrictions in
their ability to fire or lay off workers than do firms
in most other OECD countries.
Other countries' efforts to mitigate inequality
and provide a safety net may come at a price, however,
since these efforts may hinder job growth and intensify
unemployment, especially for young and less-skilled
workers. Indeed, over the past two decades, unemployment
rates generally have been higher in other advanced
countries than in the U.S. Heeding this lesson, some
European countries have recently taken steps to reduce
the distortions associated with generous social insurance
programs and employment protections. For example, some
are following the U.S. lead, placing less emphasis
on policies that discourage hiring and more on programs
like the earned income tax credit. By contrast, the
U.S. has done little to move closer to the European
model of social protections and the reduction of inequality
and poverty.
Conclusion
This comparison of the U.S. and other advanced industrialized
countries, though just a sketch, is suggestive. The
possible responses to rising inequality do not boil
down to "either/or" kinds of solutions. Rather,
these responses range along a fairly wide continuum,
reflecting the tradeoffs that policymakers face between
efficiency and equity. Certainly some market-determined
income differences are needed to create incentives
to work, invest, and take risks. However, there are
signs that rising inequality is intensifying resistance
to globalization, impairing social cohesion, and could,
ultimately, undermine American democracy. Improvements
in education are an imperative for reducing inequality
and an easily justifiable investment, given its high
social return. In contrast, improvements in the social
safety net entail costs, even when policy interventions
are well-designed from an efficiency standpoint. Even
so, in my opinion, they deserve high policy priority.
Inequality has risen to the point that it seems to
me worthwhile for the U.S. to seriously consider taking
the risk of making our economy more rewarding for more
of the people.
Janet L. Yellen
President and Chief Executive Officer
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Piketty, T., and E. Saez. 2006. "The Evolution
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Endnotes
From
1972 to 1997, nonfarm labor productivity rose at only
a 1.7% rate, while real labor compensation rose at
an annual rate of 1.3%.
Despite
the widespread view that labor's share of total
income has fallen as capital's share has gone
up, there actually was no net change in these shares
over 1997–2005, although there were fluctuations
during the period.
These
broad trends in inequality are also observed for men
and women analyzed separately.
The
basic story about inequality in real wages does not
change if one broadens the analysis to include benefits
or if one examines earnings or family income.
See
Dew-Becker and Gordon (2005). Piketty and Saez (2006)
show that in 2001 the top 1% of the income distribution
held 15.4% of total income.
The
job displacement figures in this paragraph and wage
loss figures below are from Farber (2005).
See
Buchmueller and Valletta (2006). Between 2000 and 2005,
coverage through employment-based plans fell from 63.6%
to 59.5%, while coverage through government programs
rose from 24.7% to 27.3%.
The
OECD defines poverty as the share of households that
receive 50% or less of the median income in each country
and takes account of household size, cash transfers,
taxes, and tax credits.
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