On November 1st, the Asset Building Program hosted “The United States of Inequality: Causes, Costs, and Consequences,” which explored the growing trend of income inequality in America. The discussion featured Timothy Noah of Slate magazine and author of a recent 10-part series weighing eight possible causes of “the Great Divergence” and what it might mean for our collective future; Ray Brescia, Assistant Professor of Law at Albany Law School; and Tom Woodruff, Executive Vice President of SEIU and Director of Change to Win. The event was moderated by Reid Cramer, Director of the Asset Building Program at New America.
Noah spoke to the central question investigated by his Slate series, “What’s causing income inequality?” First, he narrowed the field by eliminating race and gender, both of which he stated have either maintained historical levels of income distribution between the high and low earning groups or narrowed. He then moved on to factors that he identifies as drivers of income inequality, including declining union membership, partisan politics, and an education system that is failing to prepare a modern workforce. He said that addressing income inequality is an important step to achieving shared prosperity and expanding upward economic mobility.
Brescia identified a historical correlation between periods of recession and increased income inequality and connected this relationship to high incidence of mortgage delinquencies. He refuted arguments that the wave of foreclosures over the past several years has been due to loans to poor, high risk borrowers under the Community Reinvestment Act. He noted that if that were the case, there should be correlation between foreclosures and the poverty rate, which there is not. Instead a positive correlation between income inequality, racial inequality, and delinquencies suggest social distance made the black middle class a target of predatory practices that gave rise to high rates of delinquencies among those households and communities.
Woodruff offered that wage stagnation, poverty, and income inequality were exacerbated by the recession but were originated in factors such as the declining power of organized labor and government procurement practices that favor employers with fewer benefits and lower wages. He said that these trends will continue as the number of jobs requiring a college education diminishes and low-skill service sector employment grows. He recommended that enhancing the collective bargaining capability of employees would increase wages and that increasing union concentration would also produce jobs.
After outlining their critique of income inequality, each was asked to identify possible policy solutions: Noah suggested that assessing new tax brackets to distinguish the treatment of income between those that are wealthy and those that are extremely wealthy; Brescia recommended strengthening the CRA to bring more lenders within its jurisdiction; and Woodruff identified strengthening the collective bargaining power of unions and the ability of workers to organize.