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Poverty & Inequality

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Around half of the world lives in poverty so extreme that they can barely survive, and around 25,000 people die from hunger each day whilst a new billionaire is created every second day. The call for a global safety net has never been so urgent - and compels the international community to transform economic priorities and guarantee the universal securing of basic human needs.

Latest Articles

US: New data reveal unprecedented income inequality

Graph showing increasing income going to top 1% of wage earners23rd Jan 07 - Lawrence Mishel, Jared Bernstein & research assistance by James Lin, Economic Policy Institute

Newly released data from two separate sources reveal just how skewed the distribution of economic growth has been over the current recovery.  Data from the Bureau of Economic Analysis through the third quarter of 2006 show that a historically high share of corporate income is going into profits and interest (i.e., capital income) rather than employee compensation.  And a newly released Congressional Budget Office (CBO) analysis of household incomes shows that a greater share of this capital income goes to the richest households than at any time since the CBO began tracking such trends.  In other words, our economy is producing more capital income and that type of income is more likely to go to those at the very top of the income scale.  Together, these dynamics are contributing to a uniquely skewed recovery.

 
Editors of 'The Economist' are Deeply Concerned About Inequality - Can You Guess Why?

The Economist22nd Jan 07 - Declan, Crawl Across the Ocean

I see that the Economist had a recent cover story entitled: "Rich Man, Poor Man: The Winners and Losers from globalisation." And it does seem that The Economist is worried about inequality. More specifically, the Economist seems to be concerned that, given fast-growing inequality, given millions of middle-class workers making no progress, given millions and millions more stuck in poverty while a few at the top make massive gains there is a very real risk that there could be a backlash which attempts to limit the exorbitant pay of CEO's.

To that end, the Economist has a full article, "Executives have enjoyed an astonishing pay bonanza. Edward Carr explains why most of them deserved it," with reasoning so weak it is laughable, including the assertion that only CEO's paid hundreds of millions will go through with downsizing, merely paying millions leaves companies unable to attract someone willing to make cutbacks.

But they don't stop there. The article, "A poisonous mix of inequality and sluggish wages threatens globalisation," is even more on point. First it lays out the problem:
 
Africa: 'World' Vows to Fight Inequality And Injustice
World Social Forum 2007, Kenya22nd Jan 07 - Jeff Otieno & Nyabonyi Kazungu, The Nation

The curtains opened at the eagerly awaited World Social Forum meeting yesterday with a vow to fight inequality and social injustice in the world.

Hundreds of delegates converged at Uhuru Park, signalling the beginning of intense discussion on how to tackle some of the world's major problems.

The delegates, drawn from both developing and the developed world, shared the common goal of making the world a better place.

Speakers representing the world's major continents spoke against free trade models which they said were being pushed down the throats of the world by the Bretton Woods Institutions and some western countries to impoverish the world.

 
Prevent a `race to the bottom'
Minimum wage
16th Jan 07 - Bruce Nissen, Sun-Sentinel

Raising the federal minimum wage is long overdue and has broad support from the American public.

The federal minimum wage of $5.15 per hour translates to a yearly salary of approximately $10,700 for a full-time worker. This impossibly low wage is also usually accompanied by a lack of health or pension benefits, making it nearly impossible for even two full-time minimum-wage workers to support a family without public assistance.

Raising the minimum wage to $7.25 is a start toward providing better opportunities for low-income families and investing in their children -- our future.

Dozens of states have already voted on raising their minimum wage above the federal one, and these measures have all passed handily. In November 2004, Florida voters elected to establish a higher state minimum wage (currently $6.67 per hour) by over 70 percent. 
 
Tax Cuts and Consequences
Tax CutsEditorial, 11th Jan 07 - The New York Times

The tax system in the United States is supposed to mitigate inequality. But a recent report by Congress’s budget agency provides fresh evidence that Bush-era tax cuts have done more to reinforce inequality than to redress it.

The agency found that in 2004, the latest year for which comprehensive data were available, the top 1 percent of households pocketed 14 percent of total after-tax income in the United States, up from 12.2 percent in 2003. That increase, the third largest in one year since the agency started keeping track in 1979, works out to an extra $128 billion. And yet despite that hefty gain, the effective federal tax rate of the top 1 percent decreased slightly.

In contrast, the share of after-tax income going to households in the middle of the income distribution fell to 15 percent in 2004, down from 15.4 percent in 2003 — the equivalent of a $29 billion loss. In that time, the share of their income going to federal taxes stayed about the same.

 
How the Income Share of Top 1% of Families Has Increased Dramatically
IncomeProfessors Thomas Piketty & Emmanuel Saez, 11th Jan 07 - Wall Street Journal

In his Dec. 14 editorial-page commentary "The Top 1% ... of What?" Alan Reynolds casts doubts on the interpretation of our results showing that the share of income going to the top 1% families has doubled from 8% in 1980 to 16% in 2004. His critique contains serious misunderstandings of our work.

First, Mr. Reynolds points out that, in contrast to our results, the official Census Bureau figures show only a modest increase in the top 5% income share. The reason for the discrepancy is that the Census Bureau estimates are based on survey data that are not suitable to study high incomes because of small sample size and top coding of very high incomes. In contrast, tax return data provide a very accurate picture of reported incomes at the top. Our key contribution was precisely to use those tax data to construct better inequality estimates. We found only families within the top 1% experienced very large gains relative to the average since 1980 and that upper middle class families (the next 4% below the top 1%) experienced only modest gains. This shows that the Census Bureau figures, based on data that cannot measure top 1% incomes, misses the extraordinary gains going to the top 1%, which is perhaps the most striking change in the U.S. income distribution in recent decades.

 
Tax Cuts Offer Most for Very Rich, Study Says
USA Tax CutsEdmund L. Andrews, 8th Jan 07 - The New York Times

Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bush’s tax cuts, according to a new Congressional study.

The study, by the nonpartisan Congressional Budget Office, also shows that tax rates for middle-income earners edged up in 2004, the most recent year for which data was available, while rates for people at the very top continued to decline.

Based on an exhaustive analysis of tax records and census data, the study reinforced the sense that while Mr. Bush’s tax cuts reduced rates for people at every income level, they offered the biggest benefits by far to people at the very top — especially the top 1 percent of income earners.

Though tax cuts for the rich were bigger than those for other groups, the wealthiest families paid a bigger share of total taxes. That is because their incomes have climbed far more rapidly, and the gap between rich and poor has widened in the last several years.

 
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