Wage Disparities Exploded in Past 30 Years

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NEW YORK (MainStreet) — The rich really are getting richer, and now the government has proof.

The hourly wages of top income earners in the U.S. increased at a significantly faster rate during the past three decades compared to the hourly wages of those at the middle and low ends of the spectrum, according to a new report from the Congressional Budget Office. The report analyzed hourly wage discrepancies between 1979 and 2009.

Workers in the top 10% of income earners (above the 90th percentile) in 2009 earned an hourly salary of at least $38.25 ($76,500 annually), while the bottom 50% earned below $16.80 an hour ($33,600 annually) and the bottom 10% (below the 10th percentile) saw wages below $8.45 an hour ($16,900 annually), the CBO reports. To put that in perspective, that means the wealthiest 10% earned at least 128% more than the median income and at least a whopping 353% more than those at the bottom.

If that sounds extreme, just compare it to the way things were three decades earlier. With inflation factored in, the richest 10% earned a minimum of $25.20 per hour ($50,400 annually) in 1979, or about 79% more than the $14.05 hourly rate ($28,100 annually) below which half of all wage earners fell that year. That richest 10% in 1979 also made 217% more than the 10th percentile ($7.95 an hour or $15,900 annually) that year.  Sure, there was still a gap between the highest income earners and the rest of the country, but certainly not as big a gap as it is now.

As the CBO’s data show, high wage earners have seen salaries increase by at least a third in the past three decades, while those in the bottom half have seen their salaries increase by at most about 20% and those in the bottom 10% have seen their salaries remain virtually stagnant.

However, the CBO report argues that the main factor behind the increasing discrepancy between income brackets is nothing nefarious, but rather a result of education, as companies have become increasingly willing to pay a premium for skilled workers who have graduated from college.

“Beginning in the early 1980s… people entering the workforce did not have significantly more education than those retiring and leaving the workforce. That slowdown in the improvement in educational attainment combined with growing demand for more-educated workers drove the wage premium for college graduates higher—a key reason for the increasing wage dispersion in the top half of the wage distribution,” the CBO’s researchers note.

No income groups saw salaries increase as quickly as they should have, though. According to the CBO, the real output per worker actually increased by 59% during the past three decades, while salaries increased by just 20% to 30% for those in the middle and high-end income brackets, respectively. Moreover, the proportion of the average worker’s salary to the nation’s overall income declined by 3% during these years, in a further sign that incomes haven’t increased as much as they should.

As the CBO notes delicately in its report, this “implies that owners of capital (such as stockholders and other owners of businesses) earned an increasing share of the income generated in the United States over that period.”

So, just to reiterate, yes, the rich really are getting richer.

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